A trust is an agreement between two parties in which one party (the Grantor) transfers legal title of property to another party (the Trustee), who then holds the property for the benefit of a third party (the Beneficiary). Trusts are a vital tool for many people, and they can be used for a variety of purposes. Generally, trusts are utilized to avoid probate, preserve family relationships, protect privacy, provide for those with special needs, and maximize tax benefits.

Trusts are typically created by an attorney who drafts a written document that describes how the Grantor wants his or her property to be managed, distributed, and governed. The document also names a trustee to manage and distribute the Trust assets, and it includes instructions on how long the trust should last and whether it should continue after the death of the Grantor.

Once a trust is in place, the trustee must gather all the assets mentioned in the document, which may include cash, investments, real estate, and more. This is referred to as an “inventory” of the trust assets, and it should be updated regularly. Often, the trustee will make responsible investments to generate income and help grow the trust assets. For example, he or she might invest the trust’s liquid assets in safe stocks that pay dividends. Alternatively, the trustee might invest the trust’s equity in a profitable business that is likely to increase in value over time.

Trustees are legally required to report on the trust’s finances to beneficiaries each year. This is known as an “accounting.” Beneficiaries may also request reasonable financial information relevant to their interests from trustees at any time. As a result, it is important for trustees to keep good records and utilize trust accounting software or other tools that can help them stay organized.

If the trust contains artwork, coins or stamps that have significant value, a trustee will want to carefully consider how they will be transferred. For instance, the trustee can direct that specific pieces be left to individual beneficiaries, to a museum or to a non-profit organization. In these cases, the trustee must be sure to retain important documents, including bills of sale, certificates of authenticity and insurance appraisals.

A trust is a great option for anyone who wants to pass on their wealth in a way that reflects their values and ensures their wishes are carried out. The process can be complicated and requires the guidance of an experienced attorney. However, there are online resources that can help anyone avoid the high cost of an attorney and still create a quality trust.