Trusts are contractual arrangements for the ownership and management of assets by a trustee according to the trust agreement. The trustee manages trust assets on behalf of and for the benefit of the trust beneficiaries. There are many different motivations for the establishment of a trust. One is to get professional management from a corporate entity, such as a trust company or a bank trust department, so that the trustee will not predecease any of the trust beneficiaries. Tax considerations sometimes justify the creation of a trust.

Life insurance is often an integral part of the trust funding. The trust itself often owns life insurance on the grantor, who names the trust as beneficiary of that insurance. Trusts can also be beneficiaries of insurance policies not owned by the trust. Those insurance proceeds provide the funds necessary for the trust to carry out its objectives. Some trusts are set up specifically for the purpose of funding life insurance premiums and receiving proceeds. If estate tax minimization is the objective of the trust, the trust is subject to more stringent requirements that can change many times during the existence of the trust.

Trusts have always been an important means of extending family financial management by the parents beyond the parents� lifetime. In these arrangements the trust is often used to distribute funds periodically rather than in a lump sum. The objective is usually to protect a child from a propensity to spend funds frivolously. By spreading out the distribution, the child is unable to get access to and squander the entire sum immediately after the parents� death. Final distribution from such trusts is often predicated on the beneficiary�s attainment of a specified age and is usually the parents� best guess as to when the child will be mature enough to handle the funds responsibly.

Trusts can also be set up for the benefit of children with mental impairments or other problems that would preclude them from ever becoming capable of managing their own finances. The nature of the trust depends very heavily on the type of care being provided to such children, especially on whether the care is private or public.

Trusts can also be an important tool for sequestering assets from a spouse to prevent the assets from being directed to a stepchild or to an unforeseen family member if the surviving spouse were to remarry after the insured�s death.

Life insurance and trusts are often combined in creative ways to fund charitable gifts. Sometimes the entire arrangement is for the exclusive benefit of the charity. In other arrangements the trust is set up for a combination of family objectives and gifts to charitable institutions. Such arrangements usually involve a stream of income payments and subsequent distribution of the trust corpus. The charity or the family member can be the recipient of either the income payments, the corpus, or both.