In essential terms, a trust is created (“settled”) when a Settlor transfer assets to a trust to be managed by a Trustee, with the instruction of managing them in favor of one or more Beneficiaries.
The Settlor appoints such beneficiaries and it is very frequent that he/she is the first Beneficiary. Additional first Beneficiaries or subsequent Beneficiaries may also be appointed by the Settlor.
The Settlor may establish different percentages for the Beneficiaries, or subject the benefits to certain conditions, terms or milestones (e.g. if my daughter graduates from college, give her a special lump sum as a gift).
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The Trustee manages the assets held in the Trust as if they were the complete owner, since they are owned by the trust agreement that the trustee represents and controls.
For this reason, such assets are completely segregated from the Trustee’s own assets and from any other Trust in which they may be acting as Trustee. Therefore, the Trust assets are safe from both the Settlor’s and the Beneficiaries’ creditors. If structured appropriately, it can also provide protection against claims against the Settlor.
