How To Set Up A Trust Fund Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Halfpoint Images/Getty Images July 29, 2022 Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our reporters and editors focus on the points consumers care about most — how to save for retirement, understanding the types of accounts, how to choose investments and more — so you can feel confident when planning for your future. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. If you want to leave your legacy behind to those you love, you’ll need to get your affairs in order. Setting up a trust fund is part of , or planning for what will happen to your money and belongings after you pass away. What is a trust fund
Trust funds are legally binding accounts that place your assets and money into a trust. A , where both outline how you want your affairs managed after your death. But a will goes through probate court and might take longer to complete compared to a trust, which doesn’t have the same requirement. have historically been used by the wealthy to pass along their assets to a set of heirs. But you don’t have to have a lot of property or money to have a trust. Anyone can have one, as long as you properly set one up. How a trust works
There are a couple of main components to a trust, including: Grantor: This is the person who opens the trust to include their assets, financials, and belongings. Sometimes called a trustor. Grantee: This is the beneficiary or the beneficiaries of the trust. Once the grantor dies, the grantee(s) receive their distributions. Trustee: This is the person or institution who owns the trust. A trust agreement is a legally binding document that details how a trust account will disperse your belongings after you die. The trustee manages the trust account on behalf of the grantor. When the grantor passes, the trustee handles disbursement to the grantees. How to set up a trust
A grantor can meet with an estate planning lawyer to find a trust that best fits their needs. Then the grantor can list each asset and the beneficiary of that asset that’s going into the trust. This can be something as small as a piece of jewelry or as big as a house. Investments, including , can also be included. It’s up to you as the grantor to determine what goes in the trust to distribute among your grantees. Once you finalize your trust documents, you’ll sign them with a notary and have the lawyer file your deed of trust (if the state you live in requires it). Then you’ll open the trust fund account in the name of the trust and fund it by transferring assets into the trust. Anything that was in the trust document should go into the trust. You’ll then register the trust with the Internal Revenue Service (IRS) and get a tax ID number for it. You’ll need this when you . It can take a few weeks or upwards of a couple of months to complete this from start to finish. But it really depends on your assets and your detailed plans for after your death. Different types of trusts
There isn’t a one-size-fits-all trust. Because everyone has different assets and needs, there are different types of trusts, including: Revocable vs. irrevocable trusts. Revocable trusts let you change the document and terms whenever you want when you’re alive. Irrevocable means it’s set in stone. Any time you set up an account and transfer assets, it’s irrevocable. Testamentary vs. living. A living trust means it can be managed and changed while the grantor is alive. Testamentary only goes into effect after the grantor dies and is only done in a last will and testament. Educational trust. A type of trust where the grantee or beneficiaries can only use it for educational expenses. Charitable trust. This is where a trust or even one single charity. It’s irrevocable. In most cases, it’s considered a private foundation. Spendthrift trust. These are trusts with special circumstances for the beneficiaries. If the grantor feels that the recipient won’t use the funds responsibly, they can set up a spendthrift account that gives the beneficiary some access to assets with restrictions. Joint trusts. This is usually best for married couples but can be used for anyone. All parties have control over the assets during their lifetimes and upon one’s passing, the other becomes a trustee. AB trusts. Couples might also opt for AB trusts or a trust that’s split into two trusts upon one partner’s passing. It’s made to minimize tax implications, specifically estate tax, for surviving partners. Blind trust. This is a type of living trust where the beneficiaries don’t know anything about the trust. If you suspect any conflicts among beneficiaries, this might be best. QTIP trust. Qualified Terminable Interest Property Trusts, or QTIP, is another one couples might consider. It’s designed to make sure that income from the trust would be paid to the surviving spouse, and once they pass the remaining amount would go to other beneficiaries. Special needs trust. Special or functional needs families might choose this option. This type of trust is specifically made for special needs children who are expected to need life-long care. They’re made to provide financial support without sacrificing government assistance or aid. Pros and cons of trusts
Pros
Avoids probate
In most cases, a trust avoids probate court, which can draw out the process of distributing assets. Probate court is public, which means people can follow a probate case as it works its way through a court system. In most cases, a trust doesn’t involve probate. If you want to keep your matters private, you can use a trust fund. Flexibility and control
You get to outline and manage the terms as best as you see fit. If anything changes, like you have kids, get a divorce, remarry, or experience another major life event, you can change many types of trusts (those that are revocable). Not just for death
Having a trust is important for when you eventually pass away, but death isn’t the only factor. You can use trusts to manage affairs while you’re alive. Educational and special needs trusts, for example, are there for when you’re living. Cons
It s costly
Sometimes can easily be done online without the aid of a lawyer. In most cases, setting up a trust requires a professional. An estate attorney is the one to handle your trust documents, which means you’re paying for their time and expertise to process your paperwork. Not everyone can afford a trust. It doesn t always include everything
While a trust is good for most things, it’s not always best for all things. Some things might not fit into a trust, like joint accounts. Unless you are creating a joint trust with the person on the joint account, you might run into some issues. Along with that, you might still need a will to cover any other assets that aren’t in your trust. Might not save you during tax time
If you were planning to use a trust to save you during tax time, it may have more to do with where you live and less to do with your trust. Some states have estate and regardless of what trust you’ve opened. Bottom line
Everyone should consider regardless of where they are in their lives. Creating and maintaining a trust is an important step in estate planning, giving your beneficiaries a clear outline of your needs. But not everyone should have a trust and if you do decide to get one, there are plenty to choose from. Make sure to do your research and ask around to find a trustworthy estate lawyer to walk you through the process. Everyone’s situation is unique and what works for someone else might not work for you. SHARE: Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Related Articles