A Guide to Trust Funds

Trust funds used to be primarily associated with those who were classified as individuals with high net worth. It was a way for these people to give their money to their children or even charitable organizations. However, these have become increasingly used among those not classified as wealthy. They are quickly becoming a much more accessible and widely sought-after tool for estate planning. Read this investment trust factsheet.

1. What Is A Trust Fund?

A trust fund is a legal agreement that gives an individual the ability to place their assets into a special account to benefit a specific person or entity. These funds can be relatively complex and a lot of the time they require the assistance of an attorney to get fully set up. While there are tools for those looking to set one up alone, you’ll want professional guidance. There are different types of trusts available including testamentary trusts that are based on a will, living trusts, irrevocable trusts, and even revocable trusts. You can create a will either online or through the assistance of a professional attorney.

2. What’s The Purpose Of a Trust Fund?

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One of the primary reasons for creating a trust fund is to figure out who is going to receive your assets. You can effectively assign different assets through your trust throughout your lifetime or when you die through your will. For example, if you want your trust fund to give a specific family member education assistance or help them with the purchase of their first home, you can do that. Also, starting a trust can end up lowering your estate taxes and give you the ability to avoid probate which is a legal process that makes someone prove the validity of a will.

3. Different Types Of Trusts

There are plenty of things that can alter the process of setting up a trust fund. For one, the type of trust fund you’re setting up. Another would be what assets you have. Lastly, the beneficiaries you’re looking to use. To figure out which type is right for you, you’ll want to figure out the purpose. By first identifying the reason you’re going to be setting one up, you can have a better idea. Next, you want to figure out who will be the beneficiary. For example, if you are looking to help a grandchild fund their college education, you might want to start up an educational trust. Whereas, if you are looking for a much more straightforward trust option that helps you allocate your assets when you die, you’ll likely want to start a revocable trust. This way, you can alter or amend the trust whenever you want throughout your life.

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At this point, you’ll want to figure out how you want everything dispersed. You want to designate someone to be a trustee or a group of trustees. This can include a professional attorney or even close relatives that you trust. These trustees will be tasked with distributing all of your assets and upholding the purpose of your trust. Figure out how you want all of the funds distributed whether it be a lump sum given at a specific date or different amounts paid at routine intervals. 

4. Transfering Assets

Another step you want to take is to figure out how much you want to fund the trust and the type of funds you’ll be moving into it. Trust funds typically consist of different types of assets that can include cash, stocks, bonds, vehicles, family heirlooms, and more.

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Transferring different assets into the trust from various financial institutions requires different paperwork at each institution. Thus, you want to keep everything fully organized. You can download our information organizer to effectively track all of the accounts in a singular place. Once all of your assets are moved and the trust is fully funded, the designated trustee is going to be set with managing your assets.

If you have different types of assets and stipulations existing in your trust, you will want to consult with a professional attorney to guarantee that your trust is properly set up and that the administration of the trust runs as smoothly as possible. Regardless of your financial situation, setting up a trust can be one of the best financial tools to ensure your assets are allocated as per your wishes.

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