What is a trust fund?

trust fund

Essentially, a trust fund holds individuals’ assets aside and distributes them to designated inheritors after they’ve died. A common misconception about trust funds is that only high-net-worth individuals need to create them. However, that is simply a myth. Anyone who wishes to protect their assets and ensure they are properly distributed to designated beneficiaries after they’ve passed away can create a trust fund. Trust funds are beneficial in the estate planning process. If you intend to create a trust fund, contact a qualified Monmouth County Estate Planning Attorney who can help you successfully establish a trust that protects your hard-earned assets. 

What are some different types of trust funds?

When an individual is estate planning, they should consider creating a trust. Essentially, a trust fund allows individuals to hold their assets and property in a secure account. The assets in a trust will be distributed to designated beneficiaries after they’ve died. Typically, individuals establish a trust fund to set aside a certain amount of money they wish to leave to their loved ones. There are several types of trust funds one can create. The following are different types of trust funds individuals could establish:

  • Irrevocable trust. An irrevocable trust is essentially a trust that cannot be modified once it is created. This type of trust cannot be revoked.
  • Revocable trust. Unlike an irrevocable trust, a revocable trust can be modified after it’s been established. This is a living trust, meaning a grantor can revoke it at any point as well as place assets in it when they please. However, revocable trusts become irrevocable when the grantor dies. This means it cannot be revoked or modified anymore.
  • Testamentary trust. This type of trust is created as part of an individual’s will. Assets can only be transferred after the grantor has died. The grantor leaves specific instructions on how they wish their executor, trustee, and beneficiaries to be. This type of trust addresses portions of an individual’s estate and assets.
  • Special needs trust. This type of trust is suitable for individuals who wish to leave a specific portion of their assets to take care of a disabled loved one. In certain states, a trust must be created to keep a special needs individual eligible for Medicaid and Supplemental Security Income (SSI). This will ensure an individual’s loved ones’ long-term care is provided for and ensured after they’ve died.
  • Charitable or remainder trust. Individuals who have a cherished charity they wish to donate funds after they’ve died must establish a charitable remainder trust. This trust works differently than others because it is completed at the end of a trust. This means once the beneficiary and taxes have been distributed, the remainder of the funds will be transferred to the individual’s specified charity.

If you are interested in creating a trust fund, don’t hesitate to reach out to one of our skilled and determined attorneys. With years of experience, our team can help you secure your assets in a trust fund to ensure they are distributed to those whom you wish in the future.