Basics of a Trust Fund

Last week, we discussed the importance of setting up a will, a service offered by +Michna Law Group. This week, we're going to talk about another service we offer: setting up a trust fund.

Define the Terms

A "trust fund" can be defined as a legal entity that holds assets for an individual or an organization. This can include cash, stocks, bonds, property, or additional financial products.

The individual or group benefiting from a trust fund is known as a "beneficiary".

The one who sets up a trust fund can be referred to using several terms, including a "grantor", a "donor", or "settler".

Lastly, the individual or group in charge of maintaining a trust is known as a "trustee".

Primary Types of Trusts

Trusts come in two primary flavors: living and after-death.

Living Trust

A living trust is also known as an inter-vivos trust. This form is set up during the lifetime of the grantor, who sometimes acts simultaneously as the trustee. Upon the death of the grantor, the assets in the trust are then distributed to the beneficiaries in compliance with the original terms and conditions of the trust.

Living Trusts can be either revocable or irrevocable, with the former representing the most common type. While this type of trust allows everyone involved to avoid probate, assets in the trust are still susceptible to state and federal taxes.

After-Death Trust

After-death trusts are also referred to as testamentary trusts. In this format, the trust is activated upon the death of the grantor, or "testator" in this case. Testamentary trusts are comprised as a part of the testator's will, thus need to be reviewed by a probate court. Because of this, a longer period is needed before the testator's assets are distributed to the beneficiaries.

Summary

While we've discussed the basic information pertaining to a trust fund, there are many additional types of trusts with corresponding benefits. For more information on these types of trusts, refer back to our blog next week.

For additional questions pertaining to trust law, contact Michna Law Group by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.