What Is a Trust
What is the meaning of a trust, trust fund, or a trust account?
The definition of a trust s a legal arrangement between a settlor (the person or entity who sets up the trust) and a trustee (the person or entity who holds the legal ownership) to provide proper distribution of assets to the beneficiaries (the person or entity who holds the beneficial ownership).
The trust can be “funded” by a variety of assets.
What’s the Purpose of a Trust
While a trust can serve a variety of needs, there are 3 core reasons why people turn to trusts.
Firstly, the trustee has a fiduciary duty to manage and distribute the assets for the sole benefit of the beneficiaries, and not for anyone else. Not doing so may result in breaking the law. Professional trust companies can be trustees too.
Secondly, with a trust, you can have greater control over how the distribution of your assets are to be made to your beneficiaries, whether you’re living or not.
And lastly, trusts can be extremely useful in special circumstances where no other instrument can cater for.
More on these specific situations later on, but let’s take a look at what a trust is made of..