A trust fund is a legal entity or arrangement that holds and manages assets on behalf of a person or organization, called the beneficiary. It is established by a grantor (also called settlor or creator), who transfers assets such as money, property, stocks, or other valuables into the trust. These assets are then managed by a trustee, who has a fiduciary duty to act in the best interests of the beneficiaries according to the rules set out in the trust document or deed
. Trust funds serve as an estate planning tool to control how and when assets are distributed, often providing income or financial support to beneficiaries over time. They can be set up to avoid probate (the legal process of validating a will), potentially reduce estate taxes, and protect assets from creditors. Trusts can be revocable (changeable) or irrevocable (fixed), and may include specific conditions for distribution, such as reaching a certain age or funding education expenses
. In summary, a trust fund:
- Holds assets for beneficiaries managed by a trustee
- Is created by a grantor who sets the terms for asset management and distribution
- Can help avoid probate and reduce estate taxes
- Provides financial protections and control over asset use
- Can specify conditions for when and how beneficiaries receive assets
This makes trust funds a versatile and powerful tool for managing wealth and ensuring it is passed on according to the grantor's wishes
