What is a Trust?
Mark needed to qualify for Medicaid. Fortunately, one of the rules he put in his trust was the power to makes gifts of trust assets during his lifetime. (Gifting is a powerful Medicaid qualification technique.) Without that power, it would have been much more difficult for Mark to qualify. This is an example of asset management and distribution during Mark’s lifetime.
After he passed, Mark’s trust then distributed the remainder of the property in it quickly and without the need for probate.
I’ve read maybe 100 different definitions for a trust, and this is the best one I can come up with: A trust is a way to arrange for the management and distribution of your money and other property by you or a third party during your lifetime and beyond.
The benefits of a trust are that a trust avoids probate (because it is a contract); it provides for that management during your lifetime if you are unable to manage the money in it; afterwards the trust can distribute the money outright or hold it in further trust for the people it goes to.
Who is involved in a trust? There are three people or parties involved.
The first is the grantor. That is the person or people placing property into the trust.
The second is the trustee. This is the person, people, or institution that will manage the property in the trust for the benefit of somebody.
The third is the beneficiary. This is the person who gets the benefit from the property in the trust.
A trust is a contract between the grantor and trustee for the benefit of a third party, the beneficiary.
Because it is a contract, the grantor can specify the rules and conditions by which property is managed or distributed. This management and distribution can occur during lifetime or beyond. Because of IRS regulations and the need to define a lot of terms it becomes rather long and looks really complicated.