You’ve probably heard of a trust fund before but might not know what it is. Trusts are financial tools that allow you to control and manage your assets for the benefit of others. They can also help protect against creditors, taxes, and potential lawsuits by protecting your assets from certain claims. If you’re considering setting up a trust yourself, here’s what you need to know:
What Is A Trust Fund?
A trust fund is a legal entity that holds assets for the benefit of other individuals. The trust owns and manages the property, pays income to beneficiaries, and distributes the principal as directed by its creator (the grantor).
The grantor can be an individual (such as an adult child) or one or more persons (such as two parents). The amount held in trust may be large or small, depending on what kind of property you want to put into the fund and how much money you have available at any given time.
Trusts can be used for a variety of purposes, including:
- Managing your assets for the benefit of others (such as family members)
- Avoiding probate when you die by having your executor use the trust instead.
Trusts are long-term investments and should not be confused with short-term savings accounts or certificates of deposit (CDs). You will not get a check from a trust until it’s time for distributions-usually after you pass away.
Can I Lose Money In My Trust Fund?
You should know that trust funds are not FDIC-insured. The money you put into a trust fund is at risk of being lost and cannot be recovered by the FDIC if something goes wrong with the bank or other financial institution where your account is held. You can lose money in your trust fund, but there are steps you can take to minimize this risk. For example, you can invest in low-risk options like CDs or bonds with lower returns but greater stability than stocks and other investments with higher risk profiles.
Another option is to ensure that your trust fund has more than one beneficiary; this way, if one person dies before they reach their designated age (or another event occurs), then there will still be enough money left over for the other beneficiaries of the trust fund to receive their share as well.
When Should You Use A Trust?
Trusts can help protect your assets from creditors or other people who might harm them. They also give you more control over how those assets are distributed, so if you want to leave them for someone else after death (or before), it’s easier to do so through a trust than simply by writing out a will or putting money into their name now.
Trust funds may also help reduce taxes on inheritance income when used properly-and. Even if they don’t reduce taxes directly, they can still make an enormous difference in how much money is available for heirs once the original owner dies. Finally, naming a beneficiary or trustee is another way that trusts can give loved ones peace of mind about what happens with any given asset after death. This provides reassurance during difficult times while ensuring that no one else has access unless given explicit permission first!
For more information, contact us today!
