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  • Aaron W Saoud, Esq.

What exactly is a Trust?

We often get the question here at the office: What is a Trust and what does it do? So to help clarify what a Trust is, we've put together the following overview.

A legal trust agreement is a document that establishes a fiduciary relationship where a trustee holds assets on behalf of beneficiaries. This agreement outlines the terms, conditions, and responsibilities governing the management and distribution of assets held in the trust.

Here's a breakdown of the key components typically found in a trust agreement:

1. Identification of Parties: The agreement identifies the settlor (also known as grantor or trustor), who creates the trust, the trustee(s), who manages the trust assets, and the beneficiaries, who benefit from the trust.

2. Trust Assets: The agreement specifies the assets that are being placed into the trust. This can include various types of property such as real estate, investments, cash, or personal belongings.

3. Trust Purpose: The trust agreement states the purpose or objectives of the trust, including how the assets should be managed and distributed. This could be for the benefit of specific individuals (such as family members or charitable organizations) or for specific purposes (such as education or healthcare).

4. Trust Terms: The agreement outlines the terms and conditions that govern the trust, including how the trustee should manage the assets, how beneficiaries are determined, and any restrictions on distributions.

5. Powers and Duties of the Trustee: The agreement specifies the powers and duties of the trustee, including investment authority, distribution discretion, and record-keeping responsibilities. It may also outline the trustee's compensation, if any.

6. Distribution Provisions: The trust agreement details how and when the trust assets will be distributed to the beneficiaries. This could be done in specific amounts or percentages, at certain ages or life events, or according to the discretion of the trustee.

7. Duration of the Trust: The agreement specifies the duration of the trust. It can be either a revocable trust, which can be changed or terminated during the settlor's lifetime, or an irrevocable trust, which typically cannot be altered once established.

8. Trust Administration: The agreement provides instructions for the administration of the trust, including how taxes and expenses should be paid, how disputes should be resolved, and how the trust should be terminated.

9. Governing Law and Jurisdiction: The agreement identifies the governing law that will apply to the trust and the jurisdiction where any disputes will be resolved.

Once the trust agreement is created and signed by the settlor and trustee(s), it becomes a legally binding document that governs the operation of the trust. It's important for all parties involved to fully understand their rights, responsibilities, and obligations under the agreement.

Additionally, consulting with your

legal and financial professionals can help ensure that the trust agreement is properly drafted and executed according to applicable laws and regulations.

We hope this helps as a starting point!

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