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A trust is a tool used by a person owning an asset who would like to give a gift of that asset in a way that is not considered an outright gift. Reasons to choose a trust as a venue for this type of action may include reducing taxation, asset protection, rules related to public benefits in the case of a special needs trust, and planning for establishing a legacy. Planning for nursing home care and Medicaid often include the use of a trust.

A trust may be revocable or irrevocable, the choice largely depending on the motivation for establishing the trust. A trust may be created by a person’s will (Testamentary) for use after death, or created and used during a person’s life (Inter-Vivos). A trust may be self-settled (Created by one individual for their own benefit). Or, it may be a third party trust, created by a third party for the benefit of another person. Trusts may be established to provide for education, asset protection, charitable giving, federal estate planning, business succession planning, and perpetual care of property. Certain types of trusts are well suited to particular applications. For example, a Special or Supplemental Needs Trust may be revocable. An Income Only Asset Protection Trust may be irrevocable. A Dynasty trust has yet another use. Trusts may be tailored to meet the planning needs of those individuals establishing the trust.

In every situation, a trust is structured to have a donor, a trustee and a beneficiary. The donor is in fact funding the trust with assets. The trustee has administrative powers, and is chosen carefully with regard to their ability to make decisions and take action related to the management of property owned by the trust. Frequently, this involves real estate, bank accounts and investments, such as stocks, municipal funds and life insurance.

The beneficiary is the intended recipient of disbursements of the assets owned by the trust. In certain situations, the trust is written to avoid direct access of the beneficiary to trust property, such as Special Needs Trusts, or Protector Trusts.