A Trust is a legal arrangement, or relationship, NOT a legal entity. To understand Trusts, and the benefits they can provide, it is essential to remember that Trusts more closely resemble contracts than legal persons.
In the simplest terms possible a Trust is established when the owner of property (the settlor) transfers his ownership to another individual (the trustee) with the restriction that the property be held for the benefit of a third party (the beneficiary) as described by the settlor’s wishes or a written document (the trust deed), which governs the administration of the trust. Despite trustees having full legal title to the trust assets, they are bound by fiduciary duty to administer trust assets for the benefit of the beneficiaries and not for themselves. This slightly confusing concept of dual ownership is the fundamental characteristic of trusts, and the reason they are so useful for tax planning and minimization, estate planning, succession planning, wealth management, and asset protection. The original owner of the property avoids any tax or other liabilities associated with the trust property by transferring the property out of his estate, yet retains influence over the future administration of that property through the terms of the trust deed by creating a relationship in which legal title to property is vested in one person, but beneficial ownership in another.