What is a Passive Trust?
A passive trust, also called a "dry trust" or a "naked trust", is a trust into which a person transfers assets in order to pass them on to heirs or beneficiaries.
How Does a Passive Trust Work?
For example, let's say John Doe is in a shaky marriage and wants to make sure $1 million of hisgoes to his children rather than his second wife, whom he many divorce. He the in a passive trust for his children.
The children are only 10 and 8 years old, but when they turn 18, they trustee manages the on behalf of the children rather than on behalf of John Doe.have access to and control over the assets. In the meantime, John's wife cannot touch the assets, and a
Why Does a Passive Trust Matter?
Passive trusts are a way to ensure thatreceive assets as intended, but they also that the benefactor gives up control over the assets. Additionally, age is typically the only condition of a passive trust, meaning that the can't withhold from the trust if, say, John's children do something of which he disapproves, such as dropping out of college. The children simply must be at least 18 years old to obtain full control over the .