What Is a Trust?

A trust is a fiduciary arrangement where a grantor transfers assets to a trustee to manage for the benefit of designated beneficiaries.

Key players:

Grantor (settlor/trustor) — The person who creates the trust and transfers assets into it.

Trustee — The person or entity that manages the trust assets according to the trust terms.

Beneficiaries — The people who benefit from the trust assets.

Types of trusts:

Revocable living trust — Can be changed or revoked during the grantor's lifetime. Avoids probate but does not provide tax benefits or asset protection.

Irrevocable trust — Cannot be changed once created. Provides tax benefits and asset protection but the grantor gives up control.

Testamentary trust — Created by a will and takes effect at death. Goes through probate initially.

Special needs trust — Provides for a disabled person without affecting government benefits eligibility.

Spendthrift trust — Protects trust assets from beneficiaries' creditors.

Charitable trust — Benefits a charity and can provide tax deductions.

Life insurance trust (ILIT) — Removes life insurance proceeds from the taxable estate.

Benefits of trusts:

Avoid probate (revocable living trusts)

Reduce estate taxes (irrevocable trusts)

Protect assets from creditors

Provide structured distributions (e.g., age-based milestones)

Maintain privacy (trusts are not public record)

Provide for minor children or incapacitated individuals

Costs. Creating a trust typically costs $1,500-$5,000+ depending on complexity.

This is legal information, not legal advice.