Basics of Estate Planning: An Introduction to Trusts

Perhaps trusts have come up in conversation, but you're unclear on what they are and how they can help you. A trust, in its most basic definition, is a legal arrangement that specifies how property will be handled and held for the benefit of another person. There are various trust types that can handle a variety of issues and achieve a number of significant objectives. Let's start by looking at the language and components that most trusts have in common.

A grantor—also referred to as a trustor or settler—exists in every trust. The person who establishes the trust, known as the grantor, is also the one who has the power under the law to transfer assets held in the trust.

The recipient of the trust's "benefits" is known as the beneficiary. A beneficiary might be a single person or a group of people. An organization like a charity can be a beneficiary as well.

The person or organization with the power to acquire title to the property on behalf of a beneficiary is known as the trustee. The management of the assets must follow the guidelines outlined in the trust agreement, and this is the trustee's responsibility. The trustee must also consider the interests of the trust's beneficiaries when acting and making decisions.

A trust needs donor funding in order to fulfill its purposes. "Funding a trust" describes the procedure of transferring ownership of assets from the grantor to the trust. These resources may include cash, property, stocks, jewelry, and other things. It's crucial to understand that the trust has no control over assets that are "outside" of it.