A legal trust is a relationship in which one person owns property for the benefit of another. In most cases, a trust can be established by a single document. Nevertheless, there are several types of documents that can be used in relation to a trust. The traditional approach to creating a trust is through a trust agreement. A trust declaration establishes ownership of property in trust for another.
A trust agreement creates a trust by defining the parameters of the relationship. Its essential parts are identification of the grantor, trustee(s) and beneficiaries, the purpose of the trust, the powers of the trustee(s), and the rights of the grantor and beneficiaries. The trust agreement directs how the trustee(s) should manage and disburse assets and how and when the grantor can amend or revoke the trust.
Read More: Definition of Trust Agreement
A declaration of trust can create a trust directly or indirectly. At its most basic, a declaration of trust simply declares that certain property to which the declarant holds title is in fact the property of another being held "in trust." A declaration of trust can also closely resemble a trust agreement in specifying detailed parameters of the trust relationship and appointing trustees and successor trustees. Unlike a trust agreement, which must be executed by the grantor and trustee(s), the declaration of trust need only be signed by the grantor (declarant).
A trust can also be formed through a Last Will and Testament. A trust so formed is called a testamentary trust, and only takes effect after the death of the grantor (or testator). Because testamentary trusts do not have to contemplate management of assets during the grantor's life, they are primarily focused on how assets are to be distributed to beneficiaries.
Power of Attorney
A power of attorney is not necessary in creating a trust. It can nevertheless be useful in aiding a trustee in performing related duties on behalf of the grantor. Like a trust, a power of attorney creates a relationship between the grantor and the trustee that allows the latter to perform certain tasks or access accounts as if they were the former. A power of attorney can make it easier for the trustee to interact with banks or other institutions.
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