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How To Set Up a Trust Fund

January 3rd, 2013 Personal Finance

There are plenty of great reasons to think about opening a trust fund - if you have grandchildren on the horizon, it's an excellent way to ensure that they have some financial stability as they get older. Trust funds can be put toward education, living expenses or to help ease the monetary burden of a parent's death. They also minimize the amount of inheritance taxes that the beneficiary has to pay, which can help. If you'd like to set up a trust fund, you'll be glad to know that it's actually a fairly simple process. Here's a basic rundown on how to do it.

Start by visiting the bank and talking with an accounting representative about starting the trust fund. The two basic types are living and after-death, and indicate when the money will be paid out.

Next, decide whether you want a revocable or irrevocable trust fund. Essentially, a revocable trust fund can be modified if you decide a change needs to be made, whether to the amount of money given out or other conditions. Irrevocable trust funds are legally considered separate from your other assets and can't be modified very easily.

Now figure out the conditions of the trust fund, such as where the money will be allocated if there are multiple recipients. You can also decide whether you want the beneficiaries to know the terms of the fund or if it should be kept a secret. Finally, make sure three copies of the signed trust fund are prepared - one for you, one for the bank and one for your lawyer. Naturally, there are plenty more details you'll have to iron out, but this is a basic look on how the process works.