Hello, this is Richard Morgan at Morgan and DiSalvo. This is part of our Back to the Basics Newsletter Series. The topic right now is going to be, what is a trust?

Estate planners like ourselves use trusts like a Swiss army knife. It’s a fungible thing kind of like a LLC business entity. We can make it sing and dance and do whatever we want it to do. The question is, what are we trying to achieve? Then, we’ll structure it to do what we want to do.

But, we use the word trust a lot, so what is a trust? I explain it in a few different ways. One, it’s a three-party contract. There’s a creator. That creator is called a settlor, trustor, grantor, all kinds of names. It’s the person with the money, and they create this trust. They give the assets to the second party called the trustee. That’s a fiduciary who’s in charge of the assets and in charge of carrying out the terms of that trust, all on behalf of the third party, the beneficiary. The beneficiary’s the one that actually benefits. We’re taking an asset. We’re put it in this three-party contract. That’s one way to think about it.

The other way to think about it is, it is merely a fiduciary relationship. Somebody is in charge, a fiduciary, in this case called the trustee who is in charge of potentially someone else’s assets. Their job is to take care of these assets with very strong duties, because it’s not theirs in theory, to take care of these assets on behalf of these beneficiaries.

Richard Morgan, Morgan and DiSalvo.