A fiduciary relationship in which one party, known as a grantor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
Living Trusts may be created during lifetime, while a trust that arises upon the death of the grantor is known as a testamentary trust. A testamentary trust is also known as a will trust, because the trust language is contained within a will.
A revocable trust can be altered by the grantor. During the life of the trust, the principal and income are available to the grantor; only after death does the trust property transfer to the beneficiaries. An irrevocable trust cannot be modified by the grantor without permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his rights of ownership to the assets and the trust.
Trusts are a useful tool that can a large impact upon the financial well beign of grantors and beneficiaries. However, they are complex, and can cause undue complexity. The design of trusts should be done only with the advice of a competent estate planning attorney.