What is a trust?

A trust is fundamentally an arrangement that holds property or assets for the benefit of another person or entity, known as the beneficiary. In a trust, one party, called the trustee, manages the property or assets based on the terms set out in the trust document. This legal framework provides a way to transfer assets, plan for the future, and direct how and when the assets are used for the beneficiary. Trusts can be utilized for various purposes, including estate planning, minimizing estate taxes, and protecting assets from creditors.

In contrast, a loan agreement pertains specifically to the borrowing of funds and outlines the terms of repayment, while an insurance policy represents a contractual agreement between an insurer and a policyholder to provide financial protection against specific risks. A type of investment fund aggregates capital from multiple investors to invest in securities or other assets according to a specified investment strategy. Each of these alternatives operates under different principles and serves distinct financial needs, making the definition of a trust unique in its focus on holding and managing property for another party's benefit.