You’ve worked hard all your life and built up a savings. When the time comes, you want control over how your money and property are distributed after your death. A will won’t satisfy all your needs if you want some distributions spread over an extended period. A trust fund may be the solution.
Trust funds are not just for the ultra-wealthy, but can be a powerful planning tool for average earners too. So what is a trust fund?
A trust is a legal entity, like a small corporation. It holds assets, such as cash or property, that are intended to provide benefit to an individual, group or organization. Trusts generally involve the following three members:
Types of Trust Funds
A trust fund can be categorized based on when it is created (living trust), if it can be modified (revocable trust), and the specific purpose of the trust (charitable remainder trust). Your state’s laws govern the types of trusts that are permitted, how trusts are created, as well as how trusts operate.
Commonly used trusts include:
Funding Your Trust
Funding your trust is the process of transferring your assets into your trust’s name. You must fund your trust for it to have any power. If the property or funds aren’t properly transferred, the trust is useless after you die. The trust assets will go to probate to be distributed under your will or the intestate succession laws of your state.
There are two ways to fund your trust: while you are alive or after you have died. Funding your trust while you are alive ensures the process is handled according to your wishes. All titled property, such as real estate or stocks, need to have the title reflect the trust’s ownership.
A "pour over will" can be used to fund your trust after you die. The will "catches" any forgotten asset and sends it to your trust. The assets may still go through probate first and be exposed to creditor claims, but then it can be distributed according to the instructions in your trust.
Advantages of a Trust Fund
There are several advantages to creating a trust fund, including:
Get a Free Initial Review from an Estate Planning Attorney
Deciding if a trust fund is appropriate for you depends on your unique circumstances, what you want to accomplish, and the laws of your state. There are numerous types of trusts, each with its own special use. Receive a free initial review from a local estate planning attorney and protect the interests of your loved ones today.