Trust Property
Trust property (also called trust assets or trust corpus) is any asset placed into a trust and managed by a trustee for the benefit of one or more beneficiaries. Assets commonly held in trusts include cash, investments, real estate, life insurance proceeds, and personal property.
Key takeaways
- Trust property is owned by the trust and controlled by the trustee for beneficiaries’ benefit.
- Transferring assets into a trust can help avoid probate and, depending on the trust type, reduce estate tax exposure.
- Trusts vary by purpose and flexibility — most commonly revocable or irrevocable — and can serve families of all means.
How trust property works
- Parties:
- Trustor (also called grantor or settlor): the person who transfers assets into the trust.
- Trustee: the individual or institution that manages trust property under fiduciary duties.
- Beneficiary: the person or entity that receives benefits from the trust property.
- Once transferred, trust assets belong to the trust. Trustees must manage assets according to the trust document and in beneficiaries’ best interests.
- Revocable versus irrevocable:
- Revocable trusts let the trustor retain control and tax responsibility for trust income; the trustor can modify or revoke the trust.
- Irrevocable trusts transfer legal ownership to the trustee; the trustor normally gives up the right to change beneficiaries or reclaim the assets, which can reduce the trustor’s taxable estate.
- Probate and taxes:
- Properly structured trusts can allow assets to pass to beneficiaries without probate.
- Irrevocable trusts are commonly used to remove assets from an estate for tax and creditor-protection purposes. Federal estate tax exemptions are large (on the order of tens of millions for individuals in recent years), but rules and thresholds change, so planning should be current.
Common types of trusts and examples
- Revocable living trust: Created during the trustor’s lifetime; the trustor often serves as trustee and can modify or terminate the trust. Useful for avoiding probate and managing assets while alive.
- Irrevocable trust: Transfers ownership out of the trustor’s estate for tax or asset-protection purposes; usually cannot be changed once established.
- Testamentary (Payable-on-Death) trusts: Created or funded at death (often via a will). Assets move to beneficiaries after the trustor’s death and typically bypass probate procedures.
- Living trusts for minors and gifts: Accounts held in trust to benefit children (for example, under custodial arrangements such as UGMA/UTMA in some jurisdictions) control how and when minors access funds.
- Special needs trust: Holds assets for a beneficiary with disabilities while protecting eligibility for government benefits.
- Other specialized trusts exist for tax planning, charitable giving, creditor protection, asset management, and more.
Practical notes and FAQs
- Can the trustee be a beneficiary? Yes — a trustee may also be a beneficiary, provided they are not the sole beneficiary, because separate fiduciary duties and interests must be respected.
- Are trusts only for the wealthy? No. Trusts can serve many purposes (care for a disabled family member, control distributions to minors, avoid probate) and can be useful for families of varying means.
- How common are trusts? Surveys indicate a minority of households use trusts; for example, one consumer finance survey reported about 6% of families had any trust or managed investment account.
Bottom line
Trust property is a core tool in estate planning for managing and transferring assets, avoiding probate, and addressing tax or creditor concerns. Trusts come in many forms with important legal and tax consequences. Consult an experienced estate planning attorney to choose and structure a trust that fits your goals and the current law.