What is a trust?

A trust is many things . . . an entity, a relationship, a contract. A trust is a means of accomplishing goals, saving taxes, protecting children from themselves and the unscrupulous, providing for the disabled, giving to charity.

But what, really, is a trust?

A trust is not a document – the document merely provides evidence of the trust. A trust is an agreement or contract between the person setting it up – the "grantor" or "settlor" or "trustor" – and the person who is to manage the trust – the "trustee" – to accomplish certain purposes, for the benefit of "beneficiaries." A trust must have a "res," that is, trust principal: something to be managed. A trust can be oral or written.

A trust is an "invisible" legal entity, like a corporation. The author of this article has set up a corporation to accomplish the practice of law, and as part of that endeavor, the corporation has gained title to assets. The author does not own those assets. His corporation does. But, as sole shareholder and director of that corporation, he controls those assets.

In the same way, the author has set up a trust. The trust holds title to assets. The author does not own those assets, but as grantor, trustee and beneficiary of that trust, the author has complete control over those assets. No one can tell the author how to manage the assets comprising the res or principal of the trust.

When the grantor serving as trustee dies or becomes unable to manage his own affairs, including his trust, someone hand-picked steps in to manage the trust and make distribution according to the terms of the trust, as shown in the trust document.

A trust is a bucket. That’s right, a bucket. This analogy is not unique to the author, but has been very helpful in explaining trusts to clients of the author’s law practice.

When you set up a trust, you get a bucket. You put stuff in the bucket – "funding" your trust. You carry around the bucket, controlling it as you will, pouring stuff out – making distributions – and putting stuff in as you wish. No one can tell you how, when or whether to put stuff in or dump stuff out.

When you die – kick the bucket! – the person you have named steps in to manage the trust. They carry around the bucket and control it according to the directions on the label – the trust document. They might pour out assets on your children for their support, or to their college for education, or to a hospital for medical care. The uses to which the stuff in your bucket can be put are limited only by your imagination and need.