A trust agreement (or “trust”) is a legal arrangement involving three primary parties: the trust maker, also known as the grantor or settlor; the trustee; and the beneficiary. A trust establishes a fiduciary relationship between the trust maker and the trustee and provides written instructions for how assets held in the trust should be managed, protected, and distributed. A useful way to think about a trust is as a set of instructions for owning and managing assets for the benefit of others. 

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​The Trust Maker
The trust maker is the person who creates and signs the trust agreement. Once the trust is established, the trust maker can transfer or “fund” assets into the trust. Depending on the type of trust and the terms of the agreement, the trust maker may continue to use and control those assets during their lifetime. 

The Trustee
The trustee may be an individual or a corporate trustee, such as a bank or trust company. The trustee is responsible for managing the assets held by the trust and carrying out the trust maker’s instructions. Depending on the terms of the trust, the trustee may have authority to sell investments, liquidate a certificate of deposit, manage other trust assets, and make distributions to beneficiaries. 

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In many circumstances, the trust maker can also serve as the trustee, particularly during his or her lifetime. A trustee has a fiduciary duty to manage and administer the trust’s assets in accordance with the trust agreement and in the interests of the beneficiaries. 

 

The Beneficiary
A beneficiary is a person, group, organization, or other entity that is entitled to receive a benefit under the terms of the trust. The trustee is generally responsible for making distributions to the named beneficiaries according to the trust’s instructions. ​

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Revocable and Irrevocable Trusts
Some trusts can be changed, amended, or revoked by the trust maker after they are established. These are generally referred to as revocable trusts. Other trusts are designed so that they cannot be changed or revoked once established; these are known as irrevocable trusts. The ability to modify or terminate a trust depends on its terms and the applicable law. Generally, after the trust maker dies, the trust becomes irrevocable if it was previously revocable, and the successor trustee administers the trust according to its terms. 

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Unlike a will, a trust can allow the trust maker to maintain significant control over trust assets during his or her lifetime while also establishing a plan for managing and distributing those assets in the future. Depending on the type of trust and the client’s circumstances, a trust may help avoid probate, reduce or minimize estate taxes, and provide asset protection for the trust maker and beneficiaries. 

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A comprehensive estate plan may include both a will and one or more trusts, along with other documents designed to address a client’s individual circumstances, goals, and needs.