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Trust fund, what is it?

TRUST FUND. WHAT IS IT?

This entry will continue the discussion of Trust Funding from our May Blog.

People hear the phrase “Trust Fund” often in connection with celebrities or the children of wealthy people.  In truth most people use the phrase without fully understanding what it means.

Previously we described Trust Funding as the process you go through to transfer all of your assets to the Trust.  This becomes the fund, which is all the real estate, money, cars and belongings that is available to your heirs upon your death – the Trust Estate.

But what happens to upon your death?  As part of your Trust you will have nominated people to be your beneficiaries – these may be your children, grandchildren, brothers or sisters – and you will be have determined what each person is to receive.  Frequently Trusts are set up to give a percentage, for example if you have four children you may leave each child 25% of the Trust Fund.

The Trustee will collect all your assets and after paying off any taxes, fees and other costs, will divide the fund into four 25% shares, one share for each child.

In forming the Trust you can set requirements that limit how the Trustee can pay a beneficiary his or her share.  Age is the most common restriction; no one wants their fifteen year old son to suddenly have access to potentially thousands of dollars.  The Trustee can hold that beneficiary’s allocated share or the Trust Fund, until they have reached the appropriate age.  However, before that condition is met, you may want to permit the Trustee to use some of the beneficiary’s trust fund to assist them in worthy endeavors such as education or should the need arise for, medical expenses.

If you would like to learn more please contact us using the form at the bottom of this page or call us at: 603 606-2631.

Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net.

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