To understand how a trust works, you need to know these four legal terms.
1. The "grantor" (sometimes called settlor, trustor or creator) creates and controls the trust. You are the grantor of your trust. And only you, as the grantor, can make changes to your trust. That's how you keep control.
2. The "trustee" manages the assets you put into your trust. Most people choose to be their own trustees. If you and your spouse are co-trustees, either of you can act and have instant control -- with no court interference -- if one of you becomes incapacitated or dies. You can also select a corporate trustee to act as your trustee or co-trustee. More about them in a minute.
3. The "successor trustee" will manage your trust according to your written instructions if the trustee is unable to act. So, if you and your spouse are co-trustees and something happens to both of you, or if you are the only trustee, your handpicked successor trustee will step in.
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to the instructions in your trust, without court interference.
Most people name an adult child, trusted friend or corporate trustee as their successor trustee.
4. The "beneficiaries" are the people and/or organizations who will receive your assets after you die.
