Trusts 101: What You Need to Know
By: Barry E. Haimo, Esq.
October 14, 2025
When people hear the word trust, they often think of something that’s complicated, only for the wealthy, or perhaps even unnecessary.
But the truth is that trusts are powerful, flexible estate planning tools that can benefit families of all backgrounds. While the chart above offers a helpful visual snapshot of how trusts work, let’s take a deeper look at the key concepts below – starting with an explanation of trusts.
Trusts Are Legal Entities
At their core, trusts are legal entities much like corporations or LLCs. That means a trust can own property, transact business, and even last for generations (some can last up to 1,000 years!).
The “architect” of a trust is called the grantor – the person who sets up the trust and defines the rules in a governing document known as the trust agreement. Because a trust is legally separate from you as an individual, it provides unique opportunities for protecting your assets, avoiding probate, and ensuring your wishes are carried out long after you’re gone.
The Three Essential Parts of a Trust
Every trust has three main components:
Trustee. The person or institution responsible for carrying out the terms of the trust. Trustees act as fiduciaries, meaning they must always put the interests of the beneficiaries first.
Assets. These are the properties, accounts, or investments placed into the trust. A trust without assets is simply an empty shell.
Beneficiaries. The individuals or organizations that will benefit from the trust. This might include children, grandchildren, or even a charity.
When these three parts come together, a trust becomes a working tool for preserving and passing on wealth.
How Trusts Are Administered
Setting up a trust is only the first step. The ongoing administration of the trust is equally important. Here’s what that looks like:
Trustee responsibilities
The trustee manages the assets for the benefit of the beneficiaries, always in line with the trust agreement. This might include making investment decisions or ensuring real estate is maintained.
Professional support
Trustees often hire accountants, financial advisors, or attorneys to handle tasks such as preparing tax returns (especially for irrevocable trusts) and creating regular accountings for beneficiaries.
Distributions
One of the trustee’s most visible roles is making distributions to beneficiaries. This may be in the form of income, principal, or both. The trust agreement defines the rules for these distributions.
Standards for Distributions
Not every trust distributes assets in the same way. The agreement might set a specific standard, such as:
- HEMS. Distributions will be limited to the beneficiary’s health, education, maintenance, and support.
- Pure discretion. The trustee decides entirely when and how to distribute.
- Discretion subject to a standard. A mix of trustee judgment and guiding rules.
These distinctions are critical because they affect how flexible (or restrictive) the trust will be in meeting beneficiaries’ needs.
Why Trusts Matter for Your Family
Whether you want to ensure your children are provided for responsibly, protect a family business, or leave a charitable legacy, a trust can give you peace of mind. It allows you to create a structured, legally enforceable plan that reflects your values and safeguards your loved ones.
If you’re considering whether a trust might be right for you, reach out. We’ll walk you through the options and design a plan tailored to your goals.
