Trusts are an essential component of most Colorado estate plans. However, despite their importance, many individuals do not understand the basics of a trust, including their key concepts and terms. While trusts can sometimes be complicated, the following post breaks down the essential aspects and terms associated with a Colorado trust.
What is a Trust and Who is Involved in the Process?
A trust is a legal agreement involving at least three parties, where one party holds and distributes assets on behalf of another. The terms of the trust – which all parties must abide by – are included in a legal document called the trust agreement.
As mentioned previously, there are three parties involved in a trust agreement. The first party is called a trustor, who creates the trust and is giving away, or transferring, the assets. The second party is called the trustee, who manages the trust and its assets. The trustee is legally obligated to manage the trust in the best interest of those receiving the assets and also consistent with the terms of the trust agreement. The third party is called the beneficiary, who will receive the assets in the trust. They are called the beneficiary because they benefit from the trust. It is important to note that the same person can be in more than one of these roles, even at the same time. For example, often, the same individual will be the trustor and the trustee.