A trust is a legal arrangement based on the administration of a trust creator’s property and assets by a third party. This third party will be a trustee and will work for the creator of the trust. How the trust is administered will be based on the governing legal agreement between the trust creator and the trustee. There will be a significant expectation of fiduciary duty to the trustee. A trust can be flexible as well as complicated. There are different types of trusts and each have their own individual advantages and disadvantages.
The classification of a trust will be based on many different factors. One factor is the revocability of a trust. When the trust agreement retains the right of the trust maker with consent of a third party or unilaterally to revoke the trust and take back assets in the trust; it is a revocable trust. An irrevocable trust does not have such a stipulation in its agreement.
This is a trust put in place during the lifetime of a trust maker and is designed to be altered, modified or revoked. Many times a revocable trust is referred to as a living trust. These trusts are popular as a way to avoid probate in the event a trust maker passes away. All the assets placed in this trust at the time a trust maker’s death will not be required to be part of a probate. A revocable trust is not an effective tool for protecting assets during the trust maker’s life. They will continue to be vulnerable to a trust maker’s creditors who try to use a court to obtain the assets during a trust maker’s lifetime.