What to Consider When Setting Up a Trust Fund

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What to Consider When Setting Up a Trust Fund

Trust funds are often associated with wealthy individuals. However, what people fail to recognize is the purpose of trust funds is to ensure that one’s wealth, despite how much it is, continues to be of use long after one has passed on or even when alive. Those in the middle-class can set up a trust fund to ensure that their wishes to let the money keep working get honored.

Basics of Setting Up a Trust Fund

How They Work

The reason most leave behind a trust is they don’t want their hard earned money squandered. The purpose of one is to leave those we love something, but we cannot be promised that they will be responsible for their inheritance. Therefore, with a trust, you avoid such scenarios and even more so ensure that current and future generations equally benefit.

Opening a trust requires that you get an attorney. In it, one can place cash, stocks, real estate, precious metals and the like. After, you have to state who the beneficiaries are and put stipulations. Will it be revocable or irrevocable? Under what conditions will it cease to exist? What happens to the fund itself during that time? Also, who will be in charge of asset management? These are just some of the questions that require answering.

Once completed, the trust fund goes under a trustee. That can be the attorney, a bank or an institution that specifically acts as a trustee. Whoever you pick, they ought to have a proven track record on delivering on behalf of the trustor whether alive or otherwise.

Reasons to Have One

Let us consider a person running a marriage mediation firm and wishes to keep it running for decades to come. As mentioned, one can have a trust running even when they are alive. In such a case, the person can decide to open a living irrevocable trust fund where funds get dispersed to those listed as beneficiaries and under the stipulations. An example is only using payments for medical emergencies, education or other lasting investments.

A significant reason why wealthy people set up trust funds is to reduce the tax they pay. When you place something under a trust, it is technically not yours anymore and is considered a gift. For that reason, you don’t pay income tax out of whatever gets generated from the wealth. In moving things from under you and into a trust, people get bumped down to a lower tax bracket.


Given trust funds are primarily for the upper and middle-class, they do attract high attorney fees. The technicalities and legalities of the same mean that you have to hire a specialist when it comes to dealing with taxes under trust funds. These professionals attract quite a hefty paycheck, usually an upward of a few thousand dollars. When done right, they are responsible for administration and accounting that have the trust running seamlessly.

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