A trust holds assets like a basket holds eggs. But it does more than that.
A basket cannot legally own anything but the trustee of the trust can and he does. The trustee owns the assets in the trust so long as he serves as trustee. This arrangement lasts as long as the trust dictates and it ends in a manner that the trust dictates. Generally it ends when the trust assets are distributed to the final trust beneficiaries.
The Big Rule is that the trustee must follow the instructions in the trust for the benefit of the trust’s beneficiaries. And that is where all of the bells and whistles of legal drafting can make a big difference for the beneficiaries: The instructions in the trust can be tweaked in many helpful ways.
Most of the people who have a Trust have it for one purpose only. They want to avoid probate. For example, Mr. and Mrs. Spartan have a joint trust. When Mr. Spartan dies the trust continues for Mrs. Spartan. After Mrs. Spartan dies all of the Trust’s assets are immediately distributed in full to the Spartan children. This is an example of a Trust that avoids probate only.
Mr. and Mrs. Seminole, however, have a joint trust that will hold some of the Trust’s assets for the benefit of the minor grandchildren until the last grandchild graduates from college. This is called a pot trust. It keeps a pot of assets available for the youngest child until that child reaches a certain age. Mrs. Seminole believes that the oldest children had the benefit of financial and emotional support the longest so their needs have been met. It is the youngest children who suffer the most when a parent or grandparent dies. Therefore, she reserved some trust money for the care of any child who might be left without an education due to the premature death of a parent or grandparent.
There are many variations on what a Trust can do for an estate plan. The key is that no two trusts are identical if they were written with detailed attention to the needs of that particular client.