Legal Definitions - trust

A trust is a legal arrangement where a person, known as the grantor or settlor, transfers their property rights to a third party, called a trustee. The trustee holds and manages the assets for the benefit of another person, known as the beneficiary. The trust is a fiduciary relationship, meaning that the trustee has a legal obligation to act in the best interest of the beneficiary.

• A settlor with the intent and capacity to create the trust
• A definitive beneficiary who is reasonably ascertained
• A trustee to hold and administer the assets
• Assets to be held in the trust
• Legal formalities, such as being in writing, signed, and notarized

For example, a parent may create a trust for their child's education. The parent transfers money into the trust, appoints a trustee to manage the funds, and designates the child as the beneficiary. The trustee has a legal obligation to use the funds for the child's education expenses.

Another example is a trust created for charitable purposes. A person may transfer assets into a trust and appoint a trustee to manage the funds for the benefit of a specific charity. The trustee has a legal obligation to use the funds for the charitable purposes designated by the grantor.

In both examples, the trustee has a fiduciary duty to act in the best interest of the beneficiary and manage the assets prudently.