What is a special trust?

A “special trust” requires a trustee to actively execute a settlor’s instructions. A special trust varies from a simple trust in that these actions can include selling the trust property and using the proceeds to pay off debts or investing cash that is part of the trust in a particular manner; whereas the trustee simply transfers the trust property to the beneficiaries at the time specified by the settlor.

A “settlor” is the creator of the trust and responsible for choosing a “trustee” to manage the property and distribute to beneficiaries as chosen by the settlor. Trustees and beneficiaries generally can be people or organizations. Depending on the settlor’s wishes, beneficiaries may either receive the trust property directly or the benefits of the property, like regular income from stocks that pay dividends.

Creating a Special Trust

The instructions for a special trust are usually documented in the trust agreement. This is essentially a contract between the settlor and the trustee and creates a fiduciary duty on the part of the trustee – that means the trustee must act in the best interests of the trust’s beneficiaries. The trust agreement also names the beneficiaries and states the purpose and duration of the trust. The trust agreement may be expressed orally or in writing, and sometimes, the agreement can be implied by the settlor’s conduct.

In creating a special trust, settlors must consider several factors. They must think about their age and health, personal and professional relationships, assets and debts, what they want to accomplish with the trust, the needs of their beneficiaries, and whether their wishes could change. All of this information will help the settlor determine the instructions the trustee must follow and the actions the trustee must take to ensure that their wishes are executed as close as possible to their intentions.

The settlor also needs to carefully consider where the special trust is created because laws concerning trusts are governed by state law, which vary by state. Generally, a trust can be established in either the state where the settlor or trustee lives. In addition, since a special trust requires extra work from the trustee, the settlor may want to consider selecting a trustee that is competent and experienced in managing assets and finances.

Case Studies: Understanding Special Trusts

Case Study 1: Alpha Tech Trust

Alpha Tech Trust is a technology company founded by its CEO, Mr. Johnson, who wishes to create a special trust to manage the company’s assets and ensure they are used to support education programs for underprivileged children.

Mr. Johnson appoints a trusted family friend as the trustee, providing clear instructions in the trust agreement on how the assets should be managed and distributed. The special trust successfully fulfills its purpose, making a positive impact on the lives of many children.

Case Study 2: Bravo Investments Trust

Bravo Investments Trust is established by a wealthy individual who wants to support various charitable causes. The individual appoints a professional financial advisor as the trustee to manage the trust’s investments and ensure regular distributions to selected charitable organizations.

The trust agreement contains specific instructions on the investment strategy and beneficiary selection. The special trust efficiently generates returns and supports numerous charitable initiatives.

Case Study 3: Charlie Family Legacy Trust

The Charlie Family Legacy Trust is created by an elderly couple to provide for their grandchildren’s education and well-being. The trust’s settlors choose a close family member as the trustee to manage the assets and ensure that the grandchildren receive the necessary support.

The trust agreement outlines the beneficiaries’ educational needs and how the trustee should handle disbursements. The special trust plays a vital role in securing a bright future for the grandchildren.

Getting Legal Help

Special trusts can be a good way to manage property in a specific manner for beneficiaries, but they can be complex, so be sure to seek the advice of a qualified attorney with experience in trusts and estates before establishing a special trust.