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When most people hear the word “trust,” they picture something complicated or assume it’s only for people with a lot of money. But trusts are used in many different estate planning situations, and they aren’t necessarily as complicated as they might sound.

At its simplest, a trust is a legal arrangement that allows assets to be held and managed for the benefit of someone else. Depending on how it’s set up, a trust can help determine how property is managed during someone’s lifetime and what happens to those assets after they pass away.

So, what is a trust in Minnesota, and how does it fit into estate planning?

How Does a Trust Work?
A trust is created when someone establishes a legal arrangement for holding and managing property or other assets.

There are three main roles involved in a trust:

• Grantor: The person who creates the trust, also sometimes called the settlor.
• Trustee: The person or institution responsible for managing the assets held in the trust.
• Beneficiary: The person or organization that benefits from the trust.

These aren’t always three different people. In some trusts, the person who creates the trust also manages the assets and may even be a beneficiary.

The trust document outlines how the assets are managed, who benefits from them, and what responsibilities the trustee has.

Why Are Trusts Used in Estate Planning?
Trusts can serve different purposes depending on a person’s estate and how the arrangement is structured.

Some trusts are created to manage property during a person’s lifetime, while others establish how assets will be handled after their death. Certain trusts also allow assets to be distributed over time rather than all at once.

One of the main differences between a trust and a will is that a trust can operate while the person who created it is still living.

Because trusts can be structured in different ways, their purpose and the responsibilities involved can vary quite a bit.

What Is a Revocable Living Trust?
A revocable living trust is one of the more commonly discussed types of trusts in estate planning.

This type of trust is created during a person’s lifetime and generally allows the person who established it to make changes or revoke it while they have the legal capacity to do so.

In many cases, the person creating the trust also serves as the initial trustee. That means they continue managing the assets held in the trust.

The trust can also name someone to take over those responsibilities if the original trustee is no longer able to serve.

What Is an Irrevocable Trust?
An irrevocable trust works differently from a revocable living trust.

Generally, an irrevocable trust can’t be freely changed or canceled once it’s been established. However, Minnesota law does recognize certain circumstances in which an irrevocable trust may be modified or terminated.

The terms of the trust determine how the assets are managed, who benefits from them, and what responsibilities are involved.

Although both types of trusts are used in estate planning, the rules surrounding changes and control of the assets can be quite different.

What Can Be Put Into a Trust?
Trusts can hold many different types of assets.

Depending on the arrangement, a trust might include real estate, bank accounts, investments, or other personal property.

For example, a trust may hold ownership of a home or cabin. It could also contain financial assets that are managed and distributed according to the instructions in the trust document.

An important distinction is that creating a trust doesn’t automatically place someone’s property into it. Which assets are actually held in the trust depends on how ownership is established and whether the property has been transferred into the arrangement.

What’s the Difference Between a Will and a Trust?
Wills and trusts are both common parts of estate planning in Minnesota, but they work in different ways.

A will is a legal document that can establish how someone’s property will be distributed after their death. It can also name a personal representative to handle the estate.

A trust, on the other hand, creates an arrangement for holding and managing assets for beneficiaries. Depending on the type of trust, it may begin operating during the person’s lifetime and continue after they pass away.

Another difference involves probate. Property distributed through a will may be subject to probate proceedings, while assets held in a trust may be handled according to the trust’s terms.

Does a Trust Avoid Probate in Minnesota?
This is one of the most common questions surrounding living trusts in Minnesota.

Probate is the legal process used to administer certain estates after someone dies. A trust provides a different way for assets held within it to be managed and distributed.

Assets properly held in a trust generally don’t need to go through probate simply to be distributed under the trust agreement.

However, having a trust doesn’t automatically mean that every asset someone owns will avoid probate. Property that isn’t held in the trust may be handled differently depending on how it’s owned and what arrangements are in place.

What Does a Trustee Do?
A trustee is responsible for managing the assets held in a trust according to its terms and applicable law.

That responsibility can include managing property, keeping records, overseeing financial assets, and distributing property to beneficiaries.

Minnesota law also establishes certain duties that apply to trustees. These responsibilities relate to how the trust is administered and how the interests of beneficiaries are handled.

Depending on the trust, a trustee’s responsibilities may last for a relatively short period or continue for many years.

What Happens to a Trust After Someone Dies?
A trust doesn’t necessarily end when the person who created it passes away.

What happens next depends on the type of trust and the instructions included in the trust document.

In some situations, a successor trustee takes over management of the assets. The trust may direct that property be distributed to beneficiaries, or it may establish an arrangement where assets continue to be managed over time.

Some trusts remain in place for years after the original grantor’s death.

Final Thoughts
A trust in Minnesota is a legal arrangement that allows assets to be held, managed, and distributed for the benefit of designated people or organizations. Trusts can take different forms, and the way they operate depends on the terms established when they’re created.

Although trusts and wills are both part of estate planning, they serve different purposes and handle property in different ways.

At Borden, Steinbauer, Krueger & Knudson, P.A., we assist clients with trusts, wills, estate planning, and probate matters throughout the Brainerd Lakes Area and greater Minnesota.