Trust
Definition
A fiduciary arrangement where a third party, or trustee, holds assets on behalf of a beneficiary or beneficiaries.
Deep Dive
A trust is a sophisticated legal and fiduciary arrangement where one party, known as the "settlor" or "grantor," transfers assets to a third party, the "trustee," to hold and manage those assets for the benefit of designated individuals or entities, known as the "beneficiaries." The terms and conditions governing the management and distribution of these assets are meticulously outlined in a legally binding document called a trust deed or trust agreement. This structure allows the settlor to retain significant control over how their assets are used and distributed, even after their death, while potentially avoiding probate and offering various tax and asset protection benefits.
Examples & Use Cases
- 1A parent sets up a trust to ensure their children receive distributions from their inheritance at specific ages or for certain milestones, rather than as a lump sum.
- 2A wealthy individual establishes a charitable remainder trust, donating assets to a charity while retaining an income stream for life.
- 3A family creates a special needs trust to provide financial support for a disabled family member without jeopardizing their eligibility for government benefits.