A trust is a way to hold money and property for someone else to manage, either during your life or after your death. The person who creates the trust is known as the grantor or settlor. The trustee who manages the assets is called a fiduciary, which means that they are legally required to always act in the best interests of the beneficiaries of the trust. A trustee can be you, your spouse, a child or a trusted friend.

There are many reasons why people choose to set up a trust. A common reason is to avoid estate taxes. Another is to protect assets from creditors or other claims made after a person’s death. Trusts are also used to keep assets safe from family members who might be tempted to sell or spend them. Trusts can also be used to hold assets for a specific purpose, such as providing funds to help a child start a business or fund medical expenses.

In addition, people set up trusts for the benefit of charities and causes they care about. Finally, there are special needs trusts to provide for a person with a disability without jeopardizing government benefits that may be critical to their daily lives.

While most trusts are created while you are alive, you can also make a revocable living trust, which allows you to retain control of your assets during your lifetime and name successor trustees to manage them after your death or incapacity. However, revocable living trusts are generally subject to the same tax rules as other assets you own and they don’t help your family avoid probate or estate taxes.

One big advantage of a living trust is that you can change the terms at any time, so your trust can evolve with your goals and circumstances. For example, you might want to include stipulations in your trust about when a beneficiary should receive their inheritance and how the funds can be spent. Your attorney can help you talk through different possibilities and scenarios to ensure that your trust reflects your wishes.

Beneficiaries of trusts can request reasonable financial information from trustees at any time and can request an accounting of the trust’s assets annually. This is a key part of being a good fiduciary and can prevent disputes between beneficiaries. Trustees should be prepared for these requests by investing in the appropriate tools, including trust accounting software and filing systems.

Many philosophers have pondered the nature of trust. Some believe that trust is a kind of reliance that requires a certain attitude, such as the belief that others will do the right thing for the right reasons. Others argue that the concept of trust is much more complex than this simple definition suggests.

Whatever the answer is, it’s clear that creating a trust involves a delicate balance of both the legal and ethical aspects of fiduciary duty. It is important to work with a team of professionals, including an attorney and a fiduciary planner, when setting up a trust.