© 2013 Robert L. Shepard, Professional Law Corporation
What is a Trust?
A trust is a fiduciary relationship with respect to certain property wherein the trustee holds legal title subject to enforceable equitable rights of the beneficiary. As a professor of Wills and Trusts, this is an excellent legal definition of a trust that I give to all my students. However, when explaining what a trust is to the general public, a different approach is needed. Think of a trust as a separate legal person. The trust can hold property, enter into agreements, sue and be sued, pretty much anything an actual person can do.
The way a standard revocable living trust works is that you transfer your assets into a trust. You no longer own them, the trust does. Usually, but not always, you name yourself as the trustee, the person who controls the trust. When you pass away, you do not own the trust assets, and so they do not have to pass through your probate. A successor trustee is given power, generally with instruction to transfer the assets to other beneficiaries, although sometimes the trust continues to manage the assets for a time.
At its core, a trust essentially separates legal ownership from beneficial ownership. The trust property is owned by the trust and controlled by the trustee. However, the trust property must be used for the benefit of the beneficiary, and if it is not, the beneficiary has rights and can have the trustee removed from power. This division of ownership has many beneficial applications in estate planning.