On the weekends we are sharing some of our "greates hits" from our blogs and newsletters of the past. This two part series appeared in the "Daily Plan It" of November 2005.
What is a Trust?
The legalese: To state it accurately, a trust is a legal relationship in which one party holds property that was entrusted to him for the benefit of another. (Of course, it might not come as a surprise to you that there are better ways to explain things than using the legalese.)
The better explanation: A trust works like a bucket. Someone puts property into the bucket. That someone is often called the “trustor” or “grantor,” but many of our documents use the term “Trustmaker.” A second person (or institution) manages what’s in the bucket. In most documents, that manager is referred to as the “trustee.” The third person’s job is the one we all would like to have. Her role is to receive some benefit from the property in the trust. This person is known as the “beneficiary.”
The tricky thing about trusts is that one person can play more than one role at the same time. Similarly, more than one person can play the same role. For example, a married couple can be the Trustmakers and also serve as the trustees. In most living trusts, the same person or persons serve all three roles. For example, a married couple can be the Trustmakers and also serve as the trustees. In most living trusts, the same person or persons perform all three roles: They put the property into the trust for their benefit and appoint themselves as managers.
In the next part of this series, we’ll explain the different types of trusts with the goal of making them understandable.