A trust is a legal arrangement in which a person or entity (the settlor) gives authority to another person, known as a trustee, to hold and manage assets for the benefit of a third party. Trusts are not just for the rich and idle, but are widely used for various purposes. There are six categories of trusts: testamentary, living, revocable, irrevocable, and revocable. A settlor can reserve some of his or her rights or the trustee may act as a beneficiary.

A constructive trust is different from an express trust, in that it is not created by the settlor and the trustee. It is imposed by the law as an “equitable remedy” and is generally created in the context of a wrongdoing. While the wrongdoer has gained legal title to the assets, it cannot benefit from them. In this situation, a plaintiff can seek to establish a constructive trust, and a court of equity may recognize the plaintiff’s claim and order the person holding the assets to turn over the assets to the rightful owner.

An irrevocable trust, on the other hand, cannot be amended after it has been established. Once set up, irrevocable trusts are not subject to estate taxes or probate. An irrevocable trust also protects the grantor from estate taxes. An irrevocable life insurance trust, for instance, can pay out to beneficiaries or cover estate expenses, while a living trust may be taxable. But it’s still better to avoid an irrevocable trust if you want to avoid estate taxes and avoid probate.

Another great benefit of a trust is that you can set up a trust with any amount of money. While many people think of millionaires and billionaires who benefit from a trust, a simple trust can be set up for only a few hundred dollars. If you’d prefer the professional services of an attorney, a trust attorney can be set up for a few thousand dollars. There are no minimum requirements for having a trust, and the fees charged are typically based on how complex the trust is.

Naming a trust is easy and represents your family and is easy to remember. An ideal name for a trust is your family name, the date it was established, and the words “Family Trust.” Naming your trust in this manner leaves little room for misinterpretation. And the date also serves as an organizational tool. If your beneficiaries have a question about the name of a trust, a financial professional can help them. You should also consult with an attorney and/or a tax adviser.

Beneficiaries are the owners of the trust’s assets and will receive both the income and the property. Beneficiaries will have varying degrees of interest in the trust, depending on how the trust is drafted. A beneficiary may receive income only from a bank account while another may receive all of the trust’s assets upon reaching age 25. While the settlor has broad discretion in naming beneficiaries, he or she may be limited by law. If the trust is an employee share plan, for example, the grantor may become the sole beneficiary.