In 1879, John D. Rockefeller, a rich industrialist and owner of Standard Oil, was facing a crisis. A self-made man who began his career as a bookkeeper at the age of sixteen, Rockefeller had built up Standard Oil through a system of mergers and acquisitions. A persistent entrepreneur, Rockefeller was involved in various industries, including the rapidly expanding railroads. By 1879 the New York State Legislature was looking into Rockefeller's dealings, specifically his railroad mergers, and when the investigation's findings were published in the Atlantic Monthly in 1881, public outcry made further mergers impossible.
Anxious to expand Standard Oil beyond Ohio, Rockefeller had been limited by antimonopoly laws and sentiment. Rockefeller, realizing that he was stymied after the legislative investigation and that he needed a change of direction, was intent on finding a backdoor to monopoly. His attorney, Samuel Dodd, provided the answer.
Dodd proposed the formation of a trust company, controlled by a board of nine trustees. This board would select directors and officers of component companies and would determine the dividends of the companies within the trust. Rather than acquiring companies directly, Rockefeller would instead control such companies indirectly via the trust. Such a form of corporate organization insured against a direct hierarchy with Rockefeller at the top; this legal technicality allowed Rockefeller to expand and continue to control his business. On 2 Jan uary 1882, the Standard Oil Trust became a reality, changing the face of big business.
As the U.S. economy expanded, so did the number of trusts, attracting such men as steel maker Andrew Carnegie, railroad tycoon Jay Gould, and financier J. P. Morgan. All would use the trust form to crush their competition and achieve monopolies in their industries.
Such concentration meant almost certain death for small businessmen and companies just getting started—they could not be competitive. The cry of "unfair" was quickly heard. Thomas Nast, the famous cartoonist who had exposed the corruption at Tammany Hall during the early 1870s, inflamed the public with caricatures of rich, powerful industrialists controlling everything from corn to Congress, while muckrakers such as Ida M. Tarbell exposed the greed and power behind the robber barons. By 1888, popular antipathy toward the trusts made them a key issue in the presidential election. Both the Democratic candidate, Grover Cleveland, and the Republican, Benjamin Harrison, were forced to make a campaign promise to fight trusts. In a closely contested election, Harrison would receive fewer popular votes, but would win the electoral college and become president.
Eager to gain public support, Harrison was prepared to sign into law antitrust legislation. Congress responded with the Sherman Antitrust Act, named after Ohio senator John Sherman. The Senate passed the bill by 51 to 1 on 8 April 1890. The bill then went on to the House, where it was passed unanimously.
Section 1 of the bill stated that "every contract combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Section 2 extended the law to anyone who attempted to "monopolize any part of the trade or commerce among the several States, or with foreign nations." Violation was ordained a felony, with each violation punishable by a fine of $350,000 and up to three years in jail.
Unfortunately, the bill was poorly worded. The legislators had failed to define the terms "restraint of trade," "combination," and "monopolize." What was to be considered restraint of trade, and how to determine "good" trusts from "bad?" were some immediate questions. This Act was used throughout the 1890s to block strikes. Companies such as Pullman Palace Railcar maintained that unions were prohibited under the "conspiracy to restrict trade" clause. Accepting this argument, the federal government sent troops to put down the Pullman strike of 1892.
A further setback came in 1895, when the Supreme Court, in the case of United States v. E. C. Knight Co. ruled that not all combinations constituted trusts that restrained interstate commerce, and such combinations could therefore not be prosecuted under the new law. The Court noted a distinct difference between commerce and manufacture, declaring that not all that is produced can be considered commerce. "Commerce succeeds to manufacture," the majority decision stated, "and is not a part of it … The fact that an article is manufactured for export to another state does not of itself make it an article of interstate commerce, and the intent of the manufacturer does not determine the time when the article or product passes from the control of the state and belongs to commerce." This decision implied that Congress did not have a right to control all products manufactured, since the simple manufacturing of a product did not make it "interstate commerce" and weakened the already ineffectual Interstate Commerce Commission.
The 1896 presidential campaign again brought the need for reform to the forefront. William Jennings Bryan, the popular orator and Democratic candidate for president, compared the rich industrialists to hogs. "As I was riding along," he declared, "I noticed these hogs rooting in a field, and they were tearing up the ground, and the first thought that came to me was that they were destroying a good deal of property. And that carried me back to the time when as a boy I lived upon a farm, and I remembered that when we had hogs we used to put rings in the noses of the hogs, and the thought came to me, 'Why did we do it?' Not to keep the hogs from getting fat. We were more interested in their getting fat than they were. The sooner they got fat the sooner we killed them; the longer they were in getting fat the longer they lived. But why were the rings put in the noses of those hogs? So that, while they were getting fat, they would not destroy more property than they were worth."
Bryan was not a socialist, but he did not want the Rockefellers, the Goulds, and the Morgans taking more than their share by way of muddy legal maneuvers. His opponent, William McKinley, meanwhile, received large donations from industrialist supporters, enabling his campaign to spend at least $4 million, a tremendous sum at the time. Some called this bribery, but Rockefeller and other industrialists insisted that they had a right to contribute money to candidates who supported their ideas. McKinley won the election by a comfortable margin, and the issue of trusts and monopolies seemed to be put on the backburner, especially with the advent of the Spanish-American War in 1898. McKinley was reelected in 1900; serious trust reform, it seemed, would have to wait. But McKinley's assassination in September 1901 brought Theodore Roosevelt into the White House.
Roosevelt, the "Hero of San Juan Hill" and former governor of New York, where he was outspoken in his criticisms of government policy toward business, quickly took big business to task, attacking the trusts and the newer "holding companies." Five months into Roosevelt's term, Morgan gave him the perfect opportunity to show his mettle when the financier formed the Northern Securities Company. The Northern Securities Company was a $4 million combination of all major groups competing for rail traffic in the northwest, including Rockefeller. Morgan thought that he would be able to negotiate with Roosevelt, even going so far as to suggest that "his man" meet with Roosevelt's "man" (Attorney General Philander C. Knox) to settle the matter.
Roosevelt was not interested in Morgan's negotiations. Instead, in 1902 he ordered Knox to bring suit against Northern Securities for violation of the Sherman Antitrust Act. The case went to the Supreme Court, and in a split five-to-four decision in Northern Securities Co. v. United States (1904), the Court sided with Roosevelt, proclaiming, "Congress has authority to declare, and by the language of its act, as interpreted in prior cases, has, in effect, declared, that the freedom of interstate and international commerce shall not be obstructed or disturbed by any combination, conspiracy, or monopoly that will restrain such commerce, by preventing the free operation of competition among interstate carriers engaged in the transportation of passengers of freight."
Roosevelt's challenge of Northern Securities quickly gained him popularity as a "trustbuster." The wave of support for Roosevelt forced Congress to create a Bureau of Corporations in the Department of Commerce and Labor to investigate the activities of corporations. Congress also passed the Elkins Act of 1903, which outlawed rebates to large shippers and increased the powers of the Interstate Commerce Commission. Although he preferred to regulate corporations rather than "bust" them, Roosevelt went on to file forty-three more antitrust suits. His successor, William Howard Taft, filed sixty-five suits against trusts; Taft is rarely given credit for his vigorous enforcement activities.
The robber barons were losing ground. In Standard Oil Co. v. United States (1911), a case pushed strongly by the Taft administration, the Supreme Court ruled that Rockefeller's Standard Oil combination had to be dissolved; the Court, however, left a small loophole that would later prove crucial in allowing some combinations, including U.S. Steel, to survive. The Court invoked a "Rule of Reason," declaring that the restraint upon trade must be "undue" or "unreasonable." As long as their tactics were not "unreasonable," the alleged robber barons could proceed.
In 1914, during the presidency of Woodrow Wilson, Congress passed the Clayton Antitrust Act; this Act prohibited mergers and acquisitions that tended to "substantially…lessen competition, or … to create a monopoly." The Act also outlawed the "interlocking" of corporate executives on boards of companies issuing more than $1 million in stocks and bonds, and forbade stock purchases and price discriminations in which the intent was to limit competition. Labor unions were exempted from these restrictions, and Congress included provisions for labor's right to strike.
That same year, the Federal Trade Commission (FTC) was created to replace the Bureau of Corporations. The FTC was granted the authority to investigate corporate activities and to make rulings on unfair monopolistic business practices; it was further empowered to regulate advertising and to keep Congress and the public informed of the efficiency of antitrust legislation.
The Depression and the New Deal brought more antitrust legislation. In 1934 Congress created the Securities and Exchange Commission to protect investors from "rags to riches" schemes and maintain the integrity of the securities market.
In 1936, the Robinson-Patman Act was passed. Its purpose was to protect small businessmen who were trying to get back into the market. While many small businesses had been wiped out by the Depression, most of the larger ones had managed to stay afloat. It was widely feared that these companies might expand in such bad times and use methods such as price discrimination to stifle competition. Robinson-Patman forbade firms involved in interstate commerce to engage in price discrimination when the effect would be to lessen competition or to create a monopoly. (This law is frequently referred to as the "Anti-Chain Store Act," as it has often been applied to them.) Through the 1940s and 1950s, the government would continue trust-busting activities. In 1969, the government filed suit against IBM, the corporate giant; the suit dragged on for thirteen years before the case was dismissed. By then IBM's business was threatened by personal computers and networked office systems. Many critics of antitrust legislation declared government intervention pointless, noting that technology is often its own safeguard against monopoly. In 1973, however, the government would succeed in forcing giant AT&T to dissolve.
During the late twentieth and early twenty-first centuries, the government engaged in a massive antitrust lawsuit against Microsoft, the computer-programming giant. The FTC began its attempt to dismantle Microsoft in 1989, accusing the company and its officers of engaging in price discrimination and claiming that the company deliberately placed programming codes in its operating systems that would hinder competition. Microsoft responded by changing its royalty policy. In 1997 Microsoft would come to trial once again, with the Department of Justice claiming that the company violated Sections 1 and 2 of the Sherman Antitrust Act. The case stemmed from the fact that Microsoft's Windows® program required consumers to load Microsoft's Internet browser, giving Microsoft a monopolistic advantage over other browser manufacturers. Microsoft claimed that this was a matter of quality service, not of monopoly. Microsoft claimed that it had produced a superior, more compatible product and that its intent was not to restrict commerce. In late 1999, the judge hearing the case ruled that Microsoft was, in fact, a monopoly and should be broken up. Two years later, in July 2001, an Appeals Court found that Microsoft had acted illegally but reversed the lower court ruling ordering a breakup.
Abels, Jules. The Rockefeller Billions: The Story of the World's Most Stupendous Fortune. New York: MacMillan, 1965.
Brands, H. W. TR: The Last Romantic. New York: Basic Books, 1997.
Chernow, Ron. The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor. New York: Vintage Books, 1997.
Garraty, John A. Theodore Roosevelt: The Strenuous Life. New York: American Heritage Publishing, 1967.
Laughlin, Rosemary. John D. Rockefeller: Oil Baron and Philanthropist. Greensboro, N.C.: Morgan Reynolds, 2001.
Tompkins, Vincent, ed. "Headline Makers." In American Eras: Development of the Industrial United States, 1878–1899. Detroit, Mich.: Gale Research, 1997.
Wheeler, George. Pierpont Morgan and Friends: The Anatomy of a Myth. Englewood Cliffs, N.J.: Prentice-Hall, 1973.
"Trusts." Dictionary of American History. . Encyclopedia.com. (January 17, 2019). https://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/trusts
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A trust is a tool that an individual or institution uses to transfer property to a beneficiary. The party that grants the property is called the trustor. The trustor, in turn, gives the property to the trustee, who is charged with the task of disbursing the property to the beneficiary according to the instructions of the trustor. In the early 1990s, more than $1 trillion were held in U.S. trusts.
One important advantage that a trust has over a simple gift is that the trustor can exercise control over the disbursement of funds or property over time, even after his or her death (or dissolution, in the case of an institutional trustor). For example, a trustor may stipulate that funds periodically transferred to an all-male academy must be terminated if the school begins enrolling females. A second, and perhaps more important, advantage is that trusts can be used to minimize tax burdens incurred when wealth is transferred.
The two main categories of trusts are non-charitable and charitable, they are differentiated from one another primarily by tax status. Charitable trusts are organized for non-profit beneficiaries, such as educational, religious, and charitable organizations. Beneficiaries of noncharitable trusts typically include individuals or groups—particularly relatives or employees of the trustor—or profit seeking organizations.
Most trustees in the United States are banks' trust departments. However, other types of financial institutions act as trustees, and some companies specialize in trust management. Furthermore, a few trustees are separate entities that have been set up as foundations to manage large trust funds.
"Trusts." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. (January 17, 2019). https://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/trusts
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Sections within this essay:Background
Types of Trusts
Asset Protection Trust
Special Needs Trust
Tax By-Pass Trust
Parties to a Trust
Reasons for Trust Creation
Avoiding a Conservatorship
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A trust is a legal entity created for the purpose of holding, managing, and distributing property for the benefit of one or more persons. A trust can hold cash, personal property, or real property, or it can be the beneficiary of life insurance proceeds. In the most basic sense, a trust is just another form of a contract. Centuries ago, English landowners, in order to insure the continued wealth of the family, put their estates in trust to be controlled and managed under the terms of the trust agreement for an indefinite period of time. Once the land was placed in trust, the landowners controlled but technically no longer owned the land. As wealth was primarily measured at that time in history by the amount of land owned, the trust arrangement allowed the landowners immunity from creditors and may have absolved them of certain feudal obligations. While feudal concerns no longer exist and wealth is held today in many forms other than land, the concept of placing property in third party hands for the benefit of another while avoiding creditors has survived. A trust remains in many circumstance an effective tool to insure that the trust creator's wishes regarding the trust assets are complied with for many years, even during periods of the creator's mental incompetency or after death.
A trust can be created during a person's lifetime and survive the person's death. A trust can also be created by a Will and formed after death. Once assets are put into the trust they belong to the trust itself, not the trustee, and remain subject to the rules and instructions of the trust contract. Most basically, a trust is a right in property, which is held in a fiduciary relationship by one party for the benefit of another. The trustee is the one who holds title to the trust property, and the beneficiary is the person who receives the benefits of the trust. While there are a number of different types of trusts, the basic types are revocable and irrevocable.
Revocable Trusts are created during the lifetime of the trustmaker and can be altered, changed, modified or revoked entirely. Often called a Living Trust, these are Trusts in which the trustmaker transfers the title of a property to a Trust, serves as the initial Trustee, and has the ability to remove the property from the Trust during his or her lifetime. Revocable Trust are extremely helpful in avoiding probate. If ownership of assets is transferred to a revocable trust during the lifetime of the trustmaker so that it is owned by the trust at the time of the trustmaker's death, the assets will not be subject to probate.
Although useful to avoid probate, a revocable trust is not an asset protection technique as assets transferred to the trust during the trustmaker's lifetime will remain available to the trustmaker's creditors. It does make it more somewhat more difficult for creditors to access these assets since the creditor must petition a court for an order to enable the creditor to get to the assets held in the trust. Typically, a revocable trust evolves into an irrevocable trust upon the death of the trustmaker.
An Irrevocable Trust is one which cannot be altered, changed, modified or revoked after its creation. Once a property is transferred to an Irrevocable Trust, no one, including the trustmaker, can take the property out of the Trust. It is possible to purchase Survivorship Life Insurance, the benefits of which can be held by an Irrevocable Trust. This type of survivorship life insurance can be used for estate tax planning purposes in large estates, however, survivorship life insurance held in an Irrevocable Trust can have serious negative consequences.
An Asset Protection Trust is a type of Trust that is designed to protect a person's assets from claims of future creditors. These types of Trusts are often set up in countries outside of the United States, although the assets do not always need to be transferred to the foreign jurisdiction. The purpose of an Asset Protection Trust is to insulate assets from creditor attack. These trusts are normally structured so that they are irrevocable for a term of years and so that the trustmaker is not a current beneficiary. An asset protection trust is normally structured so that the undistributed assets of the trust are returned to the trustmaker upon termination of the trust provided there is no current risk of creditor attack, thus permitting the trustmaker to regain complete control over the formerly protected assets.
Charitable Trusts are trusts which benefit a particular charity or the public in general. Typically Charitable Trusts are established as part of an estate plan to lower or avoid imposition of estate and gift tax. A charitable remainder trust (CRT) funded during the grantor's lifetime can be a financial planning tool, providing the trustmaker with valuable lifetime benefits. In addition to the financial benefits, there is the intangible benefit of rewarding the trustmaker's altruism as charities usually immediately honor the donors who have named the charity as the beneficiary of a CRT.
A Constructive Trust is an implied trust. An Implied Trust is established by a court and is determined from certain facts and circumstances. The court may decide that, even though there was never a formal declaration of a Trust, there was an intention on the part of the property owner that the property be used for a particular purpose or go to a particular person. While a person may take legal title to property, equitable considerations sometimes require that the equitable title of such property really belongs to someone else.
A Special Needs Trust is one which is set up for a person who receives government benefits so as not to disqualify the beneficiary from such government benefits. This is completely legal and permitted under the Social Security rules provided that the disabled beneficiary cannot control the amount or the frequency of trust distributions and cannot revoke the trust. Ordinarily when a person is receiving government benefits, an inheritance or receipt of a gift could reduce or eliminate the person's eligibility for such benefits. By establishing a Trust, which provides for luxuries or other benefits which otherwise could not be obtained by the beneficiary, the beneficiary can obtain the benefits from the Trust without defeating his or her eligibility for government benefits. Usually, a Special Needs Trust has a provision which terminates the Trust in the event that it could be used to make the beneficiary ineligible for government benefits.
Special needs has a specific legal definition and is defined as the requisites for maintaining the comfort and happiness of a disabled person, when such requisites are not being provided by any public or private agency. Special needs can include medical and dental expenses, equipment, education, treatment, rehabilitation, eye glasses, transportation (including vehicle purchase), maintenance, insurance (including payment of premiums of insurance on the life of the beneficiary), essential dietary needs, spending money, electronic and computer equipment, vacations, athletic contests, movies, trips, money with which to purchase gifts, payments for a companion, and other items to enhance self-esteem. The list is quite extensive. Parents of a disabled child can establish a Special Needs Trust as part of their general estate plan and not worry that their child will be prevented from receiving benefits when they are not there to care for the child. Disabled persons who expect an inheritance or other large sum of money may establish a Special Needs Trust themselves, provided that another person or entity is named as Trustee.
A Trust that is established for a beneficiary which does not allow the beneficiary to sell or pledge away interests in the Trust. A Spendthrift Trust is protected from the beneficiaries' creditors, until such time as the Trust property is distributed out of the Trust and given to the beneficiaries.
A Tax By-Pass Trust is a type of Trust that is created to allow one spouse to leave money to the other, while limiting the amount of Federal Estate tax that would be payable on the death of the second spouse. While assets can pass to a spouse tax-free, when the surviving spouse dies, the remaining assets over and above the exempt limit would be taxable to the children of the couple, potentially at a rate of 55%. A Tax By-Pass Trust avoids this situation and saves the children perhaps hundreds of thousands of dollars in Federal taxes, depending upon the value of the estate.
A Totten Trust is one that is created during the lifetime of the grantor by depositing money into an account at a financial institution in his or her name as the Trustee for another. This is a type of revocable Trust in which the gift is not completed until the grantor's death or an unequivocal act reflecting the gift during the grantor's lifetime. An individual or an entity can be named as the beneficiary. Upon death, Totten Trust assets avoid probate. A Totten Trust is used primarily with accounts and securities in financial institutions such as savings accounts, bank accounts, and certificates of deposit. A Totten trust cannot be used with real property. A Totten Trust provides a safer method to pass assets on to family than using joint ownership. To create a Totten Trust, the title on the account should include identifying language, such as "In Trust For", "Payable on Death To", "As Trustee For", or the identifying initials for each, "IFF", "POD", "ATF". If this language is not included, the beneficiary may not be identifiable. A Totten Trust has been called a "poor man's" trust because a written trust document is typically not involved and it often costs the trustmaker nothing to establish.
There are typically three main parties to a Trust. The Trust Maker, sometimes called the Grantor or Maker, is the person who creates the Trust. The Trustee is the person or entity named to hold the legal title to the Trust estate. There may be one or several Trustees. The Beneficiaries are the persons who the Trust Creator intended to benefit from the Trust estate. The rights of the beneficiaries depend on the terms of the Trust. Beneficiaries have the equitable title to the property held in the Trust. During the lifetime of the Trustmaker, the Trustmaker, Trustee and Beneficiary can all be the same individual. This is most often the case in Revocable Trusts.
The Trust Creator, sometimes called the Grantor or Trustmaker, is the person who started out as owner of the property that is to be transferred to and held by the Trust. The trustmaker makes an agreement with the trustee agreeing to convey his or her property into the name of the trustee for the benefit of the beneficiaries.
A Trustee is a person or institution selected to follow the instructions provided by the declaration of Trust. A Trustee has a very high "fiduciary duty" to act with the utmost good faith in dealing with the Trust estate. Many grantors and their respective spouses act as the initial Trustees of a revocable living Trust. In this way they remain in control until they are incapacitated or die. Then pre-selected successor Trustees are appointed in accordance with the terms of the declaration of Trust. Usually a spouse, family member or trusted friend are selected as successor Trustees. Trustees should be knowledgeable about financial matters, be Trustworthy, know how to manage and invest the Trust estate, care about the beneficiaries of the Trust, and have the financial capacity to reimburse the Trust in the event that they make serious mistakes. If a bank or Trust company is selected to serve as a Trustee of a Trust, it will usually charge a fee for this service, which is paid from the Trust estate.
Because the beneficiary, trustmaker, and the trustee can be the same person, the trustmaker and trustee can agree that the trust creator keep complete control over the trust by retaining the right to remove and replace the trustee, sell or transfer the original trust property, dissolve or revoke the trust, and change the trust beneficiaries.
The Beneficiaries are the persons whom the Trust Creator intended to benefit from the Trust estate. Beneficiaries are said to have the "equitable title" to the property held in the Trust. The rights of the beneficiaries depend on the terms of the Trust. The trust agreement can provide that the beneficiaries have almost complete control over the manner in which trust assets are held and managed, as well as control over the timing and dollar amounts of distributions. Or the beneficiaries could be given absolutely no control. The decision as to how trust powers are apportioned depends on the trustmaker's objectives, trust, and confidence in the trustee, and tax consequences.
Once the trustmaker of a revocable trust dies and the trust becomes irrevocable, an anti-alienation clause usually protects the assets held in the trust form being used as collateral by the beneficiaries. Thus, creditors cannot force a trustee to make a distribution to the trust beneficiaries and the assets held in a trust can remain outside the reach of the beneficiaries' creditors.
A trust can be use to maintain control over the trust assets for a designated period of time which may survive death.
Tax and asset protection aspects of trusts depend on the financial situation of the creator and the type of trust used. In certain circumstances, a trust can achieve substantial tax savings yet not achieve asset protection from creditors of the trustmaker. Every-one gets a lifetime credit against Federal Estate Taxes that permits a transfer of up to $675,000 Estate Tax free. Individuals and married couples with a total estate value less than $675,000 in 2000 (the amount will gradually increase to the year 2006) do not need a trust to save on Federal Estate or Gift Tax. For those who are married, there is an unlimited marital deduction. All estate taxes can be avoided upon the death of the first spouse to die. However, the surviving spouse would have to remarry and give the entire estate to the new spouse in order to get another unlimited marital deduction. Many people would rather their own children benefit from their estate, rather than having a surviving spouse pass it on to a new spouse. A trust can accomplish this. The trustmaker can establish a tax by-pass Trust to hold property for children, while still allowing the trust funds to provide for the surviving spouse. This arrangement enables the trustmaker to place up to $675,000 in a Trust for the benefit of the surviving spouse and children which will not be subject to estate tax upon the death of the surviving spouse. Coupled with the surviving spouse's estate and gift tax credit, the children could then inherit up to $1,350,000 free from Federal Estate and Gift Tax. At current Federal Estate Tax rates, this could amount to a significant savings of hundreds of thousands of dollars.
Assets may be put in trust because the trust creator has confidence in the prospective trustee's knowledge, experience, or ability to properly manage the type of assets to be transferred into the trusts. The utilization of a trustee in such circumstances may have the additional advantage of relieving the beneficiaries of what may otherwise be a burden.
If property is held in a Trust, a successor Trustee can step in and take over management, without the delay and expense of going to court to appoint a conservator to manage the property, if the Trust Creator becomes disabled. This may be particularly important if the trustmaker is self-employed or owns a portion of a business or partnership.
In many estate plans, the Trust is the central tool that is used to control and manage property. A Trust continues despite the incapacity or death of the grantor. It determines how a Trustee is to act with respect to the Trust estate. It determines how property is to be distributed after the death of the grantor. A properly drawn Trust is a separate entity that does not die when the creator dies. The successor Trustee can take over management of the Trust estate and pay bills and taxes, and promptly distribute the Trust assets to the beneficiaries, without court supervision, if the Trust agreement gives the Trustee that power. Trusts, unlike Wills, are generally private documents. The public would be able to see how much the descendent owned and who the beneficiaries were under a Will, but typically not with a Trust. Like a Will, however, a Trust can be used to provide for minor children, children from a prior marriage and a second spouse in the same trust, transfer a family-operated or closely-held business, provide for pets, provide for charities and can remove life insurance benefits from a taxable estate, while still controlling the designation of insurance beneficiaries.
Trusts are often created as an alternative to or in conjunction with a Will. Trusts are today usually considered an estate planning tool. The Uniform Probate Code includes provisions dealing with affairs and estates of the deceased and laws dealing with nontestamentary transfers such as trusts. The theory behind the Code is that wills and trusts are in close relationship and thus in need of unification. Since its creation, over thirty percent of states have adopted most provision of the Code.
Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (and Others) Condon, Gerald, HarperCollins, 2001.
Make Your Kid a Millionaire: Eleven Easy Ways Anyone Can Secure a Child's Financial Future McKinley, Kevin, Simon & Schuster, 2002.
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"Trusts." Gale Encyclopedia of Everyday Law. . Encyclopedia.com. (January 17, 2019). https://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/trusts
"Trusts." Gale Encyclopedia of Everyday Law. . Retrieved January 17, 2019 from Encyclopedia.com: https://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/trusts