What is a Trust?
Example: You are visiting your sister in Australia for six months and your son needs $5000 for living expenses while you are gone.
You could deposit $5000 in his checking account. But what if you are concerned that he might spend it on a wall size plasma television and have nothing left for food?
Instead of giving him the money outright, you could give it to your best friend with instructions regarding how the money is to be spent for your son’s benefit.
By giving the money to your best friend for your son’s benefit, you have established a Trust. You are the Grantor because you gave the money to your friend. Your friend is the Trustee because she is the one responsible for the management and distribution of the money according to your instructions. Your son is the Beneficiary because he will receive the benefit of the money you have put in the Trust. The list of instructions you gave your friend is the Trust Agreement. It tells your friend (Trustee) what to do. The $5000 is the Principal of the trust.
There are many types of trusts: revocable, irrevocable, living, testamentary and other distinctions. Illinois law sets forth requirements for all of them.
If you are interested in setting up a trust or establishing an estate plan involving a trust, contact a law firm that concentrates in the area of estate planning.