I wish that financial education was taught in public schools. What is a trust, what are some benefits, and who is it a good option for?
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To start, you need to understand a legal fiction, which is essentially something we made up in the law for a particular purpose. Some legal fictions separate ownership and control. Most of the time, you would think ownership comes with control. We invented trusts to separate ownership of some assets from control of those assets (usually for tax or government-related purposes).
You set up a trust to own assets. And you set rules to control those assets. And you appoint a person, called a trustee, to exercise the rules that control the assets. And you do all this to benefit someone or something, called a beneficiary. And you do all that to ensure the assets are protected from certain taxes or other government-related attempts to diminish their value.
Some trusts provide for easy transitions of property when someone dies (better than a will). Some trusts ensure some people have nearly-permanent wealth that they never earned. Some trusts protect property from development.
The point is a trust is a legal fiction that owns assets for the benefit of another person or thing.
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