What is a Trust?
Many times when we meet with a client, they come into the office saying that they want a trust. When we ask them if they know what a trust is, they respond, unequivocally, "yes". But when we ask them to explain it to us in terms that they understand, invariably, they are unable to do so. We have found that the easiest way to explain a trust to a client, is to compare it to a corporation. Corporations have been around in our client’s lives much longer than trust. We explain that a trust is a fictional legal entity that exists because our laws say it exists. Just like a corporation: a fictional legal entity that exists because our laws say it exists. A trust, like a corporation, is not something that you can see, feel or touch. You see and talk to the people that create the trust, that manage the trust, or you can see or touch the assets that a trust owns. Similarly, you can shake hands with the corporate officers or directors, you can see, touch, buy or sell the assets that a corporation owns or produces. And just as a trust is held for the benefit of the trust beneficiaries, a corporation is held for the benefit of shareholders. Lastly, a trust is typically governed by the terms of the trust agreement that creates it, just as a corporation is governed by the terms of it Articles of Incorporation or Corporate By-laws. Granted, trusts and corporations are treated differently for tax purposes, security registration purposes, liability protection purposes, and many other purposes. The comparison is useful, however, to explain the answer to the question: "What is a Trust?".
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