A trust is a legal entity that holds assets and can provide financial, tax and legal protections. It is set up and funded with money or property by a grantor and managed by a trustee for the benefit of one or more beneficiaries. Trusts may be revocable or irrevocable and may have different types of terms, such as those describing how the trustee will manage and distribute the trust assets or how long the trust will last.

A person who carries out the duties of a trustee is called a fiduciary, and a fiduciary has a high standard of duty. The fiduciary must act solely in the interests of the beneficiary without any personal benefit or gain, and he must follow the instructions in the trust document that describes how the trustee will manage and give away the trust assets. A trustee must also be impartial and keep careful records. A trustee who is unable or unwilling to perform his duties may be removed by the court.

Depending on the purpose of your trust, the trustee should be someone who is both competent and willing to carry out your instructions. It is important to have a discussion with anyone you might name as trustee before they are named. It is also a good idea to have a backup trustee in case your designated trustee is unable or unwilling to serve.

A revocable trust is a useful tool for estate planning, since it allows the grantor to retain control of the assets while alive and make arrangements in the event of incapacity or death. It can help reduce costs and delays in the settlement of your estate, and it may avoid some taxes. However, a revocable trust is not always the best solution for everyone, and it is often less expensive to use a will instead.

An irrevocable trust can be used to avoid estate taxes and to preserve privacy, but it is more difficult to change and usually incurs a cost. Using an irrevocable trust for estate planning purposes is usually only appropriate when you have significant assets.

If you choose to use a trust as part of your estate plan, it is important to consult with an attorney. You should beware of prepared forms or kits that are available in magazines, brochures and through door-to-door salespeople, as these typically contain general provisions that may not suit your specific situation. A lawyer will help you evaluate whether a trust is the right option for your goals and discuss options to consider, including naming co-trustees and beneficiaries.

A trust can be used to hold a variety of assets, including cash, stocks and bonds, real estate, savings/checking accounts, certificates of deposit and insurance policies. It is important to retitle assets into the name of the trustee when you create a trust and, at termination, to have them re-titled back into individual owners’ names. If you own a business, you may want to establish a business trust in addition to your estate plan. This can allow you to institute rules and procedures that will make the business a viable investment for all beneficiaries while rewarding those individuals who are active in the business.