A trust is legal entity that usually exists to efficiently transfer ownership of property. Of course there are many different potential uses for a trust.

Every trust names certain parties, usually individual people, who have certain rights and responsibilities with respect to the trust.

Grantor
This is the person who sets up a trust and initially puts things into it.

Trustee
This is the person who is control of the trust.

Beneficiary
This is the person who is supposed to benefit from the trust. It is the job of the trustee to make sure that trust-owned assets are being used for the benefit of the beneficiary.

In most trusts, the Grantor, Trustee, and Beneficiary start out as the same person: the one who created the trust.

Usually, upon the death (or incapacitation) of the Grantor, a Successor Trustee takes over. Often, but not always, there is a Beneficiary who is not the Trustee. This is the case when the trust was set up to benefit minor children.

When the Trustee and Beneficiary are the same person (and especially when that person is also the Grantor), the Trustee can usually do anything they want with the trust assets. After all, who would try to argue that you are not benefiting from using the money in whatever way you’d like.

But, once the Beneficiary becomes a separate person, like a minor child, the Trustee is suddenly bound by law to make sure that the assets of trust are used only for the benefit of that person. Additional instructions in the trust can specify exactly what that might mean, and how much discretion is given to the Trustee.

Who is named as Beneficiary and Trustee, what kind of instructions you write into the trust, and how much discretion is given can have major impacts on how the Trust works, and affect things like taxes and liability. It’s important that you work with an attorney when creating your trust.