Revocable living trusts and irrevocable trusts also are explained. The effects a trust has on income and death taxes also are discussed at the end of this topic. In simple terms, a trust is a relationship in which a person, called a trustor, transfers something of value, called an asset, to another person, called a trustee. The trustee then manages and controls this asset for the benefit of a third person, called a beneficiary. An asset is any kind of property.
Trusts have several uses and they can be of much benefit when they are properly set up.
One of the uses of a trust is to provide flexible control of assets for the benefit of minor children. The trust may avoid the necessity of further legal proceedings such as the appointment of a conservator. A conservator is someone who controls the estate inherited by minor children. The conservator is restricted by law and must be bonded and file annual accountings with the probate court. Children cannot legally handle their own financial affairs before they reach the age of 18, or sometimes 21 in other states.