The exact purposes of the trust are decided by the settlor and agreed to by the trustee. The trust is created when both parties sign the trust instrument. From that point forward, the terms of the trust instrument will provide the rules for the trustee to follow in deciding how to use the property of the trust for the beneficiary.
When the trust is signed, funds are received and deposited with a “custodian,” which is a bank or other large financial institution where the funds will be completely safe. Community Trust invests most of its trusts conservatively, preferring to avoid losses more than to grab gains. Working with sophisticated trust management software, Community Trust keeps track of income and assets, carefully records every transaction, and sends annual accountings to each beneficiary (or responsible party) at the end of the year. Statements of each accounting by Community Trust are available upon request.
Creating a trust should not be done lightly. The trust will be legally binding, and once the trust is established, the trustee owns the property legally. This relationship is useful, however, because the trustee has expertise, and it cannot make itself a beneficiary, or use the property for its own purposes. It has to follow the rules in the trust agreement for how to use it, and the only financial interest that it is allowed to have is the right to a fee for services.
Getting Down to Specifics
A trust can include a virtually limitless range of provisions, because there is a nearly limitless range of circumstances that could come up in the relationship between the trustee and the beneficiary, and the more situations the trust anticipates, the more likely the trust will meet everyone’s expectations. There is, however, a much more finite range of issues that trustees and beneficiaries have learned over the years (and the centuries!) are the ones most likely to need some rules, in order to facilitate a successful trust experience. For example, one of templates that Community Trust often uses for its individual SNTs has the following “Sections,” sometimes called “Articles:”