Investors the world over are constantly looking for ways to make their money work harder. If you own property, have savings or an investment portfolio, trust funds can give you greater control over where they end up. Here we’ll take a proper definition before looking into the types of trust funds available, and whether they’ll work for you. Before looking into the types of trust funds available and whether they’ll work for you.
Trust funds: a definition
Trust funds contain property or assets such as savings or stock. Such funds are managed by a designated trustee. A time is designated when your property or assets are passed onto your designated recipient, such as your death. They were once felt to be the preserve of the very wealthy, but today they’re a facility that anyone with property or assets can benefit from.
Such funds are often chosen by an individual to guarantee their wishes are met. Wills can be less reliable than trust funds and typically open to more disputes. Nothing is made public and only the trustee and beneficiary are made aware of the trust fund’s worth.
Why choose a trust fund?
Trust funds offer more control over your assets. As well as confirming that your property or savings are used in a specific way, you can also arrange a trust to pay out in pre-specified instalments. This option can prove useful if, say, you’re unsure whether your beneficiary will deal with your savings in a responsible way.
Those with trust funds are also likely to escape any of the legal wranglings which may arise following the creation of a will. Trusts are not subject to probate, and all assets belong to the trust. Your trustee has already been granted authority, so there’s no need to shift responsibility to an executor.
Types of trust funds
There are two main types of trust funds – revocable and irrevocable.
Revocable trust funds can be changed whenever you wish. Should your financial status change, you’ll be able to add or remove assets from your fund. And if you change your mind for any reason, you can shut down the trust and recover the assets within it.
Given their name, irrevocable trust funds cannot be changed. Should you wish to cancel the fund for any reason, it’s not possible to do so. However, such an arrangement can be beneficial for some investors.
No tax is paid on any interest accrued, and the wealth held within an irrevocable fund is considered separate from the rest of your assets. This can also help when it comes to reducing the amount of tax you’re paying.
How do trust funds work?
Those who wish to set up a trust fund are called ‘grantors’. For best results, it’s wise to get some independent financial advice in order for your assets to be valued and compare the trust fund option to other investment opportunities. Whilst a trust fund will benefit many, other options may work harder for you, depending on your current personal circumstances.
If your best option is to progress with a trust fund, you’ll require the services of a legal professional to help you set it up. At this stage, you’ll need to designate your trustee and beneficiary. Beneficiaries are often family members but can be friends, business colleagues or even charitable organisations.
You’ll also need to stipulate any terms and conditions, in case you wish to pay out your assets in instalments. In cases of monetary savings, a grantor can also specify where the money must be spent. This is helpful for protecting your money in future, even when you’re no longer around.
Let’s say your beneficiary is a young party animal with a penchant for spending money on nights out., you can order that your trust is only used to pay for a deposit on a house, or for university tuition fees.
There are many ways of ensuring your money goes to specified persons following your death. For anyone looking to have greater control over their property or other assets, trust funds are very much worthy of consideration. Defining terms allows for less legal involvement than a will, and some may save taxation money too. Be sure to check any management fees incurred, speak with an expert and consider all options to see which will be of the greatest benefit to your own assets.