A trust is not a document. Let’s get that out of the way up front.

Yes, there is a document that a lawyer prepares. But those pieces of paper are not the trust. Just like the Constitution is not the United States.

A trust is actually a legal entity, similar (kind of) to a corporation. The trust document, like the corporation’s bylaws or the Constitution of a country, governs the trust- telling everyone what the trust can and cannot do, and what certain people can and cannot do.

So- a trust is a legal entity… What does it do?

Owns stuff. Controls stuff.
(”Stuff,” of course, being a precise legal term for “things.”)

There are an almost infinite number of more specific things that can be accomplished with a trust and the way it is drafted, but primarily, a trust’s role is to own and control property.

So how does that work, exactly?

Let’s say I set up a trust. I control the trust. I can then go to my bank, fill out a form, and have my bank account owned by the trust. I could have my house owned by my trust. I could have my trust own my life insurance. I could have my trust own anything at all.

I control the trust, the trust controls the stuff, therefore I control the stuff. I can continue to reap the benefit of my bank account and my house but, technically, I don’t own them anymore.

So what?

The thing that makes the useful is that I can name a successor trustee, or someone to take over control of the trust when I die (or whenever I want, actually). Among other useful things, this means that when I die, none of my trust-owned stuff will go through probate. Why should it? The owner (the trust) didn’t die. That makes the transfer of property immediate and private, two things that probate certainly is not.

When creating a trust, you can include a great deal of instruction about how the property in the trust can be used. Unlike instructions in a will, these instructions can govern the property forever, since a trust can, potentially, last forever. Would you like to make sure your children don’t get the million dollar life insurance settlement until they are thirty years old? You can specify that sort of thing in the trust. Want to make sure that your donation to a school will only be used to provide scholarships? Again, a trust is the way to go.

So- a trust provides a way to transfer ownership efficiently, and control future use effectively. Of course, there are countless variations on these themes. There are many different types of trusts, and different ways of wording the instructions, and different ways to interpret that differences. Each decision that is made in creating a trust can have an effect on things like taxes, liability, and attachability. This why DIY is not the way to go with a trust- you want to make sure you get it right.