Tuesday, July 5, 2011

Oak Lawn Estate Planning | What is a Trust?

To explain what a trust is and how it works, consider the following example. This example is a common action of a parents throughout the U.S.

You give money to your baby sitter for things that may be needed for your children. You “trust” that she will use the money for the children’s benefit and not for herself. This, in essence, fulfills the four necessary requirements for a trust.

1. Grantor – The person to creates the Trust …i.e. funds the trust

2. Trustee – Some other Person or entity most agree to hold money or property for the benefit of someone else.

3. Corpus – Also known as the “principal” of the trust.

4. Beneficiary – The person or persons who benefit from the trust

This is an example of a basic trust. We will call it a "Babysitter Trust". In this case, you as the parent are the grantor of the trust. You became the grantor when you handed the money to the babysitter. The babysitter is the trustee of the trust when she is holding the money in accordance with your directions. The money you give to the babysitter is the corpus of the trust. This also could have been property that the babysitter had possession and control over. Finally, your children are the beneficiaries of the trust. The children are the ones who the money is intended to benefit.

This is the basic four necessary parts of a trust. It really makes a lot more sense when it is broken down into its four parts in a simple everyday example. Now that you know what a trust is, look for the next post explaining how to categorize a trust. If you need help setting up a trust, contact the Law Office of Jonathan W. Cole at (708) 529-7794. 

5013 W. 95th St.
Oak Lawn, IL 60463
(708) 529-7794

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