What is a Trust Fund?
Trust funds are arrangements that allow individuals to create sustained benefits for another individual or entity. Parents sometimes establish a trust fund to provide some degree of financial security for their children, with the trust providing resources to meet basic needs after the parents are deceased. A trust fund can also be established to benefit a charity or other non-profit organization. A trust can include a wide range of assets. In addition to cash, a trust fund may include resources such as property, stocks, bonds, or any other type of financial instrument. The trust fund may be managed by a single trustee, or be structured to allow for more than one trustee. It is the responsibility of the trustee to see that the resources included in the trust fund are used in the best interests of the recipient of the trust. A trust fund normally has some limitations imposed on how the assets contained in the trust may be utilized. For example, the recipient may not be able to begin draw
While the common assumption is that trust funds are only for the wealthy, a trust fund can actually be leveraged into an effective financial tool for a larger range of income levels. The basic concept of a trust places a separate legal entity in control of financial assets (property, savings, etc.) for the benefit of the beneficiary of the trust. The individual who establishes the trust is referred to as the donor or grantor and the group or entity responsible for managing and executing the trust is known as the trustee. One of the most common goals for establishing a trust is to separate the benefits of property ownership into current and future portions. Common trust designs first pass trust benefits on to one’s surviving spouse, and next to the remainder beneficiaries (children, grandchildren, etc.). What are some reasons for creating a trust fund? • To help reduce certain types of estate taxes. • To establish supervision of your assets in case you become unable to personally overse
You’ve heard the words “trust fund” a thousand times but are not 100 percent sure of the technical meaning. You’re in the right place. A trust fund can, quite simply, be a fund that holds money or assets on behalf of an individual or group. However, over time, the way these funds have been used has become more and more sophisticated and, understandably, are subject to various laws and rules in relation to their administration.
