Trust Property

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 12, 2023

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Definition of Trust Property

Trust property, also known as trust assets or trust corpus, encompasses the tangible or intangible items held within a trust.

The trust is established by the settlor (or grantor), who transfers assets into the trust. This process of establishing trust property involves selecting the appropriate assets, determining the type of trust, and drafting a trust agreement.

Trust property is then managed by the trustee, who has a fiduciary duty to manage the assets in the best interests of the beneficiary. The beneficiary is the individual or entity that stands to benefit from the trust property.

In some cases, a protector may be appointed to oversee the trustee's actions. Ultimately, the arrangement allows for efficient wealth management, asset protection, and structured transfer of assets.

Importance of Trust Properties

Trust property plays a vital role in financial and estate planning, enabling efficient wealth management and a structured transfer of assets to beneficiaries.

By placing assets in a trust, the settlor can protect these from creditors, minimize estate taxes, and ensure the orderly disposition of wealth.

Furthermore, trust property provides a mechanism for settlors to stipulate specific conditions for asset distribution, thus ensuring their wishes are fulfilled even after their demise.

This way, trust property ensures a legacy, provides for loved ones, and can even support charitable causes.

Key Players in Trust Properties

Settlor or Grantor

The settlor, also known as the grantor, is the individual who establishes the trust. They transfer their assets into the trust, determine the trust's terms, and identify the beneficiaries.


The trustee is entrusted with the management of the trust property. They have a fiduciary duty to act in the best interests of the beneficiary, manage assets wisely, and distribute them according to the trust's terms.


The beneficiary is the person or entity that receives the benefits from the trust property. Beneficiaries can enjoy benefits such as income generated from the trust property, or they can be entitled to the trust property itself.


A protector's role can vary significantly based on the trust's terms. Generally, a protector has the power to oversee the trustee’s actions, ensuring they act according to the trust's terms and the beneficiaries' best interests.

Key Players in Trust Properties

How to Establish a Trust Property

Selecting a Trust Property

Selecting trust property involves determining which assets the settlor wants to include in the trust. These assets should align with the settlor's goals—whether it's wealth preservation, tax planning, or providing for loved ones.

Determining the Type of Trust

The type of trust selected plays a significant role in achieving the settlor's goals. It's essential to consider factors such as tax implications, control over assets, and the level of asset protection needed when choosing a trust type.

Drafting the Trust Agreement

The trust agreement is a legal document outlining the terms of the trust. It should clearly define the roles of the settlor, trustee, and beneficiaries; the trust property; and instructions for the trust property's management and distribution.

How to Establish a Trust Property

Transfer of Trust Property

How a Property is Transferred Into a Trust

Transferring property into a trust requires changing the legal ownership of the asset to the trust. This can involve signing a new deed for real estate, transferring stock certificates, or re-titling other assets.

Role of Title Companies in Trust Property Transfers

Title companies often facilitate the transfer of real estate into a trust. They ensure clear title, handle the legal paperwork, and provide insurance against title defects.

Consequences of Improper Transfers

Improper transfer of assets into a trust can lead to disputes over ownership, tax complications, and potential invalidation of the trust. It's essential to consult with legal professionals to ensure correct procedures are followed.

Management of Trust Properties

Trustee's Role in Managing a Trust Property

The trustee's primary role is managing the trust property. They must protect the assets, invest them prudently, and follow the trust's terms.

They are also responsible for accounting and reporting obligations to keep beneficiaries informed about the trust's status.

Legal Duties of a Trustee

The trustee is bound by a fiduciary duty, meaning they must prioritize the beneficiaries' interests above their own. They must adhere to the trust agreement, avoid conflicts of interest, invest trust assets wisely, and act with care, skill, and prudence.

Consequences of Mismanaging Trust Properties

Mismanagement of trust property can lead to legal consequences for the trustee, including removal, damages, or personal liability. It can also disrupt the trust's purposes and potentially harm the beneficiaries' interests.

Distribution of Trust Properties

Conditions for Distribution

The conditions for distribution of trust property are typically outlined in the trust agreement. These can include specific dates, the beneficiary reaching a certain age, or the occurrence of certain events.

Process of Distribution to Beneficiaries

Trust property is distributed to beneficiaries as per the trust's terms. This can involve direct payments, creating sub-trusts, or transferring asset ownership. The trustee must carry out this process in a fair and transparent manner.

Possible Disputes and Their Resolution

Disputes over trust property distribution can arise due to misunderstandings, alleged trustee mismanagement, or conflicts among beneficiaries. Legal proceedings, mediation, or arbitration are common methods to resolve such disputes.

Trust Properties and Taxes

Tax Implications for the Settlor

The settlor's tax implications depend on the trust type. For instance, in a revocable trust, the settlor remains liable for taxes on trust income, while in an irrevocable trust, they can potentially remove assets from their taxable estate.

Tax Implications for the Beneficiary

Beneficiaries may owe taxes on income or distributions they receive from the trust. However, tax liability can vary based on the trust's nature and the beneficiary's circumstances.

Tax Implications for the Trust Itself

Trusts may be subject to income tax on retained income and may have to file annual tax returns. Trust tax rules can be complex, necessitating expert advice.

Protecting Trust Properties

Protection From Creditors

Trust property is often protected from the creditors of the settlor and beneficiaries, especially with irrevocable trusts. This makes trusts a powerful tool for asset protection.

Protection From Legal Judgments

Similarly, trust property can be shielded from legal judgments, providing a layer of security against potential lawsuits or claims.

Role of Trust Properties in Estate Planning

Trust property plays a crucial role in estate planning, offering a way to manage and protect assets, minimize estate taxes, and ensure the orderly transfer of wealth to beneficiaries.

Trust Properties in Special Circumstances

Trust Properties in Divorce Cases

Trust property is typically not considered marital property in divorce cases, unless the trust was established during the marriage or marital assets were used to fund the trust.

Trust Properties in Bankruptcy

In bankruptcy, trust property is usually safe from the debtor's creditors, depending on the trust's nature and the bankruptcy laws in the jurisdiction.

Trust Properties in the Death of the Trustee

Upon a trustee's death, a successor trustee named in the trust agreement takes over the trust's management. The transition should be smooth, with minimal impact on the trust property.


Trust property is a vital component of financial and estate planning, encapsulating a wide range of assets, including real estate, cash, and securities, held in a trust.

The key players in the dynamics of trust property—such as the settlor, who creates and funds the trust, the trustee who manages the assets, the beneficiaries who receive the benefits, and the protector who ensures compliance—are instrumental in maintaining the trust's purpose and functionality.

The process of establishing trust property involves careful selection of assets, determining the type of trust best suited to the settlor's objectives, and drafting a precise trust agreement.

Understanding these facets of trust property can provide a valuable framework for wealth preservation, tax efficiency, and the seamless transfer of assets across generations.

Trust Property FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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