Trust funds aren’t limited to one demographic. Here’s a quick look at what this estate-planning strategy entails.
A trust fund is a special type of legal arrangement that places assets in an account to benefit another person, group or organization.
The grantor, or person who establishes the account, donates the property, such as cash, stocks, bonds, real estate, mutual funds, art or a private business, to the fund and decides the terms upon which the fund must be managed. The beneficiary, or person whom the trust was established for, will reap these benefits upon the specifics laid out by the grantor. Tools are readily available online to assist you in setting up a trust fund yourself; however, a trustee is highly suggested. This person will assist the grantor in overseeing and managing the assets in a trust fund.
You’ll start the process off by deciding whom your beneficiaries will be and why you have chosen to start the trust in the first place. There are several benefits when opening a trust fund for both the grantor and their recipients:
- Setting up a charitable annuity trust or charitable trust can save you a considerable amount each year in taxes while benefiting your favorite charity.
- Family members often set up trust funds designed to pay educational expenses for their children.
- Trust funds serve to protect family businesses. The trustee will be responsible for overseeing management, while the beneficiary reaps financial benefits.
Funding The Trust
After the grantor decides how the beneficiary shall receive their assets and has properly informed the trustee of the terms and conditions of this trust, the fun part starts: funding the trust.
Typically, you can hold a variety of assets in one trust fund, from stocks and bonds to real estate and cash. You can also deposit lump sums of money into this account or choose to make payments over time.
If you’re interested in starting a trust fund or in finding out more information on trust funds, it’s important to discuss such matters with a qualified trust attorney, your accountant or your local registered investment advisory firm. It pays to plan. You may find that a trust fund is an ideal option for the livelihood of both you and your family.