Trusts are basically an arrangement with legal documents were in the trustee on behalf of the beneficiary holds the legal title of the property. Beneficiaries are certain people or rather in most cases, they are children whose parents have passed away at an early stage.
However, a trustee may or may not be a person. A trustee can be a law firm or even a bank. The concept of trust started to avoid cases of probation. Over the years trusts were different into parts but the meaning and overall work remained the same.
Trusts are basically divided into two parts. They are as follows:
Testamentary trust– this is a trust that can be created by a will. However, the main thing is it only activates or comes into existence once the donor dies. Until and unless the donor dies the beneficiary will not be changed.
Inter Vivos trust– this is completely different from testamentary trusts. Unlike testamentary trusts here the trust comes into existence once the donor wants. So the donor can live while the trust has already started to grow.
Now inter vivos trust has two separate branches. They are given below:
Revocable trust- revocable trust is better known as a living trust. This is such a trust where the donor will have full control and it is as per his words that the trust can be terminated or amended. Such trusts are generally seen in cases of tax planning and asset management.
Irrevocable trust– this is totally opposite to revocable trust. Here the donor does not have any control or power over the termination or amendment of the trust. Once the trust is generated it remains fixed and it cannot be changed at all. These kinds of trust are normally seen in cases of Medicaid planning.
The trust is widely considered to be the most innovative contribution of the English legal system. Today, trusts play a significant role in most common law systems, and their success has led some civil law jurisdictions to incorporate trusts into their civil codes.