What is Trust Law?

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 4,036 reviews

Jump to Section

Need help with a Trust Agreement?

CREATE A FREE PROJECT POSTING
Post Project Now

What Is Trust Law?

Trust law refers to laws governing the creation and implementation of trusts, which are fiduciary relationships. In this type of relationship, one party (called the trustor) gives a second party (called the trustee) the right to hold title to assets or property for the benefit of a third party (called the beneficiary). In finance, trusts can include closed-end funds built as public limited companies.

Trust can be established to:

  • Offer legal protection for the assets of a trustor
  • Ensure those assets are distributed following the trustor's wishes
  • Save time
  • Cut down on paperwork
  • Reduce or altogether avoid estate or inheritance taxes

Why Use a Trust?

Various reasons for using a trust exist. Some common reasons for establishing a trust include:

  • Avoiding taxes and probate
  • Determining how an individual's money should be distributed and managed, either while that individual is alive or after their death
  • Dictating terms of an inheritance to beneficiaries
  • Protecting assets from creditors
  • Providing for a beneficiary who cannot easily manage their finances, such as an underage beneficiary or a beneficiary who has a mental disability

Trusts do have some disadvantages as well. Some downsides of trusts include:

  • Requiring an investment of time to create
  • Requiring money to create
  • Being difficult to revoke

Categories of Trusts

Many types of trusts exist under trust law. However, each specific type of trust fits into one or multiple categories.

Living or Testamentary Trusts

Also known as inter-vivos trusts, living trusts are written documents that provide an individual's assets as a trust for their benefit and use during their lifetime. After that individual dies, the assets are transferred to their beneficiaries. The individual has a successor trustee with these types of trusts. The successor trustee is responsible for transferring the assets.

Testamentary trusts are also known as will trusts. These types of trusts specify how the individual's assets are designated once that individual dies.

Revocable or Irrevocable Trusts

A trustor can change or even terminate a revocable trust during their lifetime. However, a trustor cannot alter an irrevocable trust once they establish the trust. Trusts may also become irrevocable upon the death of the trustor. A living trust may be irrevocable or revocable, but a testamentary trust may only be irrevocable.

Typically, irrevocable trusts are more desirable. This is because irrevocable trusts cannot be changed, and they contain assets that have permanently been moved out of the possession of the trustor, which allows for minimizing or avoiding estate taxes.

Funded or Unfunded Trusts

A trustor puts assets into a funded trust during their lifetime. An unfunded trust, on the other hand, is just a trust agreement — it does not include funding.

An unfunded trust may become funded upon the death of the trustor, but it might also stay unfunded. As an unfunded trust would expose the trustor's assets to many of the issues a trust would usually avoid, it is essential to make sure there is proper funding when using an unfunded trust.


Get Free Bids to Compare

Leverage our network of lawyers, request free bids, and find the right lawyer for the job.

Get Bids Now

Common Types of Trusts Funds

You'll find a wide variety of trusts designed for different situations. Some of the most common kinds of trust funds include:

  • Blind trusts: These trusts create a way for trustees to handle the trust's assets without the beneficiaries' knowledge. These trusts may be helpful if a beneficiary must avoid conflict of interest situations. ( Here is an article about blind trusts.)
  • Charitable trusts: These trusts are established to benefit a specific nonprofit organization or charity. Charitable trusts are usually created as part of an estate plan as they help reduce or even completely avoid gift and estate taxes. Types of charitable trusts include:
    • Charitable lead trusts: These charitable trusts allow certain benefits to go to a given charity and the remainder of the benefits to go to a trustor's beneficiaries.
    • Charitable remainder trusts: These trusts are funded during the lifetime of the trustor. The trusts disperse income to beneficiaries such as a spouse or children for a predetermined period of time before donating the remaining assets to the specified charity.
  • Credit shelter trusts: These trusts are sometimes called family trusts, bypass trusts, or "B" trusts. This type of trust allows someone to bequeath a sum up to, but not exceeding, the estate-tax exemption. The rest of that person's estate would then pass tax-free to a spouse. Funds that you place in a credit shelter trust are perpetually free of estate taxes, even if the funds grow.
  • Generation-skipping trusts: These trusts let someone transfer their assets to beneficiaries tax-free. The beneficiaries must be at least two generations younger than the trustor. This type of trust is used frequently to transfer assets to grandchildren. ( Here is an article about the generation-skipping tax exemption.)
  • Insurance trusts: These trusts protect life insurance policies that exist within a trust. Insurance trusts are irrevocable trusts. They remove life insurance policies from taxable estates. The action may prevent the trustor from borrowing against the life insurance policy or changing beneficiaries, but after that person dies, proceeds can be used to cover estate costs.
  • Marital trusts: Also known as "A" trusts, marital trusts give benefits to a surviving spouse. These benefits are usually included in the surviving spouse's taxable estate.
  • Qualified personal residence trusts: If a property is likely to greatly appreciate, a qualified personal residence trust may be useful. These trusts remove someone's home (or their vacation home) from the estate.
  • Qualified terminable interest property trusts: These trusts let someone direct assets to certain beneficiaries (who will be their survivors) at different times. A typical scenario would be a trust that provides income to the trustor's spouse, with the trustor's children then receiving whatever remains in the trust once that spouse dies.
  • Separate share trusts: These trusts allow a parent to establish a trust that has different features for different beneficiaries, typically children of the trustor.
  • Special needs trusts: These trusts are designed for dependents receiving government benefits, for example, Social Security disability benefits. By setting up this type of trust, the individual with a disability can receive income without affecting their government benefits or even causing them to forfeit their government payments.
  • Spendthrift trusts: Spendthrift trusts fulfill a few key functions:
    • These trusts prevent creditors from claiming the assets the trustor places in the trust.
    • These trusts allow independent trustees to manage the assets in the trust.
    • These trusts forbid beneficiaries from selling their interest in the trust.
  • Totten trusts: Also called payable-on-death accounts, these trusts are less complex than other types of trusts. A trustor creates a Totten trust during their lifetime and also acts as the trust's trustee. Typically, this type of trust is used for bank accounts. Totten trusts cannot include physical property.
    Totten trusts offer the major advantage of allowing assets included in the trust to avoid probate when the trustor dies. A Totten trust does not require a specific written document and often doesn't cost anything to establish. Instead, the only thing needed to create a Totten trust is having identifiable language included in the title on an account. Examples of this language include:
    • "As Trustee For"
    • "In Trust For"
    • "Payable on Death To"

If you are considering creating a trust, it is important to work with an experienced lawyer who understands the intricacies of trust law. A lawyer can help you decide the right type of trust to fit your unique needs and create an effective document that distributes your assets the way you intend.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Sarah K. on ContractsCounsel
View Sarah
5.0 (13)
Member Since:
June 21, 2021

Sarah K.

General Counsel (Commercial, Tech & IP Focus)
Free Consultation
Get Free Proposal
New York, New York
11 Yrs Experience
Licensed in NY
New York University School of Law

Seasoned attorney with over 10 years of experience in legal leadership across business functionalities. Specialization in tech, product, IP, data and commercial but well versed in all transactional and operational advisory matters.

Michael K. on ContractsCounsel
View Michael
5.0 (35)
Member Since:
June 28, 2021

Michael K.

Associate Counsel
Free Consultation
Get Free Proposal
Miami, FL
5 Yrs Experience
Licensed in FL
St. Thomas University School of Law

A business-oriented, proactive, and problem-solving corporate lawyer with in-house counsel experience, ensuring the legality of commercial transactions and contracts. Michael is adept in reviewing, drafting, negotiating, and generally overseeing policies, procedures, handbooks, corporate documents, and more importantly, contracts. He has a proven track record of helping lead domestic and international companies by ensuring they are functioning in complete compliance with local and international rules and regulations.

Roman V. on ContractsCounsel
View Roman
5.0 (1)
Member Since:
July 9, 2021

Roman V.

Trademark Attorney
Free Consultation
Get Free Proposal
Milwaukee, WI
9 Yrs Experience
Licensed in MD
Marquette University Law School

I'm an experienced trademark attorney and enjoy helping clients protect and grow their brand names through trademark registration and enforcement. I've worked with a wide variety of clients in different industries, including e-commerce, software as a service (SaaS), and consumer goods, to register trademarks for product names, logos, and slogans, both in the US and abroad.

Justin A. on ContractsCounsel
View Justin
5.0 (8)
Member Since:
July 7, 2021

Justin A.

Partner
Free Consultation
Get Free Proposal
Seattle, WA
6 Yrs Experience
Licensed in NY, WA
The University of Chicago Law School

I am an entrepreneurial lawyer in the Seattle area dedicated to helping clients build and plan for the future. I earned my law degree from the University of Chicago and worked in a top global law firm. But I found advising real people on legal issues far more rewarding. Reach out to discuss how we can work together!

Max M. on ContractsCounsel
View Max
4.9 (17)
Member Since:
July 12, 2021

Max M.

Business Attorney
Free Consultation
Get Free Proposal
Baltimore, Maryland
16 Yrs Experience
Licensed in MD
Georgetown University Law Center

Results oriented business attorney focusing on the health care sector. Formerly worked in Biglaw doing large multi-million dollar mergers and acquisitions, financing, and outside corporate counsel. I brought my skillset to the small firm market, provide the highest level of professionalism and sophistication to smaller and startup companies.

Joshua C. on ContractsCounsel
View Joshua
Member Since:
June 28, 2021

Joshua C.

Attorney/Owner
Free Consultation
Get Free Proposal
Ashland, MA
7 Yrs Experience
Licensed in CA, MA
UCLA School of Law

Attorney Joshua K. S. Cali is a respected business, estate planning, and real estate attorney based in Ashland serving Middlesex County and other nearby areas. Joshua graduated summa cum laude from Bentley University in Waltham, MA, and from UCLA School of Law in Los Angeles. Before starting his own firm, Joshua practiced estate planning for high net worth clients at a boutique law firm in San Diego, CA.

Erin F. on ContractsCounsel
View Erin
Member Since:
June 28, 2021
Drew B. on ContractsCounsel
View Drew
Member Since:
June 30, 2021

Drew B.

Managing Member
Free Consultation
Get Free Proposal
Cleveland, Ohio
25 Yrs Experience
Licensed in MO, OH
Saint Louis University

Drew is an entrepreneurial business attorney with over twenty years of corporate, compliance and litigation experience. Drew currently has his own firm where he focuses on providing outsourced general counsel and compliance services (including mergers & acquisitions, collections, capital raising, real estate, business litigation, commercial contracts and employment matters). Drew has deep experience counseling clients in healthcare, medical device, pharmaceuticals, information technology, manufacturing, and services.

Daniel R. on ContractsCounsel
View Daniel
Member Since:
July 1, 2021

Daniel R.

Managing Attorney
Free Consultation
Get Free Proposal
Chicago
10 Yrs Experience
Licensed in IL
Gonzaga School of Law

Daniel is an experienced corporate attorney and works closely with corporations, privately held companies, high-net worth individuals, family offices, start-ups and entrepreneurs. Daniel graduated from the Gonzaga University School of Law and is licensed to practice law in Illinois.

Jaroslaw P. on ContractsCounsel
View Jaroslaw
Member Since:
July 20, 2021

Jaroslaw P.

Associate
Free Consultation
Get Free Proposal
Warsaw, Poland
16 Yrs Experience
Licensed in AK
Wroclaw University - Law

Attorney - I graduated in Law from the University of Wroclaw and in Economics from the Scottish University of Aberdeen; My legal interests include, in particular: contracts, intellectual property, and corporate law, as well as transactional / regulatory advisory along with related risk management (M&A); The industries with which I have worked most often are: IT, real estate and construction, professional sport, industrial chemistry and medicine, oil & gas, energy, and financial services; I possess many years of experiences working with international entities for which I have prepared and negotiated contracts, as well as (due diligence) reports, analyses, litigation documents, and presentations; Apart from law firms, I have also worked for investment banks and big 4 - thanks to that I also gained financial, technological, and consulting experiences; I shall be described by: accuracy, openness, honesty, concreteness, a broad approach to the problem, and ... a lack of bad manners, along with a good sense of humour :)

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call