Black's Law Dictionary defines a trust as "an equitable or beneficial right or title to land or other property, held for the beneficiary by another person, in whom resides the legal title or ownership" This definition encapsulates the essence of a trust as a legal arrangement where one party holds property on behalf of another, ensuring the property is managed and applied according to the trust's terms for the benefit of the beneficiaries.
In the establishment of a trust, there are typically three key parties involved:
The Grantor (or Settlor): This is the person who creates the trust, deciding how the assets within the trust should be managed and distributed. The grantor transfers ownership of certain assets to the trust.
The Trustee:This individual or entity is responsible for managing the trust's assets according to the terms set forth by the grantor. The trustee has a fiduciary duty to act in the best interest of the beneficiaries.
The Beneficiary(ies): These are the persons or entities that the trust benefits. Beneficiaries have the right to receive income or other benefits from the trust as specified by the grantor.
A Third-Party Non-Grantor trust is a specialized type of trust where the grantor (the person who establishes the trust) is not the beneficiary or the Trustee, and can never be part of the trust in any way. This arrangement allows for deeper protection of assets from creditors, removal of liability, and favorable tax consequences. Unlike trusts where the grantor also benefits from the trust's assets, a Third-Party Non-Grantor trust effectively removes the assets from the grantor's taxable estate and protecting the assets from the grantor's creditors. This type of trust is considered specialized because it is designed to offer enhanced asset protection and tax advantages, making it an attractive option for individuals seeking to safeguard their wealth and provide for their loved ones while minimizing legal and financial vulnerabilities.