Course: Estate Planning
Lesson 3: Understanding Trusts and Trust Documents

Student Question:

Perhaps a slightly mundane question, but here we go:

It had been my understanding that property in a trust was held and owned by the trust itself, as a separate legal entity. However, several times in this course there has been reference to the trustee having ownership of the property. Is there a way to reconcile these two ideas?

Or, is it a question of “it depends on what state you are in”?

Thanks!

James.


Instructor Response:

James,

The Trustee has LEGAL ownership of the trust assets.

  • Trustees are responsible for administering the trust according to its terms, preserving trust assets, making investment decisions, minimizing income taxes, and interpreting the terms of the trust (just to name a few of their responsibilities).
  • Trustees cannot use the assets for their own benefit.

The beneficiaries have BENEFICIAL ownership of the assets.

  • Beneficiaries have the specific right to use trust assets, under the terms of the trust, for their own benefit.
  • Beneficiaries have NO legal ownership rights or responsibilities over trust assets.

How completely does this address your question?

Bruce