How does a trust work?
Income is earned by the trust company. The trustee is empowered to distribute the trust income to whom of the beneficiaries and in what proportions he or she chooses. In the case of a family trust the trustee could, for example, distribute income to the children of the family and thereby reduce the taxable income of the parents.
A trust is an agreement in which a grantor transfers the legal ownership to a person or institution that has the job of managing the transferred property for the benefit of another person. Trusts create a fiduciary relationship between the trustee and the beneficiary. If the trustee does not live up to his or her duties, then the trustee is legally accountable to the beneficiary(ies) for any damages or loss in value.
