What is a trust?

A trust is a relationship where A owns something for B.

A is the legal owner but B is the real owner.

Just think of a bank account for kids. Kids cannot operate bank accounts so the parent opens an account as trustee for the kid. The parent's name is on the account but the money belongs to the kid. The income from the account belongs to the kid and should go on their tax return (they won't have to lodge one unless they earn more than a certain amount). The parent is the trustee and the kid is the beneficiary.

Simply put that is what a trust is.

There are many different types of trust with one of hte main ones being a discretionary. This is one where the Trustee can give the income to a wide class of beneficiaries at the discretion of the trustee. This is great because the trustee can give to the beneficiaries with the lowest income first and this will reduce the tax payable.

It is also good because the beneficiaries don't own the trust property or the income (until a distribution), so if a beneficiary goes bankrupt the trust assets are not up for grabs. The trustee wouldn't give them any income either or the creditors may get their hands on that. They would then give to them again once they come out of bankruptcy.

Thats the quick version of what a trust is.