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Everything You Need To Know About Trust Funds

Everything You Need To Know About Trust Funds

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Planning for the future is not only concerning your life, but it affects those who are important to you as well. Considering your family’s financial stability, such as your children, is crucial even after retirement or death. Most individuals prefer a trust fund. It assures individuals that their assets and family are secured.

What is a Trust Fund?

A trust fund is a type of legal entity used as a tool to hold and transfer assets to a beneficiary. It can transfer the grantor’s property, business, money, stock, and bonds to the benefactor. A trustee can arrange and manage the assets in the fund.


  • Beneficiary: This can be an individual, organization, or business chosen by the grantor to have access and receive the assets stipulated in the trust fund.
  • Grantor: This is an individual who currently owns the assets, chooses the beneficiaries, and the terms for the trust fund.
  • Trustee: It can be an individual, such as an advisor, or a company. The entrusted third-party will arrange the grantor’s terms and ensure the beneficiary will receive the trust fund.

How Does it Work?

There are different types of trust funds to meet your needs. These include irrevocable trust funds, revocable trust funds, and charitable remainder trust. All three have ways to transfer assets; however, they vary in legal guidelines. As with anything relating to your finances, we suggest your talk with a qualified financial advisor first.

Irrevocable Trust Funds

The irrevocable trust fund cannot be rescinded or alter the beneficiaries or conditions. Creating the trust fund causes the grantor not to have a legal claim over the assets. Therefore, the grantor does not pay income tax earned from the assets or estate tax. Lastly, it protects the assets from being taken to pay withstanding debt of the grantor after death. Thus, the beneficiary will still have control over the assets and capitalize on its benefits.

Revocable Trust Funds

Revocable trust funds are also known as a living trust. Unlike the irrevocable trust funds, the stipulated terms and chosen beneficiaries can be changed or removed until the grantor’s death. Therefore, if the grantor decides to rescind the trust, all assets will return to their estate. The revocable trust permits flexibility. Nonetheless, if the grantor has an outstanding account or debt, these assets will be allocated to meet the bills.

Charitable Remainder Trust

The charitable remainder trust is also known as the charitable annuity trust. It allows the grantor to transfer assets to a chosen charity. A donation of a set percentage income to cause will remain until the funds are exhausted.

The Benefits

Tax Benefits

Transferring assets to a trust fund minimize the tax on your estate due to moving your assets to a lower tax bracket. Depending on which variety of trust funds, specific tax benefits and guidelines can benefit the grantor.


It ensures that your legacy is secured. It enables your family, businesses, or other organizations you care about will be stable. Trust funds also provide that assets will not be wrongly allocated or seized in certain circumstances.

Ongoing Transfers

There are varied ways to attain a trust fund. Using a life insurance policy to allocate funds to benefactors has benefits. These depend on the type of system and what the company offers. Ongoing transfers are a fixed amount given throughout a set period. Additionally, utilizing the money to generate dividends, interest, or income for the beneficiary to possess.

The Drawbacks 


When creating a trust fund, consulting the expertise of a lawyer might be required. These fees can be expensive, depending on the extent of the work. However, individuals can also seek financial advisors who can further aid in planning their funds. Another point of consideration is if sufficient funds are available to be utilized in daily life and allocated to a trust fund.

Moving Forward

Planning for the future is a task never too early or too late to do. A trust fund is a way to ensure that what you cherish the most is secured. It has different varieties to meet your needs. Nonetheless, there are benefits and drawbacks to consider; however, evaluate if this is what you want and need for the future.

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