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What is a trust?

What Is a Trust?

A trust is a legal arrangement where a person (known as the settlor or grantor) transfers assets, such as money, property, or investments, to another person or entity (known as the trustee) to hold and manage for the benefit of one or more beneficiaries. The trustee has a fiduciary duty to manage the assets in the best interest of the beneficiaries, and the beneficiaries have a beneficial interest in the trust assets.

There are different types of trusts, but the basic elements of a trust include:

The settlor: The person who creates the trust and transfers assets into it.

The trustee: The person or entity responsible for managing the assets held in the trust.

The beneficiaries: The individuals or entities who are entitled to benefit from the assets held in the trust.

Trusts can be used for a variety of purposes, such as estate planning, asset protection, or charitable giving. They can be created during the settlor's lifetime (known as a living trust or inter vivos trust) or through a will (known as a testamentary trust).

Trusts can be revocable, meaning the settlor retains the right to change or cancel the trust, or irrevocable, meaning the trust cannot be changed or revoked once it has been created.

Trusts can also be discretionary, where the trustee has discretion over how and when to distribute the trust assets to the beneficiaries, or fixed, where the beneficiaries have a set entitlement to the trust assets.

You can learn more about this topic with our Equity and Trusts notes.

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