Generally defined, a trust account is considered to be an arrangement made legally in which specific assets will be held by an outside party for the overall benefit of another individual or group. All three parties who are involved in trust funds are considered to be the following:
Typically, trust funds are used as a tool involving estate planning, as they help to both avoid probate and decrease taxes. This is the legal process that is generally used in order to assist with effectively and fairly distributing the assets that previously belonged to an individual who is now deceased. While there are many different types of trust funds that are designed to serve all kinds of purposes, perhaps one of the most common is considered to be an escrow account, which involves a brokerage firm partnering with a bank that lends mortgages to hold funds in escrow. These funds will then be used to help pay specific fees on behalf of someone who is purchasing a home.
In terms of a grantor and/or settlor, this is the party that is responsible for setting up the trust fund itself. The grantor is the party who will provide all of the assets that are to be held in a trust. It’s also important to note that they are not legally permitted to donate stocks, bonds, cash, real estate, objects considered to be fine art, or any other type of valuable item. Furthermore, the grantor is the one who will solely determine the terms in which the trust fund itself will be overseen.
A beneficiary is the one party in which the trust fund itself has been established. This entity can be either a group or an individual. They are also the party that will ultimately benefit from any and all assets contained within the trust, even if they aren’t actually the owner of the assets themselves. This is something that is determined by the trust management teams, who will always be established by the grantor when they create the trust fund itself.
When it comes to a trustee, this is another party that can be either a group or an individual, as well as a group of advisers and an organization that serves as the manager of the trust. In terms of a trustee, this is the party that’s ultimately responsible for making sure that the trust itself stays in line with its overall function and duty to whomever the beneficiary may be. It’s also important to note that there are some trust funds that mandate that all of the assets be directly managed by the beneficiary, while other types of trusts require that the assets be managed by whomever the trustee designates as a qualified investment advisor. In the event that a brokerage company were to coordinate the account of a real estate trust fund, then whomever is assigned to be the account’s broker is legally considered to be the trustee, thereby resulting in the broker being considered the account’s primary manager.