Trust

AAA

DEFINITION of 'Trust'

A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

There are two types of trusts:
1. Living Trust (inter-vivos): A trust that is in effect during the trustor's lifetime.
2. Testamentary Trust: A trust that is created through the will of a deceased person.

INVESTOPEDIA EXPLAINS 'Trust'

For example, a trust can be used if a beneficiary is under age or has a mental disability that impairs the person's ability to maintain his or her own finances. Once the beneficiary is deemed able to manage the funds or assets by the terms dictated under the trust, the beneficiary will receive possession of the trust. The trust is taxed on any funds not distributed to the beneficiary.

RELATED TERMS
  1. Beneficial Interest

    The right to receive benefits on assets held by another party. ...
  2. Clifford Trust

    Clifford Trusts allow grantors to transfer assets that produce ...
  3. Exemption Trust

    A trust whose purpose is to drastically reduce or eliminate federal ...
  4. Inter-Vivos Trust

    A fiduciary relationship used in estate planning that is created ...
  5. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  6. Testamentary Trust

    A legal and fiduciary relationship created through explicit instructions ...
Related Articles
  1. Taxes

    Distribution Rules For Inherited Retirement Plan Assets

    If you've recently inherited a retirement plan, you must get to know the rules for distributing the funds.
  2. Home & Auto

    Certifications For Estate Planning

    These certifications can lead to a promising career, but is estate planning for you?
  3. Insurance

    Keep Your Pet's Trust

    Find out how to protect and provide for your pet after you pass away.
  4. Home & Auto

    Can You Trust Your Trustee?

    Ignorance and incompetence can cost you money. Make sure your trustee is up to the task.
  5. Professionals

    Advisors: Tips For Providing For Older Clients

    Make sure the needs of baby boomers and their parents are met - if not exceeded.
  6. Retirement

    6 Estate Planning Must-Haves

    You need an estate plan even if you don't have significant assets. Learn what you need to include in yours.
  7. Retirement

    Why You Should Draft A Will

    Don't trust the courts to follow your wishes - plan the distribution of your own assets.
  8. Retirement

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  9. Options & Futures

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  10. Options & Futures

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center