A trust fund is basically a fund comprising of any kind of assets which are intended to provide benefits to one individual or an organization. It is formed so that the money from one person can be passed on to another person or organisation and still be useful after the death of the person who created that trust fund.
A grantor creates a trust fund to collect assets for the befit of an individual such as a child or grandchild or people even create trust funds for organisations like charitable organisations and non-profit organisations.
The assets can range from cash, stocks, bonds, marketable securities or any other type of asset which can be built over the course of years. Typically, the recipient of the trust fund must wait till a certain or a specific turn of events to be able get the benefits from the assets of the trust fund. And before the time that the assets are available to be used by the recipient, a trust fund is managed by a trustee or a group of trustees, who mayor not be the same as grantor.
A grantor builds up the assets whereas a trustee manages them. The agreements with the trustees can vary. They can as simple as being just a dispenser of assets to the beneficiary or even complex like being able to make investment decisions for the beneficiary. It is often regarded that trust funds can only be created by wealthy people, but actually a person of any means can set it up for protecting the funds from being potentially misused and even to get tax benefits.
The money can be used by your children for educational expenses and you decide where your money can be spent after you pass away. The amount which you give to be forming a trust fund will be exempted from taxes, and this also means that you will not be able to use that money because now it does not belong to you. The legal documents pertaining to the creation of trust funds are quite complex, so it is advisable that you take up the advice of an attorney or your financial adviser for a proper trust fund to be formed.
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