Definition of Trust

Definition of Trust. What is a trust? How a trust works and what are trusts most useful for.

What is a Trust

Trusts are legal arrangements in which one person holds property (the trustee) for the benefit of other (the beneficiary). How is a trust created? Through the writing of a trust document, which states that the trustee holds property owned by the trust for the benefit of the beneficiary.

How a Trust works


Also called the trustor or the settler, the grantor is the person who sets up the trust; he is usually also the person who transfers property into the trust.


The trustee is the legal owner of the trust property. Trustees are those responsible for administering and carrying out the terms of the trust according to the terms of the trust document. They are responsible for administering the trust for the benefit of the beneficiaries. This can be a family member, trusted friend, or a professional trust company.


This is the person for whom the trust was created. The beneficiary has equitable title or the rights to the trust property.

In contrast, the trustee has legal title to the assets owned by the trust. The trustee is thus liable to be sued by the beneficiary if the trustee does not obey the trust document specifically.

Also, note that the grantor, trustee and beneficiary can be the same person.

Definition of Trust

For more about what is a trust: Setting up a Trust, What is a Living Trust, What is an Irrevocable Trust.

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