What Is Trust Property?

What Is Trust Property?

Let me explain trust property directly: it's the assets you've placed into a trust, creating a fiduciary setup between you as the trustor and a trustee, all for the benefit of your chosen beneficiaries. You can include just about any asset here—cash, securities, real estate, or even life insurance policies. People also call this trust assets or trust corpus, and that's the straightforward term I'll use.

Key Takeaways

Here's what you need to grasp: trust property means the assets in a trust that a trustee controls for the beneficiaries. In certain setups, it shifts tax liability from you, the trustor, to the trust itself. Through estate planning, this property can go straight to your beneficiaries after your death, skipping the probate process entirely.

Understanding Trust Property

As the trustee, you're obligated to handle the trust property according to the trustor's instructions and always in the best interest of the beneficiary. You could be an individual or a bank acting in this role. Sometimes, the trustor—also known as a settlor or grantor—steps in as trustee to manage assets for someone else, like a child.

No matter who you are as trustee, you must follow the specific rules and laws for that trust type. Once assets move into the trust, the trust owns them outright. In an irrevocable trust, the original owner can't control or reclaim those assets anymore.

Types of Trusts

Trusts come in various forms, but they mainly divide into revocable and irrevocable categories. Let me break them down for you.

Revocable Trust

In a revocable trust, you as the trustor keep legal ownership and control over the assets. That means you're on the hook for taxes on any income they produce, and the trust could face estate taxes if its value exceeds the exemption limit at your death—in 2025, that's $13.99 million.

Irrevocable Trust

With an irrevocable trust, you transfer legal ownership to the trustee, so those assets aren't yours anymore, which reduces your taxable estate. You also give up rights to change the trust, like switching beneficiaries, unlike in a revocable setup.

Important Note

Keep in mind, you might hear trustor called grantor or donor depending on the context.

Payable on Death (POD) Trust

You can set up trusts during your lifetime or after death, like with a Payable on Death (POD) trust, which moves assets to a beneficiary only after you pass. These are often called testamentary trusts since the transfer happens post-death. The assets go directly to beneficiaries, avoiding probate—the lengthy and costly legal validation of a will. You can even specify these in your will.

Living Trust

In a living trust, you transfer assets while still alive. For instance, parents might set up bank accounts in trust for their kids to cover college costs. The trustee manages these carefully, but the children don't get full access or spending freedom. Think of something like a Uniform Gifts to Minors Act (UGMA) account. Beneficiaries, such as children, might only access the assets and income after reaching a set age.

Are Trusts Just for the Wealthy?

No, trusts aren't exclusive to the rich. Anyone can benefit from them, like with a special needs trust that holds assets for someone with a disability, regardless of family background.

How Common Are Trusts?

Based on the Federal Reserve's 2022 Survey of Consumer Finances, 6% of families have some kind of trust or managed investment account.

Can the Trustee and the Beneficiary Be the Same Person?

Yes, a trustee can also be a beneficiary, but only if they're not the only one.

The Bottom Line

Trust property fits into estate planning to transfer assets upon death and cut tax burdens. Some trusts even shield assets from bankruptcy or lawsuits. If you're thinking about setting one up, consult an estate planning attorney who knows trusts inside out.