Succinctly stated, a trust is a relationship whereby property is held by one party for the benefit of another. A Trustee holds the property for the trust’s beneficiaries.
Trusts are frequently created in wills, defining how money and property will be handled for children or other beneficiaries. An individual would be interested in creating a trust when he or she has children under the age of majority (who cannot inherit directly until attaining 18 years of age) or when there are concerns that an immediate distribution to beneficiaries is not in the best interest of the estate and the beneficiaries. For example:
- A surviving spouse may not be able to manage the estate without assistance;
- A parent may feel that, at age 18, a child may not be mature enough to handle a large sum of money.
When you create a trust in your will, you direct your executors to hold your estate, or part of it, in trust for the beneficiary or beneficiaries. It is quite common to provide in a will that a child’s share is to be held for his or her benefit until the child attains a certain age, and to give the executors the discretion to use the funds being held in trust for the benefit of the child until he or she attains that age. It is also common to provide for a staged distribution of the child’s share. For example, a part may be paid at age 21 and the balance at age 30. Until the child reaches age 30, the executors will have some control over the child’s interest in the parent’s estate.
Many factors must be taken into account when you are deciding whether or not to establish a trust or trusts under your will. These factors include the size of your estate, the ages of your beneficiaries and how responsible they are, and any special needs, such as medical or educational, which a beneficiary may have.