how trust funds work
estate planning is a process that involves determining how an individual s assets and other financial affairs will be managed and how any property they own will be distributed after they die property can include any bank accounts investments personal property real estate and or life insurance wills are the most common estate planning tool but trust funds are also popular legal entities laws governing trust funds can vary depending on the country of residency and creation the following parties are involved in establishing a trust 1the grantor generally creates an inheritance arrangement that s carried out after they re no longer mentally competent or alive as the appointed fiduciary the trustee is responsible for carrying out the interests and wishes of the grantor this can include allocating living expenses or even educational expenses such as private school or college expenses and or paying a lump sum or transferring property to the beneficiary or beneficiaries after death trust funds provide certain benefits and protections for those who create them and their beneficiaries revocable trust funds vs irrevocable trust fundsall trust funds are either revocable or irrevocable both are referred to as living trusts when the grantor creates them during their lifetime a testamentary trust is one that s created after the grantor s death usually under terms left in a last will it s irrevocable because the grantor is no longer living to make changes to it 4the grantor can change the terms of a revocable trust at any time or even dissolve and undo the trust completely if they choose assets funded or placed into a revocable trust can be transferred to any number of designated beneficiaries after the grantor s death or even during their lifetime 5the primary benefit of a revocable trust is that the assets avoid probate after the grantor s death this leads to the quick distribution of assets to the named beneficiaries the terms of a revocable trust aren t made public like those of a last will so an estate can be distributed with a high level of privacy grantors can act as their own trustees when they form a revocable trust or they can appoint someone else to the role they can name a successor trustee to take over management of the revocable trust after their death when the assets are typically distributed to beneficiaries and the revocable trust is dissolved an irrevocable trust fund is very difficult if not impossible to change or dissolve undoing it or its terms typically requires the unanimous consent of all beneficiaries this makes them virtually immune to estate taxes and creditor claims the grantor of a revocable trust can take back assets they ve placed into the trust at any time so they re still considered to personally own them this isn t the case with an irrevocable trust the grantor permanently gives up control and ownership of the assets and money placed into the trust although they set the terms as to the beneficiaries who will receive them and when 3types of trust fundsseveral types of trust funds are included under the umbrellas of revocable and irrevocable trusts they often have different rules and stipulations depending on the assets involved and the beneficiaries a tax or a trust attorney may be your best resource for understanding the intricacies of each of these vehicles this isn t an exhaustive list special considerationswealth and family arrangements can grow quite complicated when a great deal of money is at stake for multiple generations of a family or another entity a trust fund can include a surprisingly complex array of options and specifications as a result trust funds aren t just for the ultra rich contrary to what some people believe anyone can use them regardless of their financial situation discuss your needs with a financial or legal professional to find out what kind of fund is well suited for you 