A trust is a legal arrangement that allows you to manage money and property for the benefit of another person. People often set up a trust to help them retain control of their assets while they are alive, avoid estate taxes and guarantee that their wishes are carried out after their death.

The person who makes the trust is called the grantor or settlor, and the person who manages the money or property is known as the trustee. The trustee can be you, someone else or a corporation. Trusts can be used to manage a wide variety of assets, including cash, real estate, stocks, bonds and personal property like artwork, classic cars and family heirlooms.

A major advantage of a trust is that it can provide for specific requirements regarding how and when a beneficiary will receive the assets. The grantor can stipulate that the funds will be paid out annually or that a lump sum will be given at a certain age. Alternatively, the grantor can specify that the funds be used to pay for a particular expense such as college tuition or the purchase of a home.

Depending on the kind of trust established, it can also offer tax benefits. For example, revocable trusts that transfer assets to beneficiaries upon the grantor’s death typically benefit from a step-up in basis, which can reduce taxes for the beneficiaries. On the other hand, irrevocable trusts that do not transfer assets to beneficiaries upon the grantor’s life-time will usually have a carryover basis, meaning the asset values will be based on the original cost basis instead of the current market value.

One of the most important considerations when creating a trust is selecting the right trustee. This is because the trustee has the responsibility of administering trust assets according to the grantor’s instructions and managing distributions to beneficiaries. It is important to choose a trustee who is responsible, reliable and capable of carrying out the grantor’s wishes. The trustee can be an individual or a corporation, and may serve as co-trustee with a spouse or other trusted adviser.

When a trust is created, the trustee must acquire legal title to the assets by signing a legal document. This can be done by changing the name on a bank account or deed or by transferring the legal ownership of an asset such as real estate. It is also important to update the beneficiary designations on any other assets that have existing beneficiaries, such as retirement accounts and insurance policies.

Trusts can be complicated, so it is a good idea to consult an attorney to determine whether they are the right option for you. These fact sheets are for general education only and do not replace the advice of your legal advisor. Trusts can be used in a number of ways, and there are many kinds of trusts. These fact sheets will not address all of your questions or provide you with specific legal advice.