Trusts can be an important part of estate planning.

LTEPThus, understanding what trusts are and how they work is necessary in order to decide whether a trust is for you.

A trust is essentially a written legal agreement between three entities. The grantor or trustor is the entity who creates the trust by providing the principal or corpus (money, real property, etc.). The trustee administers the trust and holds legal title to the assets for the benefit of the third entity, the beneficiary. All trusts must have a defined purpose and also identify a time for performance.

While it is possible a trust may last forever, typically, a trust ends upon the occurrence of a certain date or event. For example, a trust may be established so it is created upon your death whereby all your assets are held by the trust and are used for the benefit of your surviving spouse. When your spouse dies, the assets are distributed per your original wishes, typically passing to your child or children.

Trusts can be created while you are alive, or as mentioned above, might not exist until you die. There are many different kinds of trusts. A trust agreement is best drafted by an experienced estate planning attorney who can clearly explain to you what type is best for your individual situation.