What is a Transfer in Trust?
A transfer in trust is a transfer of assets held for someone else's benefit to a third party, known as the trustee. When a transfer in trust is performed, the person who set up the trust gives up the title to the assets and no longer has control of them. This method of setting up a trust is one of many ways to set up a trust and has both drawbacks and advantages.
The person who establishes a trust is known as the grantor or trustor. There are a number of reasons for people to make trusts. They may want to set aside assets to care for dependent children or to benefit a charitable organization, for example. Trusts are also used for people who want to keep assets available to pay for their retirement without compromising eligibility for government benefits. When assets are kept in a trust, they are administered by a trustee who is charged with caretaking the trust and disbursing assets as needed.
In a transfer in trust, the trustor assigns the ownership of the trust to someone else, who acts as the trustee. The grantor no longer has any hold on the assets and is not involved in making decisions about how to operate the trust. This may be done when there are legal reasons to be separate from the assets, when a trustor does not want to act as the trustee, or when a trustor has concerns about her or his ability to manage the trust appropriately.
The trustee controls the assets, but the assets are not there for the benefit of the trustee. Trustees are paid for the work that they do and must take compensation that is reasonable. A trustee who abuses the position by taking substantial payments out of the trust or directly flouting the will of the grantor can be removed. The beneficiary of the trust may sue a trustee or a regulatory agency may step in to protect the beneficiary's interests in these situations.
Also known as a conveyance in trust, a transfer in trust is a big decision. Someone who has concerns about how the assets in a trust will be managed should consult a lawyer to talk about the options available and the potential consequences of making a transfer in trust. Lawyers who specialize in trust and estate planning can assist people with developing a trust that will meet their needs and satisfy all legal requirements.
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