A trust is a special legal entity that you can use to manage or distribute your assets.
A simple way to think of a trust is to discuss a life insurance trust.
Suppose you purchased a $1,000,000 worth of life insurance with the idea that should you die prematurely, your family will receive $1,000,000 to replace the income they will lose by your death. Although if you think about that, if you earn $100,000 a year that replaces only 10 years of your income. But let’s talk about what happens to that money.
Suppose you die. The insurance company writes a check to your beneficiary for $1,000,000. Suppose you and your spouse die at the same time and your children are contingent beneficiaries. And suppose those children are minors. An insurance company will NOT write a check to a minor. The check has to go to an adult or other legal entity. In this case, that legal entity could be a trust.
What would your spouse do with $1,000,000 cash? Intelligently invest it in the stock market? Or would it be better to put it in the hands of a professional entity whose job is to invest and manage that money. An entity that you can leave instructions behind as to how that money is to be used.
Some time ago I was working with a well to do business person that is a good example of what you can do with a trust. He had three boys, one was starting college and the other two were still in high school. He was a big fan of his boys getting a college education. His trust said that if his sons went to college, the trust would provide tuition, room and board, obtain a car, give an allowance, etc. If a son did NOT go to college, that son could not touch any of the inheritance until he was 45. You can have the trust do what you would have done had you lived.
You can also pour over personal assets to your trust such as a retirement program or even property. A trust can manage a business but only short term until it can be sold.
A trust works with your will.