ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Trusts - What is a Trust and How does it Work?

Updated on June 14, 2011

What is a Trust?

Trusts can be a great way to shelter money for your heirs, and also a great way to help provide for those that need it. A trust is a legal entity that earns income, pays taxes, and then distributes the earnings. There are trustees, that handle the trust and makes any investment decisions needed. The trustee pays taxes and distributes the income.

With a trust, you can give the trustee authority to do different things. For instance you can give your trustee the authority to match up and meet the needs of your heirs. So you can imagine the peace of mind that it can bring. Since there can be funds that cover things like college or or buying property, you can see how one will benefit one person at a given point in their life and while another item may be better suited for another.

Trusts can be set up as an accumulation trust, or as a regular distribution trust. An accumulation trust retains and then reinvests the income that it earns for future distribution.

Beneficiaries

Who Benefits from a Trust?

You can establish a trust for anyone really. The idea is that this will be a source of income for them. Often we see trusts for a person's parents, or their spouse, and of course children and even close friends. There are different time frames too for how long a trust fund can last. Some might choose a trust to last for a parent's lifetime. Another may last until a child turns 25, and another might last until a grandchild finishes high school or college.

Revocable and Irrevocable Trusts

So how long does a trust fund last? It depends on if the fund is revocable or irrevocable, first of all. If it is irrevocable then you cannot make any changes once the trust is set up. When you have a revocable trust, you can opt to make modifications over time if need be. So what other difference are there between revocable and irrevocable trusts?

Irrevocable Trusts

Irrevocable Trusts don't allow for any changes, and you also don't have any control over the assets. You cannot benefit from the assets of an irrevocable trust and gifts are limited to 10,000 dollars annually. You can sometimes avoid estate taxes, it just depends so do more research for your particular situation and trust.

Revocable Trusts

You can modify a revocable trust for your lifetime, and you control the assets and pay for the taxes. You can transfer the assets in and out. There are no annual limits to the transfers. They will be taxed as part of your estate, whereas with the irrevocable that isn't always the case.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)