On trust funds

A question from Yahoo! Answers:

How much money would you have to have to start a trust fund and what is a trust fund?

Could you ever touch that money?

A trust fund is a collection of assets designated by one person (called grantor or settlor) to be held in trust for the benefit of another person or persons (called beneficiaries). Trusts are usually set up by parents for benefit of their children or by grandparents for benefit of their grandchildren.

Quite often, a trust funds is actually a “don’t trust” fund. Parents don’t trust their child to handle his/her inheritance in a judicious manner, so in their will, they appoint a law firm or a bank to invest the assets of the trust and pay a monthly allowance to the beneficiary after their death.

There is no legal limit to the minimum size of trust. There is also a great variety in the cost of setting up and ongoing administration of trusts.

Whether you can take things out of a trust depends on whether the trust is revocable. There is also a type of trust where the grantor reserves the right to receive all income from trust assets for as long as he and his spouse are alive.

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