Trust Agreement vs Declaration of Trust: Understanding the Differences

A trust is a legal arrangement in which a trustee holds and manages assets for the benefit of a beneficiary. Trusts are commonly used in estate planning, as well as for asset protection and business purposes. However, before establishing a trust, it is important to understand the different types of trust documents that may be used. In this article, we will discuss the differences between a trust agreement and a declaration of trust.

Trust Agreement

A trust agreement is a legal document that establishes the terms and conditions of a trust. It is a written agreement between the settlor (the person who creates the trust), the trustee (the person who manages the trust), and the beneficiaries (the people who benefit from the trust). A trust agreement outlines the purpose of the trust, the assets that will be held in trust, the beneficiaries’ rights to the trust assets, and the trustee’s duties and responsibilities.

A trust agreement is a flexible document that can be tailored to the specific needs of the settlor. For example, a trust agreement can include provisions for how the trust assets will be managed and distributed, as well as provisions for the trustee’s compensation and removal. A trust agreement can also include provisions for how the trust will be terminated, such as in the event that the intended purpose of the trust is fulfilled, or if the trust is no longer necessary or feasible.

Declaration of Trust

A declaration of trust, on the other hand, is a simpler document that establishes the existence of a trust. It is a declaration by the trustee that they hold trust assets on behalf of the beneficiaries. A declaration of trust does not provide details on how the trust will be managed or how the trust assets will be distributed. Instead, it simply establishes the trustee’s legal ownership of the trust assets and their obligation to hold and manage those assets for the benefit of the beneficiaries.

A declaration of trust is useful in situations where the settlor wants to establish a trust quickly and without the need for extensive documentation. For example, if the settlor is transferring ownership of property to a trustee for the benefit of a beneficiary, a declaration of trust can be used to establish the trustee’s ownership of the property.

Which Document Should You Use?

The choice between a trust agreement and a declaration of trust depends on the specific circumstances of the trust. If the trust is complex and involves multiple assets and beneficiaries, a trust agreement may be more appropriate. A trust agreement provides more detail on how the trust will be managed and how the trust assets will be distributed. If the trust is simple and involves a single asset and beneficiary, a declaration of trust may be sufficient.

In conclusion, understanding the differences between a trust agreement and a declaration of trust is important when establishing a trust. Both documents serve different purposes and provide different levels of detail on the management and distribution of trust assets. By working with an experienced attorney, you can determine which document is best for your specific trust needs.

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