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Identifying Characteristic of Trusts
Trusts are divided into 3 categories. The EW must first examine the terms of the trust to determine which category the trust falls into and then follow the procedures for evaluating that type of trust. The chart below outlines the three types of trusts. If a Trust does not meet all of the characteristics for an OBRA 93 or MQT trust, then it is an “Other Trust”.
Characteristics of a Trust
| OBRA ‘93 | MQT | Other Trusts |
| Established on or after 8/11/93. | Established prior to 8/11/93. | Date established is insignificant. |
| Established other than by will. | Established other than by will. | May or may not be established by will. |
| Established by an individual, spouse or someone acting on his/her behalf. | Established by individual, spouse or someone acting on his/her behalf. | Usually, but not always, established by someone else. |
| Established in part or in whole with income, property or property rights of the individual or spouse. | Established in part or in whole with income, property or property rights of the individual or spouse. | Usually, but not always, established with assets belonging to someone else. |
| Individual or spouse may or may not be beneficiary of the trust. | Individual or spouse MUST be beneficiary of the trust. | Individual or spouse may or may not be beneficiary of the trust. |
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Trustee may or may not have discretion to distribute trust assets. Trust terms may place restrictions on when or if distributions may be made. |
The trustee MUST have the discretion to distribute principal and/or income to or for the benefit of the beneficiary. | Trustee may or may not have discretion to distribute trust assets. |
Example
On 9/30/96, Mr. Smith (trustor) establishes a trust. He names himself as trustee and is given complete discretion to distribute trust assets. He also names himself as trust beneficiary but appoints his daughter, Jane, as beneficiary upon his death.
He places his savings account with a current balance of $100,000 and his house (principal residence) in the trust. The trust is set up as an irrevocable trust.
This trust is an OBRA ‘93 Trust because it is:
- Established after 8/11/93, and
- Not established by will, and
- Established by Mr. Smith, and
- Established with Mr. Smith’s own property.
If this trust was established in 1990 instead of on 9/30/96, it would be treated as an MQT Trust. If this trust was established by will, it would be treated as an Other Trust.
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