You may have heard of a trust fund. Knowing the definition of a trust fund may not be part of your vocabulary though. A trust fund is the legal entity that assets are transferred into when a trust a created. The trustee controls the trust funds on behalf of the beneficiaries. That is a lot of words that need defining- trust fund, trust, trustee, and beneficiary. Nicole Pavlik as a leading Phoenix estate planning lawyer can help unravel the meanings of these important terms.
First the term trust fund is often used interchangeably with the term trust, but there is a critical difference between the two. A trust is a legal agreement that specifies how assets placed in a trust fund will be managed and distributed. A trust is a common tool in an estate plan to protect assets during the lifetime of the creator of the trust and then upon their death, be distributed to beneficiaries such as children, spouse, and other loved ones selected by the decedant. It is like a will, in the sense, it leaves property like money, jewelry, cars, real estate, and other items of value to your chosen benficiaries. A beneficiary is the person (or entity) that you legally designate to receive the benefits from your estate, in this case from the trust.
What Types of Property Can You Put in a Trust Fund in Phoenix?
Trust funds can hold a variety of assets in Phoenix, Arizona. Examples of assets that you can put into a trust include:
- Real estate,
- Personal property, and
- Life insurance policies.
A trust fund can include multiple different types of property. There is no maximum or minimum amount of property that can be placed into a trust fund in Arizona.
How Do You Fund a Trust in Phoenix?
It is critical that assets are properly put into a trust fund. Otherwise, the property will not be governed by the terms of the trust. It is not enough to identify the property in the trust document. Instead, you must transfer ownership of the property to the trust.
The process will be different depending on the type of asset. For example, you can fund your trust with real estate by transferring the title of the property to your trust. Whereas you can fund your trust with life insurance by listing the trust as a beneficiary of the policy. To ensure your trust is properly funded, you should work with experienced Phoenix estate planning lawyer, Nicole Pavlik.
What are the Types of Trusts in Phoenix?
There are several different types of trusts that you can create in Phoenix. The trust that is the best fit for you will depend on your unique circumstances. Below are brief descriptions of three common types of trusts.
- Revocable Living Trust – A revocable living trust can be changed or revoked during the grantor’s lifetime. It gives the grantor significant control over the trust funds. It has the main benefit of avoiding probate.
- Irrevocable Trust – An irrevocable trust cannot be changed or canceled by the grantor except under very specific circumstances. Although there is less control, irrevocable trusts can lower tax liability and provide asset protection from lawsuits and creditors, among other benefits.
- Special Needs Trust – A special needs trust is a type of irrevocable trust designed to protect and hold assets for a disabled beneficiary. A major benefit of a special needs trust is that it allows the beneficiary to maintain eligibility for public benefits.
Your Phoenix Estate Planning Attorney Nicole Pavlik
Nicole Pavlik is an experienced Phoenix estate planning attorney who will help you create a comprehensive estate plan, which can include a trust. She can help you understand the defintion of a trust fund further than what was touched upon in this article.
If you have questions about estate plans, trust funds, or other important tools you should have in place now and when you pass, call the Nicole Pavlik Law Firm today at (602) 635-6176 or send a message using our online form. A modern law firm, our office provides virtual meetings as well as in person and initial consultation is free.