Trust Validity

Trust Validity
question

What are the main requirements that must be present in order to create a valid trust?

answer

There are a number of requirements to have a trust, which might include:

  • Grantor, trustor or settlor, who sets up the trust. The grantor must be competent to sign the document.
  • Trustee - a person must be named to administer the trust and hold legal, not equitable title to the property.
  • Res or property, the corpus, principal or assets of the trust. This is not always essential to a valid trust. For example, a "standby" trust is a trust prepared and signed waiting in "standby" for a future contribution of assets (e.g., on the death of the person to fund it).
  • Beneficiaries - the people whom the trust will benefit from.
  • Purpose - there must be a purpose for the trust.

In most instances the trust will be evidenced by a written signed document, called a trust agreement. If there is no written signed agreement, state law in your state may permit an oral trust. In some instances the courts will impose an equitable or constructive trust over property.

All the above being said, you must consult state law (or the laws of the country) where the trust is formed to determine the minimum requirements. Minimum requirements aside if you are planning a trust transaction, the objective should be to meet the grantor's goals, not merely being able to satisfy the minimum requirements of state law.

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