A trust is a mechanism that holds assets for one or more people.

For example, a parent may transfer money into a trust for the benefit of their child. The person who manages the money in the trust is called the trustee. The money held in the trust is called either the corpus or principal. In this example, the child is called the beneficiary. The parent is the grantor.

TRUST TERMS

• Grantor: The person who sets up a trust.
  
• Trustee: The person named by the grantor to oversee and manage the trust.
  
• Corpus or Principal: The assets or property in the trust.
  
• Trustee: The legal owner of the assets of the trust. The assets in the trust are legally owned by the trustee, but may only be used for the benefit of the beneficiary.
  
• Beneficiary: The person who receives or benefits from the assets or property in the trust.

There are two general categories of trusts.

• Living Trust: A trust made while the grantor is alive.

  This trust is usually done as part of a person's estate planning to avoid or minimize taxes that may be payable at the time of death. Usually, there are two kinds of living trusts:
  

  • Revocable: The person making the trust retains the right to change the trust in any way. This includes adding or removing assets from the trust. The grantor can make these changes at any time.
    
  • Irrevocable: The person making gives up the right to change the trust in any way. The terms of the trust and the property in the trust are fixed and cannot be changed by the Grantor under any circumstances.
  
  
• Testamentary Trust: This type of trust takes effect when the Grantor dies. Because the grantor is not available to make any changes to the trust, the trust is irrevocable.