In financial terms, what is a trust?

A trust is fundamentally a fiduciary relationship in which one party, known as the trustee, holds and manages property or assets for the benefit of another party, referred to as the beneficiary. This arrangement allows for the separation of legal ownership and beneficial ownership, ensuring that the assets are managed in a way that aligns with the wishes of the person who created the trust, known as the grantor or settlor. This can include financial assets, real estate, or other forms of property.

Trusts can be utilized for various purposes, including estate planning, tax planning, and asset protection. They provide a mechanism for ensuring that assets are distributed according to the grantor's desires, often avoiding probate and potentially minimizing estate taxes. Trusts may also protect assets from creditors or during divorce proceedings, depending on the type and structure.

In contrast, other options provided represent different financial concepts. For example, a savings account with high interest rates mainly refers to a traditional banking product designed for saving money rather than managing or protecting assets. A loan from a financial institution does not involve holding property for another's benefit but rather is a borrowing arrangement. Lastly, an investment product that guarantees returns also does not embody the fiduciary obligations or mechanics of a trust, as it generally