Trust property (also called trust assets or trust corpus) is any asset placed into a trust so it is held and managed by a trustee for the benefit of one or more beneficiaries. Trust property can include cash, securities, real estate, life‑insurance proceeds, business interests, and virtually any other asset that can be legally transferred into a trust. Once assets are transferred into a trust, the trust — not the original owner — is typically the legal owner of those assets. (Investopedia; Cornell Law School)
Key takeaways
– Trust property = assets placed in a fiduciary relationship (trustor/grantor → trustee → beneficiary). (Investopedia)
– Trusts are used to manage and distribute assets, help avoid probate, provide creditor protection (in some cases), and accomplish tax or care objectives. (Investopedia)
– Main categories: revocable trusts (grantor retains control) and irrevocable trusts (grantor gives up legal control). Tax and estate consequences differ between them. (Investopedia)
– In 2025 the federal estate tax exemption is $13.99 million per decedent (IRS). (IRS)
– Trusts are used by many types of families; in 2022 about 6% of U.S. families reported having “any kind of trust or managed investment account.” (Federal Reserve)
Understanding trust property
– Parties and roles
• Trustor (also called grantor, settlor, donor): person who creates the trust and transfers assets into it.
• Trustee: person or institution that legally holds and manages trust property under the terms of the trust and fiduciary law. (Cornell Law School)
• Beneficiary: person(s) or entity who receives the benefits of the trust property.
– Legal ownership: When property is properly transferred into a trust, title is held by the trust (or by the trustee for the trust), not the grantor (especially important in irrevocable trusts).
– Trustee duties: The trustee must act in accordance with the trust instrument and applicable law, manage assets prudently, avoid conflicts of interest, and act in the beneficiaries’ best interests. (Cornell Law School)
Types of trusts (overview and practical implications)
– Revocable living trust
• Grantor retains control, can change or revoke the trust during lifetime.
• Income from trust assets is typically taxed to the grantor.
• Avoids probate for assets properly funded into the trust, but generally does not shield assets from the grantor’s creditors or reduce estate tax exposure (because the grantor still legally owns the assets). (Investopedia)
– Irrevocable trust
• Grantor transfers legal ownership to the trust/trustee and usually cannot change beneficiaries or terms without following strict procedures (or not at all).
• Assets removed from the grantor’s estate for estate tax purposes (may reduce estate tax exposure) and may provide some creditor protection.
• May change who bears income tax depending on trust structure. (Investopedia)
– Testamentary trusts (including POD arrangements tied to death)
• Created by a will or that take effect at death; property is transferred at the grantor’s death.
• Can avoid probate if assets are designated to transfer directly on death (payable‑on‑death (POD) designations) or held in accounts that pass outside probate. (Investopedia)
– Living trust
• Created during the grantor’s lifetime — can be revocable or (less commonly) irrevocable — and can hold assets that are to be managed or distributed while the grantor is alive or at death. (Investopedia)
– Special types and uses
• Special needs trust: preserves eligibility for public benefits while providing for supplemental needs of a beneficiary with disabilities.
• UGMA/UTMA custodial accounts: custodial arrangements for minors (not technically a trust in many jurisdictions, but serve a similar custodial purpose).
• Life insurance trusts, charitable trusts, spendthrift trusts, and others — each has specific legal, tax, and administration features.
Payable on Death (POD) and testamentary considerations
– POD beneficiary designations (for bank accounts, brokerages, and many financial assets) pass outside probate directly to the named beneficiary on the owner’s death. These are not always “trusts” in the strict sense but can be used in tandem with trusts or wills to accomplish probate‑avoidance goals. (Investopedia)
– Testamentary trusts are created by a will and only become effective at death; they do not avoid probate for the estate assets that fund them through the will (because the will must be probated). But POD designations and trust accounts funded during life can avoid probate. (Investopedia)
Are trusts just for the wealthy?
– No. Trusts serve many purposes aside from estate tax planning, such as:
• Managing assets for minors or beneficiaries who lack capacity.
• Protecting assets for a beneficiary with special needs.
• Avoiding probate for any level of assets if the grantor wishes to streamline transfer.
• Controlling distributions (e.g., education funds, staged inheritances).
– While very large estates often use trusts for estate tax planning, smaller estates may use trusts primarily for management, privacy, and probate avoidance. (Investopedia)
How common are trusts?
– According to the Federal Reserve’s 2022 Survey of Consumer Finances, about 6% of families reported having “any kind of trust or managed investment account.” Use of trusts rises with wealth and age, but trusts are used across many socioeconomic groups for varying goals. (Federal Reserve)
Can the trustee and the beneficiary be the same person?
– Yes, but with limitations:
• A trustee can also be a beneficiary as long as they are not the sole beneficiary (to avoid conflicts and legal issues). Placing the same person as sole trustee and sole beneficiary could defeat the trust’s purpose (especially for irrevocable trusts intended to remove assets from a grantor’s estate).
• In revocable living trusts, the grantor often is trustee and primary beneficiary during life (for convenience). At death, successor trustees and beneficiaries take over. (Investopedia; Cornell Law School)
Practical steps to create and fund a trust
1. Define your goals
• Decide what you want the trust to achieve: probate avoidance, tax planning, asset protection, care for a minor or disabled person, privacy, or charitable giving.
2. Choose the trust type that matches your goals
• Revocable living trust for probate avoidance and management flexibility.
• Irrevocable trust for estate tax reduction and creditor protection.
• Special-purpose trusts (special needs, life insurance, charitable remainder) where appropriate.
3. Select parties
• Choose a reliable trustee (individual or corporate) and successor trustees.
• Name beneficiaries and contingent beneficiaries. Consider successor beneficiaries and how distributions are to be made.
4. Draft the trust document
• Work with an experienced estate‑planning attorney. The trust agreement should specify trustee powers, beneficiary rights, distribution rules, successor trustees, trust termination, and mechanisms for amendment (if revocable).
5. Fund the trust (crucial step)
• Title and beneficiary designations must be changed for real estate, bank and brokerage accounts, retirement accounts (special rules apply), life insurance, business interests, and other assets. A trust is ineffective with respect to an asset left in the grantor’s name.
• For real estate: execute a deed transferring the property into the trust (follow local recording rules).
• For bank/brokerage accounts: change title or open new accounts in the trust’s name; consider POD or TOD designations as complementary tools.
• For retirement accounts: be cautious; designating the trust as beneficiary has special tax consequences and should be done with professional tax/estate planning advice.
6. Review tax implications
• Revocable trust income is usually reported on the grantor’s tax return. Irrevocable trusts may be separate tax entities.
• Consider estate tax thresholds (e.g., 2025 federal exemption is $13.99 million). State estate or inheritance taxes may apply at much lower thresholds.
• Consult a tax professional before funding certain assets into an irrevocable trust.
7. Implement supporting documents
• Pour‑over will (to catch assets not retitled into the living trust), powers of attorney, health care directives, and beneficiary designations.
8. Keep records and periodically review
• Update the trust after major life events (marriage, divorce, births, deaths, moves to new state, significant changes in asset values, or law changes).
9. Trustee administration
• Trustees should follow fiduciary duties, maintain records, file tax returns for the trust when required, and make distributions per the trust’s terms. Seek professional help (attorneys, accountants, trust companies) when needed.
Common mistakes to avoid
– Not funding the trust (the trust document does nothing unless assets are properly transferred).
– Failing to update beneficiary designations, which can override trust instructions.
– Naming an unsuitable trustee without considering succession or continuity.
– Putting retirement accounts into an irrevocable trust without understanding retirement account tax rules.
– Trying to DIY complex irrevocable or special needs trusts without professional advice.
When to consult professionals
– Always consult an estate‑planning attorney before creating irrevocable trusts or trusts with complex tax, Medicaid eligibility, special needs, or business succession implications.
– Use a tax advisor for the tax consequences of trust funding and administration.
– Consider corporate trustees (banks or trust companies) if you want professional continuity and administrative support.
The bottom line
Trust property is simply assets placed into a trust to be managed by a trustee for beneficiaries. Trusts are versatile planning tools used for probate avoidance, asset management, special needs planning, creditor protection, and sometimes tax planning. Choosing the right trust and properly funding and administering it are essential — and legal and tax advice is often necessary to avoid unintended consequences.
Sources
– Investopedia. “Trust Property.”
– Internal Revenue Service (IRS). “IRS Releases Tax Inflation Adjustments for Tax Year 2025.”
– Board of Governors of the Federal Reserve System. “Changes in U.S. Family Finances from 2019 to 2022.”
– Cornell Law School Legal Information Institute. “Trustee.”
Editor’s note: The following topics are reserved for upcoming updates and will be expanded with detailed examples and datasets.