A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” The rules or instructions under which the trustee operates are set out in the trust instrument. Trusts have one set of beneficiaries during their lives and another set — often their children — who begin to benefit only after the first group has died. The first are often called “life beneficiaries” and the second “remaindermen.”
There can be several advantages to establishing a trust, depending on your situation. Best-known is the advantage of avoiding probate, the court process by which a deceased person’s property is passed to his or her heirs. In a trust that terminates with the death of the donor, any property in the trust prior to the donor’s death passes immediately to the beneficiaries by the terms of the trust without requiring probate. This can save time and money for the beneficiaries.
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