What Is a Trust and Do I Need One?

What is a trust?

A trust is a legal entity created to hold, manage, and distribute assets in accordance with the terms of the trust agreement. Each trust consists of three parties: grantor, trustee, and beneficiary. The grantor is the individual who creates the trust by putting assets into it, the trustee is the person who carries out the wishes of the grantor, and the beneficiary is the person who benefits from the assets within the trust. There can be multiple grantors, multiple trustees, multiple beneficiaries, or even just a single person who acts as all three.

A trust is created when a grantor and a trustee enter an agreement about what will be done with certain assets for the benefit of one or more beneficiaries, and those assets are then transferred into the trust. Until the assets are transferred, no trust exists. This means, for instance, that a house must be retitled in order to put the house into a trust. Once that happens, the grantor no longer legally owns the house; the trust becomes the owner. Because the trust is the owner, the trustee is free to manage or dispose of any trust assets in accordance with the plan set forth in the trust agreement. And to ensure assets are not mishandled, the trustee is bound by a fiduciary duty to preserve and protect the assets and to follow the terms of the trust.

What can I do with a trust?

Trusts are extremely flexible, allowing for the execution of a wide range of plans for your assets. Trusts allow you to efficiently distribute property to beneficiaries, avoid probate, protect money from creditors, and ensure the well-being of minors or individuals with special needs. Depending on the kind of trust and the agreement, you can also set up a plan for charitable giving, tax savings, business succession, incapacity planning, real estate management, providing income for a loved one, or simply preserving a legacy.

Most people opt for a trust to avoid probate, but there are many other practical uses even while you’re alive, such as hiring a person to invest funds and distribute the income to children or grandchildren. Trusts are also a great way to plan for contingencies: suppose you want all your assets to go to your spouse when you die, but you also want to ensure that your assets go to your kids rather than a future partner if your spouse remarries following your death. You can easily do that with a trust.

Do I need one?

Whether a trust is for you depends on your needs and whether the benefits outweigh the costs. A basic trust for a modest estate with a family member as trustee costs relatively little. But an intricate trust with detailed directives for diverse asset types, to be overseen by a professional trustee, can entail substantial expenses. Under Texas law, trustees are entitled to “reasonable” compensation for their services, but that term is not defined. Instead, it is up to the parties to determine what is reasonable under the circumstances. Naturally, you can expect to pay a lot more when hiring a professional trustee like a bank or trust company than you would when naming your own child or other relative.

Apart from costs, you must also consider that establishing a trust requires careful documentation and ongoing maintenance, so it may not be the best for those seeking the simplest solution possible. Additionally, while it is true that there are many different kinds of trusts for different purposes, there are always pros and cons to consider. For example, irrevocable trusts can be effective for tax or creditor protection or even to qualify for Medicaid if used correctly, but they are inflexible and limit the grantor’s control over the assets placed within the trust.


Trusts are a powerful tool that can benefit just about any estate, but they are not for everybody. The more complex your plans are for what should be done with your property after your death, the more likely you are to benefit from a trust. Additionally, trusts are one of the best means to set aside assets for the care of loved ones—or for yourself in the event of future incapacity—during your life. But for those with simple plans for a modest estate, there are generally other creative avenues of estate planning that can achieve the same results for a lower cost. I recommend consulting an attorney to see what plan best suits your needs and preferences.