What is a simple trust?
UPDATED: December 16, 2019
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Trusts are generally created as a way to manage property, such as cash or real estate, and transfer it to someone else at a certain point in time. The person who creates the trust is called a settlor, while the person who receives the property from the trust is called the beneficiary. The person who is designated to manage the trust is referred to as the trustee.
What is the Role of the Trustee?
Trustees have legal title to the trust property until it is transferred, and they are considered fiduciaries, meaning that the trustee must act in the best interest of the beneficiary when making decisions about the trust. In addition, settlors can usually choose any living person or legal entity to be a trustee or beneficiary. For example, a settlor can name an entity, like a law firm, as trustee or an organization, such as a charity, as a beneficiary. Overall, the settlor has a great deal of discretion in creating a trust, but some state laws do impose restrictions.
There are several types of trusts, and a simple trust, also known as a bare trust, is one to which the trustee does not have to do anything other than ensure that the trust property is given to the named beneficiary within the time frame specified by the trust. The trustee has no other duties, unlike with other kinds of trusts.
Like all trusts, the simple trust is governed by the trust agreement, which is basically a contract between the settlor and the trustee detailing the settlor’s wishes and intentions. Questions about the management and distribution of the trust property, as well as the roles and duties of different people and entities involved are usually answered by following the trust agreement’s instructions. If the trust agreement cannot settle an issue, the matter may go to court to be resolved by a judge according to state trusts and estates laws.
A simple trust can be created through a written document, like a trust document or a will, an oral declaration, or a court order. The most important aspects of creating a legally binding trust include showing a clear intention to create the trust, clearly identifying the property to be placed in the trust, and specifically naming the beneficiaries of the trust.
Cost to Set Up a Simple Trust
The costs to set up and manage a trust vary depending on the type of trust. A simple trust may be less expensive than others because the trustee’s work is minimal. However, costs can rise depending on the size of the trust – the more property that is involved, the more time professionals will have to spend on things like record keeping, tax planning, and account maintenance, which can become expensive.
Getting Legal Help
Although simple trusts are not as complicated as other trusts, the laws that govern trusts can be, so it is always a good idea to speak with a qualified trusts and estates attorney before creating any kind of trust.