People trust each other in a variety of ways: they trust that their parents and romantic partners will love them, that business partners will fulfill their contracts, and that doctors, psychotherapists and political leaders will make sound decisions. They also trust complete strangers, such as taxi drivers and grocery store clerks. Trust is essential to human relationships. It is what allows us to entrust our money, our children, and our health care to others. When someone violates our trust, we can feel devastated, and it can be very difficult to regain it.

In a trust, you can set aside assets to benefit loved ones during your lifetime or at your death (via your will). You can also transfer assets to the trust to lower your taxes. The trust can help you avoid probate, a lengthy legal process that requires proving your will is valid.

Often, it is a good idea to name more than one trustee of your trust. A trusted family member or friend can serve as a trustee, or you may appoint an institution like a bank trust department to act as trustee. In either case, the trustee will be responsible for managing your property and distributing it to beneficiaries as instructed in your trust instrument.

A well-functioning trust is built out of a complex interplay between three factors: fidelity, benevolence and competence. Fidelity is the belief that the person you are trusting will do what they say they will; benevolence is a feeling of warm, fuzzy affection; and competence is the ability to carry out the tasks required. Fidelity, benevolence and competence are the determinants of trust.

Fidelity and benevolence are often linked because of their psychological effect on our brains. According to Rose McDermott of Brown University, when we are bonded with another person, our brains secrete the hormone oxytocin, which increases our feelings of trust and decreases our anxiety levels. Oxytocin is released when we bond with our families, our friends and even our pets. It is also released when we meet strangers and are interacting with them in unfamiliar situations. It helps reduce our stress and makes social interactions more predictable.

It is important to understand that a trust will not guarantee the security of your assets. In fact, it is possible that your beneficiaries could be unable to access your trust funds at all, or that their use of the funds will be limited by state law. You can take steps to address these concerns by creating a trust with specific restrictions and guidelines for how the funds can be used.

One of the most important aspects of a trust is making sure that it is properly “funded.” Funding your Trust means moving your assets into the Trust, and this can involve some complicated paperwork with various institutions. For example, it is a good idea to rename your assets to reflect that they are now Trust-owned. Many assets, including life insurance policies, can be transferred directly to a trust, but you will need to carefully consider the tax implications of this option.