What is a trust, and why do people set one up?
A legal arrangement in which one person holds assets for the benefit of another — separating legal ownership from the right to benefit, which is the whole mechanism and the source of everything trusts can do.
The three roles: the settlor, who puts assets in; the trustees, who hold legal title and must act in the beneficiaries' interests; and the beneficiaries, who are entitled to benefit. One person can hold more than one role, with limits.
Why the separation is useful:
Protecting people who cannot manage assets — children, and adults lacking capacity. This is the commonest legitimate use and is what many trusts in wills exist to do.
Controlling timing. Assets released at a specified age or on defined events rather than immediately.
Providing for successive beneficiaries — a surviving spouse for life, then children. This is heavily used in second marriages, where the aim is to provide for a partner while ensuring assets ultimately reach children from a first relationship.
Keeping assets out of an estate for administration purposes, since assets in trust do not pass by will.
Protecting vulnerable beneficiaries, including from their own creditors or from relationships.
Charitable purposes, which is a distinct category with its own rules.
Business and pension structures, where trusts hold assets for members.
The main types: bare trusts, where the beneficiary has an absolute right; interest in possession, where someone is entitled to income; and discretionary trusts, where trustees choose between beneficiaries — which is the most flexible and the most heavily taxed.
The duties are serious. Trustees must act in beneficiaries' interests, avoid conflicts, invest prudently, keep accounts and act unanimously unless the deed says otherwise. Trusteeship is a real legal responsibility with personal liability, and people frequently accept it without understanding that.
On tax. Trusts have their own regime — charges on creation, periodic charges, and exit charges for some types. The assumption that a trust avoids tax is usually wrong, and anti-avoidance rules are extensive.
Registration requirements now apply to most trusts in many jurisdictions.
General information, not legal or tax advice.