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Trust funds are a broad category of financial and estate planning tools, establishing a legal body that holds assets in waiting for another individual. The name comes from the fact that a neutral third party, known as a trustee, manages these assets until the pre-agreed upon time that they transfer to the beneficiary. Trust funds can contain virtually any asset, including stocks, bonds, real estate, a business, and just good old-fashioned money. As mentioned, many different specific types of trust funds exist for different purposes, each with unique regulations and rules pertaining to taxation, distribution of funds, and the type of assets being held.

All trust funds have three people party to their details: the grantor, the trustee, and the beneficiary. The grantor is the original owner of the assets, the person who decides to set up the trust fund in the first place and gathers the necessary assets. The trustee is the neutral third party, often an employee at a financial institution, who manages the assets for a given period of time and will distribute them to the beneficiary at the appropriate moment. Finally, the beneficiary is the person chosen to receive the assets in the trust. Trust funds are generally created in order to determine how assets will be distributed after the grantor’s death. Often, prior to the full disbursement of the trust, there will be some allowance granted for expenses like education or a small monthly income.

While there are many different kinds of trust finds, there are two broad categories that most do fall under. A living, or revocable, trust allows the grantor to continue controlling assets and making changes to the trust during their lifetime. An irrevocable trust is very difficult to make changes to once agreed upon and the grantor does lose some control over the assets during their lifetime. However, irrevocable trusts may have significant tax benefits for both the grantor and the beneficiary. Other types of trusts include blind trusts, marital trusts, charitable trusts, and special needs trusts. A tax or a trust attorney would be your best resource for understanding the intricacies of each of these trust funds and would be a necessary step in finding out which could work for your specific financial situation.