Trust Fund

MoneyBestPal Team
A formal structure that manages assets for an individual or group of people.

A trust fund is a formal structure that manages assets for an individual or group of people. The grantor, who designates the trust fund, may contribute assets to the trust fund either while still alive or after passing away.

The recipient of the trust fund's proceeds is referred to as the beneficiary, and they are entitled to income or principal distributions in accordance with the conditions established by the grantor. The trustee is whoever or whatever oversees the trust money, and they have a fiduciary duty to act in the beneficiary's best interests.

Trust funds can be used for a variety of things, including preserving family wealth for future generations, avoiding probate and estate taxes, shielding assets from creditors and lawsuits, giving to charity causes, and providing financial security for loved ones. Many assets, including money, real estate, stocks, bonds, companies, insurance policies, or personal property, can be held by trust funds.

There are many types of trust funds that can be tailored to suit different needs and goals. Some of the common types are:
  • Living vs. testamentary: A living trust is established while the grantor is still alive and may be amended or revoked at any time. A testamentary trust is established by a will and becomes effective upon the demise of the donor.
  • Revocable vs. irrevocable: The grantor of a revocable trust may alter or dissolve it whenever they see fit. Once created, an irrevocable trust is unchangeable and cannot be revoked.
  • Funded vs. unfunded: During the grantor's lifetime or after their passing, assets may be transferred into a funded trust. Unfunded trusts don't have any assets until they get them from another source, like a will or an insurance policy.

Trust funds are sophisticated legal vehicles that need careful preparation and expert advice. You should speak with a financial planner and an estate lawyer if you're interested in setting up a trust fund for yourself or a loved one. They can assist you in designing a trust fund that satisfies your requirements and objectives.