What is a Trust Fund?

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What Is a Trust Fund?

A trust fund, or trust account, is a legal instrument used for transferring property from one person or entity to another.  The person or business making the transfer is called the “grantor”, while the person receiving the property is called the “beneficiary”. 

Before the beneficiary assumes ownership of the property, the property is first transferred to a third party, called the “trustee”.  The trustee will then hold the property for a defined period of time, or until specified conditions have been met.  Thus, the transfer from the grantor to the beneficiary is done in a controlled, regulated manner. 

This is especially useful in instances where the grantor wishes to only transfer the property after certain conditions have been met (such as when the beneficiary graduates from college, or has their first child, etc.)

What Are Some Types of Trust Funds?

There are two basic types of trust funds: inter vivos or living trusts, and testamentary trusts.  Inter vivos trusts are executed during the lifetime of the grantor, and often take effect immediately or according to the trust specifications.  In contrast, testamentary trusts only take effect upon the death of the grantor.

There are other different types of trusts that are based on the purpose of the trust.  A common example of this is a charitable trust, where the property is transferred specifically to a charitable organization.

What Are Common Legal Disputes Involving Trust Funds?

A common legal dispute with trust funds is where the trustee violates their trust duties.  For instance, if they use the trust property for their own purposes, they may become liable for losses caused by any mishandling of the funds.  Another violation is where the trustee “commingles” their own funds with the trust funds, causing confusion with the accounting.  This can also result in financial losses for the beneficiary.

In such cases, a monetary damages award may be ordered in order to compensate any party that has been affected by the mismanagement of trust funds.

Do I Need a Lawyer for Help With Trust Fund Accounts?

Trust funds can often be somewhat complicated to deal with, and generally require the assistance of an estate lawyer.  It may be in your best interests to hire a qualified lawyer if you need help drafting, editing, or reviewing a trust fund document.  Your attorney can suggest options for you based on the laws in your state, and can provide you with legal representation if you need to file a lawsuit.

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Last Modified: 10-28-2014 04:43 PM PDT

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