A trust fund can be a property or a fund that holds assets or money on behalf of a group or an individual. Trust funds have become sophisticated and are now governed by various rules and laws related to their administration.
- What may be stored in trust? All kinds of possessions can be detained in trust –superannuation, property, shares and many others. There are times when funds are managed by business bodies on behalf of affiliates. Sometimes funds are managed by the community, governments, or kept inside families to sustain the needs of loved ones following the death of the main asset holder. Trust funds can also be held to facilitate venture by a group of concerned people – for example, property depositors can donate to a property trust. These entities or people are not required to know one another to belong to one trust fund. The fund keeps their assets or money and distributes the earnings in accordance with the provisions of the fund. To cite another example may be a charitable institution, which establishes a fund for disaster relief purposes where members of the public could contribute. The charity institution and the leading body of the fund decide then how to give the funds to the beneficiary for whom the funds have been collected.
- Tax connotations. Earnings received from a trust fund are taxable because they contribute to the annual income of the recipient. Most of the time a tax benefit had already been provided to the asset holder, or the fund structure may have already given a tax benefit in the form of capital gains tax. If this is the case, the beneficiary of the trust fund would not think of selling the property because of tax burden. As an alternative, the inherited asset can be inherited further down the ancestry.
- Get financial guidance. An accountant, an investment broker, and a financial planner can give guidance on how to improve your financial condition being a trust fund beneficiary. When you decide to buy another property, these financial advisers are the best people to tell you how to go about the transaction and when you cannot be burdened by taxes.
- Who establishes the trust fund? Trust funds are agreements allowing a person to establish sustained assistance to another person or entity. Parents usually create a trust fund to grant some degree of monetary freedom for their loved ones, with the trust giving provisions to meet basic needs following the death of the parents. A trust fund may also be created to benefit an aid organization or other non-profit organizations.
It is beneficial for all of us to know the basics of a trust fund. Most people don’t understand its real meaning even if the term can be read from books, lectured in a college class, and heard from friends who are beneficiaries. It is also worth noting that a trust fund is not exclusively for cash but it may also include other resources such as bonds, stocks, properties, and other types of financial tools.