Cecil Harvell of Harvell & Collins discussed the concept of trusts, explaining that they are legal agreements involving a creator, a trustee, and a beneficiary, designed to manage assets for specific purposes. He highlighted various types of trusts, including those for minor children, special needs, asset protection, and those addressing concerns in second marriages, emphasizing the importance of having a valid reason for creating a trust. The conversation underscored the need for careful selection of trustees and the necessity of consideration in trust agreements, while encouraging listeners to seek professional guidance when considering trusts.

What is a Trust?

• A trust is defined as a contract or agreement between three parties: the creator (grantor), the trustee, and the beneficiary. The trustee holds property for the benefit of the beneficiary according to the terms set forth in the trust document. [02:00]

• The trust can be freestanding or funded through a will, and it serves as a legal agreement that outlines the management of assets. [04:00]

Common Purposes of a Trust

• Trusts should have a strong purpose; creating one without justification is not recommended. [06:00]

• Example: A couple seeking a trust was found not to need one as their situation did not warrant it (e.g., adult children with no special needs). [08:00]

Specific Trust Purposes

1. Spouse's Trust: Used in second or third marriages to ensure that assets benefit the new spouse during their lifetime but ultimately return to the children from the prior marriage. [10:00]

2. Protection from Divorce: Trusts can protect a child's inheritance from becoming marital property in the event of a divorce. [12:00]

3. Trust for Minor Children: Commonly established to manage assets for minor children until they reach adulthood. [14:00]

4. Special Needs Trust: Designed for beneficiaries receiving government benefits to ensure that an inheritance does not disqualify them from those benefits. [16:00]

5. Spendthrift Trust: Created to manage distributions for beneficiaries who may have spending issues, allowing for controlled access to funds over time. [18:00]

6. Asset Protection Trust: Protects assets from being depleted by long-term care costs, such as nursing home fees. [20:00]

Trustee Selection

• The selection of a trustee is crucial; it should be someone trustworthy and capable of managing the trust's assets. Co-trustees can also be appointed for shared responsibility. [24:00]

• Contingency plans should be in place in case the initial trustee is unable to fulfill their duties. [26:00]

Consideration in Trusts

• Trusts require consideration, which can be as simple as a nominal payment (e.g., $10) to establish the agreement legally. This ensures that both parties are aware of their responsibilities. [28:00]