What is a Trust?
Think of a Trust like a “rule book”. The rule book is attached to a box containing certain items. The book contains instructions for how the items in the box should be managed and who has permission to use the items in the box. The rule book also appoints a Trustee to carry out the instructions provided in the rule book.
In legal terms:
- A Trust is a contract between a Trustmaker and a Trustee.
- The Trustmaker (also sometimes referred to as the grantor, donor, or settlor) is the person who creates the trust instructions and transfers property to the trust.
- The Trustee is the person who administers the trust according to the instructions provided in the trust document.
- The Beneficiary is the person or entity who benefits from, or will benefit from, the Trust.
- There may be more than one Trustmaker, Trustee, or Beneficiary of a Trust and the same individual may serve in more than one role. For example, the Trustmaker may also appoint himself or herself as the initial Trustee of the Trust.
What Are Trusts Used For?
Trusts are powerful estate planning and asset protection tools. The most common type of trust that people may encounter is the Revocable Living Trust which is a popular estate planning tool that is often thought of as a substitute for a Will. Revocable Living Trusts are preferred by many because they are more flexible and powerful than a Last Will and Testament.
To learn more about Trusts, here are some additional articles:
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