What is a Trust Fund & How Does it Work?
Minimize taxes and ensure lasting protection for your family's future.
What is a Trust Fund?
A trust fund, also known as a legacy fund, is a financial estate planning technique used to establish protections for individuals and families such as:
- Tax
- Legal
- Assets
- Financial
These techniques help with asset protection by maximizing your financial capital while minimizing potential tax costs, and potential legal seizures.
Types of Assets Trust Can Hold
Trust funds can be a great method for legacy financial planning. Trusts can hold a variety of assets such as:
- Property
- Money
- Stocks and bonds
- Business
- A combination of the above
Why Use a Trust Fund?
A trust fund can be used to provide additional income through distributions for specified individuals. This can be incorporated into retirement income planning.
In addition, trust funds can be used to support a wide variety of individuals or family members. Depending on their needs, it can simply protect assets, or help support individuals with special needs.
Through the trust fund, it can provide additional financial support to a physically or mentally disabled person or a chronically ill individual, without jeopardizing public assistance benefits.
In addition to helping families, it can also be designed to help local non-profits. There are so many ways trusts can be designed to support your goals, it all depends on the types of trusts.
How Do Trust Funds Work?
To create a trust, it requires three parties to establish it:
- A grantor
- A beneficiary
- A Trustee
A trust fund grantor is the owner of the assets that are to be transferred within the legacy fund. He or she defines the trusts' rules and terms, choosing:
- The type of trust
- The terms of the trust
- The beneficiary
- The trustee
The trust fund beneficiary is the recipient of the legacy fund's assets. This can be an individual, group, or organization.
A legacy fund Trustee is the third party that acts as a custodian for the trust fund's assets. He or she is responsible for acting in a fiduciary manner, according to the terms the Grantor set within the trust.
This person is responsible for managing and administering the Trust's assets according to the terms set.
How Do Trust Funds Pay Out?
A trust payout is dependent on:
- the type of trust
- the terms of the trust
The typical ways a trust pays out are either:
- lump sum
- percentage of funds
- set incremental amounts
4 Types of Family Trusts
Special Needs Trust
A special needs trust provides legal support for:
- Mentally disabled
- Physically disabled
- Chronically ill individual
It allows individuals to receive income without reducing their eligibility for government assistance.
Generation Skipping Trust
A generation-skipping trust is a legacy fund in which the assets skip the grantor's children and go to the grantor's grandchildren.
Qualified Terminable Interest Property Trust
A qualified terminable interest property trust fund helps transfer trust assets to a surviving spouse while avoiding the federal gift tax.
Qualified Domestic Trust
A qualified domestic trust is designed to provide tax benefits to a non-citizen surviving spouse of a taxpayer.
It offers the surviving spouse marital deductions on estate taxes for any assets placed into the trust before their spouse's death.
3 Types of Charity Trusts
Charitable Remainder Trust
A charitable remainder trust is a tax-exempt trust designed to reduce taxable income while providing a revenue stream to an individual until their death.
Afterward, the remaining assets in the trust are given to a charity.
Charitable Trusts
A charitable trust is a non-tax-exempt trust in which unexpired interests are devoted to one or more charitable purposes.
Charitable Lead Trust
A charitable lead trust is an irrevocable trust designed to reduce a beneficiary's potential tax liability, upon inheritance, while also providing an income stream to a charity.
9 Types of Beneficiary Trusts
1. Grantor Retained Annuity Trust
A grantor retained annuity trust is an estate planning tool in which assets are locked in a trust and provide an annual income.
2. Irrevocable Funeral Trust
3. Spendthrift Trust
A spendthrift trust provides a legacy fund to a beneficiary in which the independent trustee has full authority to make decisions on how the trust funds may be sent to the beneficiary.
4. Totten Trust
5. Irrevocable Life Insurance Trust
6. Irrevocable Trust
7. Revocable Trust
8. Testamentary Trust
9. Living Trust
Trust Planning Services
At Langan Financial Group, our trust fund advisors have been setting up trust funds and managing assets for individuals, families, and organizations for over 35 years.
We strive to be the best trust fund advisors possible. You can view our BrokerCheck to see our employment history, our zero regulatory issues, and zero arbitration issues.
In addition, you can view our over 75 - 5 star reviews on Google reviews.
We are highly flexible with your schedule. While our standard hours are 8:00 am to 5:00 pm, we are available evenings and weekends by appointment to help cater to your schedule.
We can schedule appointments via:
- Phone
- Zoom
- In-person
So whatever your preference is and wherever you are, we will do our best to meet with you.
Let Us Help Protect Your Legacy. Talk with a Trust Advisor!
If you have any trust fund questions or concerns, please feel free to contact us for a free consultation.
You can reach us at 717-288-1880 or visit our contact us page to send an inquiry. We will be sure to respond within 24 hours.
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Disclosure: Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Cambridge and Langan Financial Group, LLC. are not affiliated. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of: AL, AZ, CO, DE, FL, GA, IA, KY, MD, NJ, NM, NY, NC, OH, PA, TX, VA, WI Cambridge and Langan Financial Group does not offer legal advice. Estate planning services are in regards to your overall financial plan. Always be sure to speak to a legal professional in regards to specific legal matters. Fixed insurance services offered through Langan Financial Group.
Testimonial/Endorsement Disclosure: The testimonials may not be representative of the experience of other customers. The testimonials are no guarantee of future performance or success. All of the testimonials/endorsements are clients with the exception of Steven Martinez of York SPCA. There was no cash nor non-cash compensation for any of the testimonials provided.
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Harrisburg, PA Office
Address: 1863 Center St, Camp Hill, Pa 17011
Phone: 717-288-1880
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Address: 3405 Board Rd, Suite 200, York, Pa 17406
Phone: 717-773-4085
