What does the term "trust" refer to in estate planning?

In the context of estate planning, the term "trust" specifically refers to a fiduciary arrangement in which one party, known as the trustee, is given the responsibility of managing assets for the benefit of another party, known as the beneficiaries. This arrangement allows the grantor, the person who creates the trust, to specify how and when their assets will be distributed. The trustee has a legal obligation to act in the best interests of the beneficiaries, which can provide an effective way to manage and protect family wealth, ensure that assets are distributed according to the grantor's wishes during and after their lifetime, and potentially minimize taxes.

This definition highlights the core function of a trust in estate planning and emphasizes the fiduciary duties involved. It underscores the relationship among the grantor, trustee, and beneficiaries, which is central to the concept of a trust.

In contrast, other options discuss different legal arrangements or frameworks. For instance, a legal document outlining a person's wishes after death typically refers to a will rather than a trust. Similarly, a method of distributing wealth equally among heirs does not capture the specific managerial and fiduciary aspects inherent to a trust. Lastly, a formal agreement to create a partnership for asset management relates to business partnerships and does not pertain to