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What Is a Simple Trust?

A trust is a means of transferring property—whether it is tangible or intangible— or funds from one party to another. There are different forms of a trust, one such form is a simple trust. A Simple trust is an expression used only within the jurisdiction of the United States of America. However, a simple trust in the US has 2 distinct definitions.

The first definition of a simple trust is also known as a bare trust, and involves the management of the property by one party for the benefit of another. This kind of trust is created by a party called a trustor, donor, grantor, or settlor, and is managed by a party, called the trustees or fiduciaries. The trustees have a duty to manage the trust for the beneficiaries, the recipients of the estate. Such fiduciaries are obligated to manage the estate in the best interests of the beneficiaries, but have no active involvement in the estate other than relinquishing the property to the beneficiaries at a date determined by the settlor.

The second definition of a simple trust involves the net income of the estate and federal tax laws. Such laws stipulate that the trustees must release the annual net income of the trust to the beneficiaries without leaving any income for charity, as this is not within the legal parameters of the trust. The beneficiaries must receive the net income equally during the year in which it was gained. However, the trust principal cannot be distributed unless otherwise stated in the trust.

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