A trust fund is a type of legal arrangement where assets such as money, securities, and other property, are placed with a trustee to manage and use to benefit a designated beneficiary, or set of beneficiaries. The trust fund is usually set up by a grantor, who is the legal owner of the assets in the trust. The grantor also has control over the trust, including the choice of trustee, the terms of the trust, and the purpose of the trust.
The Benefits of Trust Funds for Businesses
Trust funds can be a beneficial asset for businesses in a variety of ways. For example, businesses may use trust funds to protect assets from creditors in the event of a business bankruptcy or other legal proceeding. They may also be able to take advantage of tax savings associated with trust funds, as trust assets are not subject to certain taxes.
In addition, trust funds can be used to protect company assets during periods of succession or estate planning. By transferring assets to a trust, the terms of the trust can ensure that the desired heirs will benefit from the asset without the company’s involvement. This can be especially helpful for family-owned businesses, as the trustees can ensure that trust assets will be distributed fairly among generations.
Beneficiaries and Control
When setting up a trust fund, the grantor must designate one or more beneficiaries that will receive the trust’s assets. The grantor normally cannot alter the trust terms without the approval of all the designated beneficiaries. However, the grantor also holds the power to choose a trusted individual or firm to manage the trust assets and act according to the trust terms. This control provides important legal protections for the grantor and the trust beneficiaries.
Trust funds can be a beneficial asset for businesses in many situations. By understanding the details of trust funds, businesses can ensure they are taking advantage of the legal and tax benefits while also protecting their assets and their heirs.