A trust allows one individual to place his assets in safekeeping for the benefit of another. However, in order to be valid, a trust must contain certain elements and meet certain legal requirements.
The individual who places his assets in the trust is known as the settlor. The trust instrument must show the settlor's intent that his assets be held and managed for another's benefit.
The individual who takes title to the assets is called the trustee. The trustee holds legal title, but must administer the assets for another's benefit. A trustee owes full fiduciary duties to this individual, and may not administer the trust for his own gain in any way.
The individual for whom the trustee manages the assets is called the benificiary. The beneficiary holds "equitable title," meaning that he does not legally own the assets, but is entitled to all benefits from the assets.
In order to be legal, a trust must have assets to be placed in the trust at the time of the trust's execution. These assets, collectively known as the "res," may also be provided in many jurisdictions by a will to take effect upon the settlor's death.
The legal structure of the trust allows the trust to avoid the delay and expense of probate. Wills must be probated before they can take effect, but because a trust is a transfer during life, rather than after death, it need not be probated.