A trust may be created a number of ways but it is usually created at death under the Will (“testamentary”) or during lifetime by a transfer of property from the owner of the property (the “Grantor” or “Settlor”) to someone (the “Trustee”) who holds the legal title for the benefit of another, the “beneficiary”. The beneficiary has an “equitable” interest in the property but not legal title. The beneficiary receives the use and enjoyment of the property. The Trustee has a number of duties that are owed to the beneficiary (i.e., loyalty, impartiality, to safeguard the property, to make it productive and to disclose material facts). The Trustee must follow the terms of the trust instrument (“Trust Agreement”). For example the Trustee may be required to distribute property or income to the Beneficiary. The Trustee may not use the property for himself or herself (unless the Trustee is also a Beneficiary).
Trusts are used to protect persons who are unable to manage the property (i.e., minor children or incapacitated persons), to protect the property from the beneficiary’s creditors, and to preserve the property from immediate disposal by the beneficiary. It is advantageous to manage family jointly owned assets (i.e., oil and gas, farming or timber rights and other assets that may be more efficiently managed as a whole rather than among a number of owners.
A trust may avoid additional probate proceedings in other states (for example oil and gas interests are owned in Oklahoma and Mississippi by a Texas resident, or a vacation home owned in Florida or New Mexico).
A trust may be a standby trust to hold assets passing through the Will at death or it may be created by the Will for minor or adult children.