Trust Fund

Trust Funds Parties

There are many different types of trust funds parties, but the three most common are the grantor, beneficiary, and trustee:

1. The grantor is the person who creates the trust fund and names themselves as the initial beneficiary. (The grantor may also be referred to as the settlor, trustmaker, or trustor).
2. The trustee is responsible for managing the trust fund and distributing assets to the beneficiary according to the terms of the trust agreement.
3. The beneficiary is the person who ultimately benefits from the trust fund.

Types of trust funds

When most people think of trusts, they think of the large, multi-million dollar trusts that are used to provide financial security for future generations. However, there are many different types of trusts, each with its own unique purpose. Here is a brief overview of some of the most common types of trust funds.

• Qualified Personal Residence Trust (QPRT) allows a homeowner to transfer ownership of their home to the trust while retaining the right to live in the home for a set number of years. 
• Qualified Terminable Interest Property Trust (QTIP) allows the surviving spouse to continue to receive income from the property after the death of the other spouse, while also allowing the property to be passed on to the couple’s heirs.
• Asset Protection Trust (APT) is a trust that is set up specifically to protect your assets from creditors. The trust owns all of your assets, and you have no control over them. This can be a great option if you want to ensure that your assets are protected from lawsuits or other creditors. 
• A Blind Trust is an arrangement in which an individual places their assets into the care of a trustee, who then manages the assets for the benefit of the individual without disclosing the details of the holdings to the individual. Blind trusts are often used by elected officials and other public figures who want to avoid any potential conflicts of interest.
• Testamentary Trusts. These trusts are created as part of a will and take effect after the death of the person who created the trust. They can be used to provide financial security for children or other loved ones, or to fund charitable causes.
• Special needs Trust. It is a trust established for the benefit of a person with a disability. The trust can be used to pay for the beneficiary’s supplemental needs, which go beyond what government assistance programs provide. The trust must be established by the beneficiary’s parent, grandparent, legal guardian, or a court.
• Individual Retirement Account (IRA) Trust is a trust fund that is established for the exclusive benefit of the individual who establishes the IRA. The trustee of the trust is responsible for managing the assets in the trust and making distributions to the IRA holder.
• Grantor Retained Annuity Trust (GRAT). The trustee pays the grantor an annual fixed sum (the annuity), which is used to pay income taxes on the trust assets.
• Generation-Skipping Trust (GST) is a trust fund that allows individuals to transfer money, assets, or property to their descendants without having to pay any estate or gift taxes on the transfers.
• A Charitable Trust is a type of trust that’s used to donate money to charity.
• Land trust is a type of trust fund that is specifically used to protect and preserve land. The purpose of a land trust fund is to ensure that the land is available for future generations, and to protect it from being developed or sold.

> Interested in Real Estate? Read about REITs, Real Estate Investment Trusts.

Irrevocable Trust Funds Vs. Revocable Trust Funds

• Revocable trusts: These trusts are created by the grantor and can be amended or terminated at any time. 
• Living trusts. These trusts are created while the person who creates them is still alive and take effect immediately. They can be used to manage assets during your lifetime or to provide financial security for your heirs after you die.
• Irrevocable trust: An irrevocable trust is a trust that cannot be changed or cancelled once it has been created.

Trust and Trust Fund are the same?

There are some important differences between a trust and a trust fund.

A trust is an agreement between three or more people. The person creating the trust (the settlor) transfers property to a trustee who holds it for the benefit of one or more beneficiaries. A trust fund, on the other hand, is simply a name for a bank account or investment account that is held in trust. A trust fund is a legal entity.

How to set up a trust fund

Here’s how to set a trust fund up:

1. Choose a trustee. This is the person who will manage the trust fund on behalf of your loved ones
2. Draft a trust agreement. This document outlines the terms and conditions of the trust fund.
3. Choose your beneficiaries. These are the people who will receive the money from the trust fund when it’s eventually distributed.
4. Choose your funding method. You can either contribute money to the trust fund yourself or have it funded by another party, such as an insurance company.
5. Set up a bank account in the name of the trust fund and deposit your funds into it. This is where the money will be held until it’s distributed to your beneficiaries.

Uses for trust funds

There are many different reasons why people might choose to establish a trust fund. Perhaps the most common reason is to ensure that heirs will have a financial cushion to fall back on in the event of the grantor’s death. Trust funds can also be used to provide for a child’s education, to cover medical expenses, or to support the grantor during retirement. In some cases, trust funds are established as a way of avoiding probate.

Whatever the reason may be, there are a number of benefits to establishing a trust fund as we will see below:

Benefits of trust funds

First and foremost, trusts offer privacy. The details of the trust agreement are not made public and are known only to the parties involved in the transaction. This can be especially important if there is a dispute between beneficiaries or if the grantor wants to keep certain information confidential.

There are many benefits of trust funds, but here are some of the most important ones:

1. Trust funds provide a steady stream of income for the beneficiary.
2. Trust funds can help reduce or even eliminate estate taxes on inheritance. (*See cons below).
3. They can also help protect assets from creditors in the event of a lawsuit or bankruptcy.
4. Trust funds can be used to manage and grow wealth for future generations.
5. They offer privacy and flexibility, since the terms of the trust can be tailored to fit the needs of the beneficiary.
6. Trust funds are a cost-effective way to provide estate planning and asset protection for your loved ones.

Cons of trust funds

A trust fund can be a helpful way to save for the future, but there are also some potential drawbacks to consider before setting one up.

1. Trust funds can be expensive to set up and maintain. You will likely have to pay annual fees, and the money in the fund may not be accessible until your child is 18 or 21 years old.
2. They may not be the most tax-efficient way to save. Trust funds can be subject to estate taxes, so make sure you understand the tax implications before setting one up.
3. Trust funds may not be as reliable as you think. In the past, many trusts have failed due to poor investment choices by the trustees.

In conclusion, a trust fund is a way to protect your assets and provide for your loved ones in the event of something happening to you. It can also be a way to reduce your taxes. If you are thinking about creating a trust fund, make sure to consult with an attorney to find out what option is best for you.