Trust funds have a bit of a stigma around them. For those who grow up in the middle class and below, trust funds are seen as something rich kids inherit and live off. While that’s not entirely wrong, it’s also not the whole story.
The truth is, anyone can setup a trust fund if they want. The question is, should t9hey?
Before we get to that, let’s take a closer look at what exactly a trust fund is.
What is a Trust Fund?
You may think a trust fund is some sort of special savings account. In actuality, it’s a legal entity typically comprised of three roles:
The grantor, the beneficiary, and the trustee.
The grantor is the person who establishes the trust. They give money, assets, real estate, stocks, etc. to fund the trust. The beneficiary is the person/group/organization that benefits from the trust. They don’t have ownership of the trust, but they receive revenue from it in some form or another.
Finally, the trustee is the person or organization responsible for managing the trust. Often this is a bank or legal office.
There are many different types of trust, some set up for family and friends, others set up for charitable reasons. Most of these fall under two categories: revocable trusts (also known as living trusts) and irrevocable trusts.
A revocable trust can be adjusted by the grantor during their lifetime, changing the terms of distribution, as well as adding or removing beneficiaries.
Irrevocable trusts, on the other hand, are very hard to change once they’re setup and assets are put into them.
The Advantages of Trust Funds
Trust funds offer a great way to distribute wealth overtime to people or groups of your choosing. You’re also able to place specific conditions for when the money is received (such as at a certain age or after a specific life event), as well as what it’s used for (such as college). Unlike wills, trust funds remain private even after death.
Additional benefits can be found, depending on the type of trust set up.
Is a Trust Fund Right for Me?
When planning your future and organizing your finances, setting up a trust is definitely an option to consider. However, it might not be the best route for everyone, depending on what your financial goals are.
The most effective way to decide your course of action is to meet with a financial professional. At KB&P Partners, we offer wealth management in Springfield, Ohio to people of all financial standings. Whether you have a lot or a little to work with, we can help you make the most of it. Contact us today!