Inception of Trusts:

1. A person may create a trust at any point in time by transferring property to the trust.
2. A Trustee (named by the transferor) administers the trust property for the benefit of the beneficiary.
3. Trustee may be either an individual or an institution, such as a bank, and ther can be more than one trustee.
4. Inter Vivos Trust:
a. Transfer to trust occurs during the transferor’s lifetime.
5. Transferor is known as the Grantor or the Trustor.

Inception  A person may create a trust at any point in time by transferring property to the trust.
of Trusts  Transferor is known as the Grantor or the Trustor
 Trustee (named by the transferor)
a. Administers the trust property for the benefit of the beneficiary.
b. Trustee may be either an individual or an institution, such as a bank, and there can be more than one trustee.
 Trustee Implied Powers:
a. The most common implied powers are
i. Power to Sell Assets
ii. Power to Lease Assets
iii. Power to Incur and Pay Reasonable expenses.

Types of Inter Vivos Trust:

Trusts  Transfer occurs during the Transferor’s Lifetime.

Testamentary Trust:
 Trust created under the director of a decedent’s will

Irrevocable Trust: means the Grantor cannot require the Trustee to return the assets.

Revocable Trust: means the Grantor may demand the Trustee to return the assets.

Complex Trust: Trusts that are not required to distribute all their Income currently.

Simple Trust: Trusts that must distribute all their Income currently and are not empowered to make charitable contributions.

Express Trust: Is simply a Trust created on purpose, and not imposed by a court.
 An express trust will always have the following parties:
o Grantor
o Trustee
o Beneficiary

Grantor Trust:
 When the individual creating a trust retains certain interests in the trust, the trust is known as a grantor trust and the
income from the trust is taxed to the grantor.

DNI  DNI (Distributable Net Income) sets the ceiling on the amount of distributions taxed to the beneficiaries.
 Beneficiaries are taxed on the lesser of the amount of the distributions they receive or their share of DNI (reduced by net tax-
exempt income)
 DNI is the maximum amount of distribution that is taxable to the beneficiary.
 Any distribution in excess of DNI is tax free return of principal to the beneficiary.
 DNI is computed as the sum of Adjusted Total Income (ATI) and tax-exempt interest.
 It does not include capital gain which is allocated to the Corpus.
 Also a trust is not taxable for DNI.
 Instead it gets a deduction called Income Distribution Deduction (IDD), that is the lower of DNI or actual distribution which
reduces the Adjusted Total Income.


Inception  Estates originate only upon the death of the person whose assets are being administered.
of  Estate continues in existence until the Executor (the person(s) named in the will to manage the property and distribute the
Estates assets) complete his duties.
 Executor’s Duties:
a. Collecting the assets,
b. Paying the Debts and Taxes, and
c. Distributing the Property