While the common assumption is that trust funds are only for the wealthy, a trust fund can actually become an effective financial tool for a broader range of income levels.
The basic concept of a trust gives a separate legal entity control of financial assets (property, savings, etc.) for the benefit of the trust beneficiary. The person who establishes the trust is called the donor or grantor and the group or entity responsible for managing and running the trust is known as the trustee.
One of the most common goals for establishing a trust is to separate the benefits of the property into current and future portions. Common trust designs first pass the benefits of the trust to the surviving spouse and then to the other beneficiaries (children, grandchildren, etc.).
What are some of the reasons to create a trust fund?
o To help reduce certain types of estate taxes.
o To establish supervision of your assets in case you cannot supervise them personally
o To more easily transfer your assets to your beneficiaries in the event of your death
o To care for minors (eg, your children) who may lack the financial expertise to properly manage your assets
Establishing a trust may not necessarily be the best option for your situations. Sometimes a well written will be more effective.