Anatomy of a Trust

Trusts and Estates

Trusts are estate planning tools that can replace or supplement a Last Will and Testament, as well as help manage property during life. A trust manages the distribution of a person's property by transferring its benefits and obligations to different people. There are many reasons to create a trust, making this property distribution technique a popular choice for many people when creating an estate plan.

Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility - many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced estate planning attorney, mastering the basics isn't hard.

Trust Basics

The basics of trust creation are fairly simple. A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a virtual container that holds title to money or property for somebody else. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. When you put assets into the trust, then the trust is funded. The assets you choose to put in a trust depend largely on your goals.

When you create a trust, you are known as the “grantor” (sometimes called the “settlor” or “trustor”). You, as the grantor, name other people, known as “beneficiaries,” who will benefit from the trust. Beneficiaries are usually your family and loved ones but can be anyone, even a charity. Your beneficiaries may receive income from the trust or may be able to access to principal assets of the trust either during your lifetime or after you die. The “trustee” is responsible for administering the trust, managing the assets, and distributing income and/or principal according to the terms of the trust. Depending on the purpose of the trust, you can name yourself, another person, or an institution, such as a bank, to be the trustee. You can even name more than one trustee if you like.

Creation of a Trust

To create a trust, the grantor simply needs to prepare a written document that outlines the purpose of the trust, identifies the trustee to manage the trust assets, and names the trust beneficiaries. While the trust document creates the trust, the trust cannot become effective until the grantor actually transfers property into and funds the trust.

Many times, the trustee will be compensated financially for managing the trust. Trusts also create a fiduciary relationship between the trustee and the beneficiaries, meaning that the trustee has a duty to act only in the best interests of the beneficiaries when managing the trust assets. If the trustee fails to act in the best interests of the beneficiaries, then the trustee can be held liable for any damages incurred by the beneficiaries.

Trust Terminology


Sometimes called a settlor or trustor, the grantor creates the trust and has the legal capacity to fund the trust by transferring property to be held in the trust.


The trustee can be any legal individual or corporation that will take title to property on behalf of the beneficiaries. The trustee must manage the assets in the trust according to the terms outlined by the grantor in the trust document.


The beneficiary, or sometimes beneficiaries, is the person benefiting from the trust. If there are multiple beneficiaries, they don’t all need to have the same interest in the trust property.

Trust Property

The trust property consists of the assets that get put inside the trust and is sometimes called the "principal" or the "corpus." Property can be any type of asset and can be transferred to the trust during the lifetime of the grantor (by using an inter-vivos or living trust) or under the will of the grantor after death (using a testamentary trust).

Revocable Trust

A revocable trust (sometimes called a "modifiable trust") is a trust that can be changed by the grantor during his or her lifetime. 

Irrevocable Trust

An irrevocable trust (sometimes called "non-modifiable trust") is a trust that cannot be changed by the grantor once the trust is deemed irrevocable. A trust can also be revocable during the grantor's lifetime and irrevocable upon death, if specified by the trust document.

Goals of Trusts

There are many reasons why you may choose to have a trust as part of your estate plan, including avoiding probate, providing financial support to family members, and providing privacy to your estate if the state where you live requires filing an inventory of assets.

Since trusts can be used for so many purposes, they are popular estate planning tools. Examples of trust goals are to:

  • Minimize estate taxes;

  • Shield assets from potential creditors;

  • Avoid the expense and delay of probating your will;

  • Preserve assets for your children until they are grown (in case you should die while they are still minors);

  • Create a pool of investments that can be managed by professional money managers;

  • Set up a fund for your own support in the event of incapacity;

  • Shift part of your income tax burden to beneficiaries in lower tax brackets;

  • Provide benefits for charity.

Disadvantages of Trusts

While there are certain advantages of using trusts as an estate planning tool, there are also some distinct disadvantages. A trust can be expensive to set up and maintain, between professional fees, trustee fees, and filing fees. Additionally, depending on the type of trust you choose, you may give up some control over the assets you choose to put into the trust. Lastly, there may be tax ramifications for certain actions taken by the grantor or trustee.

Contact a Wayside Legal Estate Planning Attorney

Wayside Legal LLC is an award-winning law firm located in North Bethesda, Maryland, with experience handling trusts and estate planning matters in Maryland, D.C., and Virginia. If you are facing a situation where you need assistance with planning for the future, contact a Wayside Legal attorney today for a consultation to discuss your specific estate planning needs.