What’s The Difference Between a Trust and A Trust Fund?

Trust funds sometimes get a bad rap because they are often associated with the wealthiest of the wealthy, however, there truly isn’t a huge difference between the kind of trust that most families establish during estate planning in order to ensure that their assets pass onto their heirs without having to go through probate and a trust fund. Both are vehicles that allow you to exercise control over who receives your money and/or property, swiftly and with the added benefit of deferring taxes.

Individuals Involved

There are three individuals involved in a trust: the grantor, the trustee, who manages the trust, and one or more beneficiaries. Almost anything can be included in a trust, such as bank accounts, business interests, investment accounts, life insurance policies, real estate, and more.

Revocable Versus Irrevocable

Most trusts are set up as revocable/flexible or irrevocable/inflexible. Grantors can make adjustments to revocable trusts (also known as living trusts) at any time, and maintain control over the trust throughout their lifetime; earning interest, paying taxes, etc. Creditors can also access the funds to pay off debts.

Conversely, an irrevocable trust cannot be changed and can only be accessed once the grantor passes away. As a result, grantors do not pay taxes on the assets in them during their lifetime and creditors cannot access these assets. Once a grantor dies, a revocable trust turns into an irrevocable trust. In addition, because funds that are in an irrevocable trust are technically not part of a grantor’s estate, grantors will sometimes move assets into an irrevocable trust in order to move into a lower tax bracket, or protect against creditor claims, etc.

Although there are only a few types of trust funds, there are a number of additional inclusions that people can include in their trust in order to establish certain conditions. For example, a “spendthrift clause” not only prevents a beneficiary from using a trust’s assets to pay off debts, but also bars creditors from going after the fund.

Work with an Experienced Florida Estate Planning Attorney

When it comes to establishing a trust (or trust fund), it is best to meet with an estate planning attorney. You will need to work with this attorney to formally establish the fund. Some people also find that meeting with a financial planner – possibly one that your attorney works with regularly – can be helpful.

When it comes to crafting your trust, you want to make sure that you work with an attorney who is experienced so that it accomplishes what you envision. Otherwise, it could end up being challenged in court.

Don’t take this risk; contact our Orlando estate planning attorneys at Gierach and Gierach, P.A. today to find out about our services. We have a number of years of experience helping individuals and families in surrounding communities ensuring that their asset goals will be accomplished through responsible estate planning.

Resource:

businessinsider.com/what-is-a-trust-fund-estate-planning-tool

https://www.gierachlaw.com/do-i-need-a-revocable-trust/