Many people wanting to have estate planning documents prepared typically think of a Last Will and Testament.  However, another potential way in which to plan your estate is through a Trust Agreement.  What is a Trust Agreement you may ask?  A trust’s primary function is to hold title to property and to provide for management of the property by a trustee.  A trust can either be revocable, meaning it can be cancelled or terminated in the future, or irrevocable, meaning it cannot be terminated.  Trusts can also be established during a person’s lifetime, which would be called an intervivos trust, or in a will, which is called a testamentary trust.  The most common use of a trust is to manage property for the benefit of a minor child, an elderly person, or a person who is physically or mentally impaired.  A trust can help avoid a guardianship, along with providing for beneficiaries who, for various different reasons, may lack the ability or knowledge to manage property on his/her own.  They can also be created for potential tax or other legal benefits.  Although every trust is different depending upon the particular needs of the person, most Trust Agreements share common elements and clauses.  

A Typical Trust Outline

Regardless of the order in which the trust provisions are stated, a trust will typically identify the person establishing the trust, also known as the grantor, name the person or entity who will be the trustee, and name the person or persons who are the beneficiaries of the trust.  The grantor is the person creating the trust and generally it is the grantor’s property and assets that are put into the trust.  The trustee is the person who manages the property in the trust for the benefit of the beneficiaries.  The beneficiaries are then the people who benefit/receive the property in the trust according to the trust’s terms.

Often times, the trust will make provisions for distribution or accumulation of the trust income and for the distribution of property upon the occurrence of a specified event.  The trust also sets forth various powers of the trustee and can make provisions for the removal or resignation of the trustee.  As such, whether it’s due to death or another reason, trusts usually then establish or appoint a successor trustee.

Distribution of the Trust Property

In a typical trust, beneficiaries may be divided into 2 categories: income beneficiaries and corpus beneficiaries.  As an example, a trust may state that the income generated from the trust be paid to “X” for life.  Then, upon X’s death, the corpus, or the remainder of the trust property, will then be distributed to “Y”.  X would be the income beneficiary and Y would be the corpus beneficiary.  Many times, the income and corpus beneficiary is the same person(s).  For example, a trust may provide that the income will be paid to X until X attains a certain age and that, upon X reaching that stated age, the corpus will then be distributed to X.  However, the trust should also name a successor corpus beneficiary in the case X never reached the age stated in the trust for distribution of the corpus.

There are endless ways in which the trust income and corpus can be distributed among various beneficiaries and so consulting with a local attorney is important to make sure your specific needs are met and your desired beneficiaries are taken care of financially.  If you are interested in having your estate planning documents prepared, Adam S. Lutzke Law Offices can help.  Call us any time at (317) 577-3888 or at [email protected]


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