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When it comes to securing the financial future of your children and loved ones, trust funds can often be a beneficial route to take to cover all your bases. It’s a common misconception that trust funds are only feasible for the wealthy, or for larger estates, but in reality a trust fund may be a great option for you despite your overall net worth.
What is a Trust Fund?
By definition, a trust fund is a “legal entity that holds property or assets on behalf of another person, group, or organization.” Essentially, it means that the assets you place into a trust are managed by a neutral third party that is responsible for distribution of the assets to your chosen recipients in the way you choose when the time comes.
How do Trust Funds Work?
Though there are different types of trust funds and their stipulations can vary based on the estate, every trust fund has three major involved parties; a grantor, a beneficiary, and a trustee. The grantor is the estate owner who opens and provides the assets for the trust. The beneficiary -or beneficiaries if there are multiple – is the person who will be receiving the assets when the trust is disbursed. The trustee is the person or organization who is given the fiduciary responsibility to manage the trust and ensure it is distributed pursuant to the grantors’ wishes after the grantors’ death.
The grantor determines which assets they would like placed in the trust, and documents are executed to assign management and control of the assets to the trustee(s). Unlike with a will – which is a public document after an individual dies – the contents of a trust fund are private and only need to be known to the parties involved. In the event of the grantor’s death, the trustee is then responsible for distribution of the assets of the trust to the beneficiaries specified.
What are the Benefits of a Trust Fund?
There are a handful of robust benefits that estate owners can take advantage of when they opt to set up a trust.
Avoid Probate
Unlike with a will, trust funds don’t need to go through the probate process after the grantor’s death. The only parties that need to be involved to execute a trust fund’s parameters are an attorney and the trustee. By avoiding probate, trusts can be disbursed much faster and with more ease, due to the lack of necessary legal processes required.
Trust Funds Can Be Revocable
Trust funds can be set up to be either revocable or irrevocable – meaning they can either be changed after they are set up or not. That means that if tax codes or regulations change after your trust fund is initially set up, you can make changes to take advantage of tax benefits or help avoid consequences related to taxation for your beneficiaries down the line.
How do I Get Started Setting up a Trust Fund?
The first step in starting to set up a trust fund is to consult an estate planning attorney. Trust funds require a legal professional to ensure the correct documents are enacted for your particular estate and type of trust fund.
If you’re in Virginia and need assistance getting started on setting up a trust fund for your loved ones, our team at HALE BALL MURPHY, PLC would love to meet you. We have decades of experience making sure our estate planning clients are making all the best decisions for their individual situations. Our attorneys are skilled at handling every type of trust, including non-traditional trusts like resulting and constructive trusts, and even pet trusts.