Steven Anderson: Trust funds: not just for the ultra-wealthy any longer

As the baby boom generation matures, the trust vehicle is being tapped more and more to house the trillions of dollars in assets expected to be passed down to the next generation, according to a study by the Spectrem Group. This probably will be more assets than in any other generation in history.

People often associate trust funds only with the wealthy, but a trust can be an effective financial tool for many people in many different circumstances.

As defined by the Federal Citizen Information Center, a trust is a separate legal entity that holds property or assets of some kind for the benefit of a specific person, or group of people, known as the beneficiary. The person creating a trust is called the grantor, donor or settlor. When a trust is established, an individual or corporate entity is designated to oversee or manage the assets in the trust. This individual or entity is called a trustee.

A trustee can be a professional with financial knowledge, a relative or friend, or a corporation. There are pluses and minuses to each type of trustee. An individual trustee might provide a more personal touch but might die or move away. A corporate trustee might be less personal, but it provides experience, investment skills, permanence and impartiality. More than one trustee can be named by the grantor if he or she wishes.

The FCIC describes two basic forms of trusts: after-death (or testamentary) and living (or inter vivos). An after-death trust will come into existence, usually by virtue of a will after a person’s death. The assets to fund these trusts usually go through the probate process. In certain states they might be court-supervised, even after the estate is closed. An example of an after-death trust would be a mother leaving land to a trust benefiting a child in her will. The will establishes the trust to which the land is transferred to be administered by a trustee until the child reaches a stated age, at which point the land is transferred to the child outright.

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