ABA Family Legal Guide

Estate Planning

Trusts and Living Trusts

What is a trust?

A trust is a legal relationship in which one person or qualified trust company (trustee) holds property for the benefit of himself or herself or of another (beneficiary). The property can be any kind of real or personal property—money, real estate, stocks, bonds, collections, business interests, personal possessions, and automobiles.

A trust generally involves at least three people: the grantor (the person who creates the trust, also known as the settlor or the donor), the trustee (who holds and manages the property for the benefit of the grantor and others), and one or more beneficiaries (who are entitled to the benefits).

Think of a trust as an agreement between the grantor and the trustee. The grantor makes certain property available to the trustee, for certain purposes. The trustee (who often receives a fee) agrees to manage the property in the way the grantor wants.

Putting property in trust transfers it from your personal ownership to the trustee who holds the property for you. The trustee has legal title to the trust property. For most purposes, the law looks at these assets as if the trustee now owned them. For example, many (but not all) trusts have separate taxpayer identification numbers.

But trustees are not the full owners of the property. Trustees have a legal duty to use the property as provided in the trust agreement and as permitted by law. The beneficiaries retain what is known as equitable title or beneficial title, the right to benefit from the property as specified in the trust.