In a trust arrangement, legal title to assets is held by one party for the benefit of another. The holder of the legal title manages and controls the assets, but beneficial ownership, including the rights to income and eventual distribution, resides with the designated beneficiary. A common example is a parent establishing a trust for a minor child, where a chosen individual or institution acts as trustee until the child reaches maturity.
This separation of legal and beneficial ownership offers several advantages. It allows for asset protection, efficient estate planning, and management continuity. Historically, trusts have played a significant role in safeguarding wealth and ensuring its proper administration across generations. This structure provides flexibility in how assets are managed and distributed, adapting to changing circumstances and fulfilling the grantor’s wishes.