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What exactly is a trust?

Author: Beau Follett

What exactly is a trust? A trust is an strategy or agreement in which property that belongs to one entity, typically a person, is entrusted to the care of another entity in order to use it for the welfare of a third party. While this agreement can take many variations, the most frequently known from of trust involves a wealthy individual who deposits a large sum of money and/or investment instruments with a lawyer. The latter person is charged with distributing funds and dividends on a regular basis to a third party. Often, the third party is a younger relative or a friend of the wealthy person.

What Is a Trust? - The Characteristics

There are three important parties involved in any trust. In some cases, there may only be two. However, the most frequent form of a trust has three factors. They are the settlor, the trustee and the beneficiary.

• The settlor is typically someone with more than enough money to support him or herself. This individual may be concerned about the welfare of another person and wish to ensure that this person will always have source of income. The settlor makes arrangements with someone else, usually a attorney or a firm of lawyers, to make financial plans for that person.

• The trustee is the person or entity charged with releasing funds and caring for their source. Once the settlor has signed over the care of certain funds to a trustee, this individual or entity is accountable for making sure that the assets either lasts indefinitely or for a finite span of time. The trustee is also in charge for distributing the funds on appointed occasions.

• The beneficiary is the person or entity who receives the income. In most cases, the beneficiary is not particularly accountable for the use of the funds once they are distributed. However, the beneficiary may have to meet specific conditions in order to continue accepting these finances. Penalties for failing to meet these stipulations can range from a simple delay in funding to actual cancellation. The trust may have a secondary beneficiary who might then receive the assets.

What Is a Trust? Why Is It Created?

Trusts are just one way to give assets to another person. They differ from straightforward gifts in two important ways. These variances have to do with timing and accountability.

Trusts are substantial sums of money and other belongings which frequently issue dividends to beneficiaries. Generally these payouts are fixed sums, irrespective of the increase or decrease of the principal. Others may allow for dividends to respond to the overall value of the principal.

Trusts also contrast from simple gifts because they do not entrust obligation for the assets to the beneficiary, commonly because the settlor does not consider the beneficiary in a position of handling the funds or simply does not want to burden him or her with the responsibility of controlling the assets.

What Is a Trust?

A trust is an practical way to assure that an individual receives your help. Trusts can go on decades after the settlor has passed on. Often they even outlive their beneficiaries. In those cases, if there is no written record stating what is to be done with the principal, a judge may possibly decide the fate of the trust.
Beau Follett is Chief Marketing Officer with www.unitedplangroup.com
Article Source: JS2 Article Marketing


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