Trust fund definition
/What is a Trust Fund?
A trust fund is a cluster of assets recorded in an account, which is intended to benefit an individual or organization. Trust funds are typically established by grantors to provide income for their descendants or selected charities. A trust fund may contain a variety of assets that are intended to start paying out income to the beneficiary once a triggering event occurs. The fund is managed by a trustee, who is responsible for prudently investing the assets as per the specifications stated by the grantor in a trust agreement. The most common type of trust fund is the revocable trust, where a grantor places assets in the fund during his or her lifetime and the trust pays out to beneficiaries following the grantor's death. Revocable trusts are used to avoid probate, thereby rapidly shifting assets to beneficiaries.
Example of a Trust Fund
For example, a trust fund could begin paying an individual once he reaches his 21st birthday. The delayed payout is intended to increase the odds that the recipient will be sufficiently mature to use the money prudently.