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The "trust" is a legal instrument that allows a third party act as trustee - someone who administers financial assets on behalf of the other. It should spell out the beneficiaries and what the money can be spent for.

A trustee will manage investments, keep records, manage assets and prepare court accountings, paying bills and (depending on the nature of the trust) medical expenses, charitable gifts, inheritances or other distributions of income and principal.

There are many situation when a Trust is a good entity to create, such as

Property Trust

In common law legal systems, a trust is a relationship in which a person or entity (the trustee) holds legal title to certain property (the trust property or trust corpus), but is bound by a fiduciary duty to exercise that legal control for the benefit of one or more individuals or organizations (the beneficiary), who hold "beneficial" or "equitable" title. The trust is governed by the terms of the (usually) written trust agreement and local law. The entity (one or more individuals, a partnership, or a corporation) that creates the trust is called the settlor, and in the United States, the trustor, grantor, donor, or creator, as well. (from Wikipedia)

Common use of Property Trusts is Estate Administration

Charitable Trust

It is a regular Trust established for charitable purposes. It has several advantages, such as: it may continue operating indefinitely, a cy pres doctrine can be applied to reform a trust, and they cannot fail if their objectives are insufficiently certain.

Trust Company

This is typically a financial institution that offers banking, investment and estate administration services.

Common uses are Finacial Services, Asset management, Escrow services

Advantages of Trusts

Because Trusts have a lot more privacy than regular corporations, they are often used to decrease or avoid tax liability. There are a number of people that offer Pure Trusts or Federal Contract Trusts as a way to escape paying taxes altogether. Because of the complexity of the laws, we recommend that you set this up only if you have an attorney who is intimately familiar with the laws and regulations, and is prepared to defend you in Court.

Large banks, lawyers, and wealthy individuals can set up Trusts for asset protection, and income redistribution. For instance, assets that belong to a Trust cannot be taken as collateral in case of bankruptcy or a lawsuit. Information about Trusts is limited, and we advice you to discuss it with a good lawyer.


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