Why Trust Funds are Used at All Income Levels

Why Trust Funds are Used at All Income Levels- The phrase “trust fund” often conjures images of wealthy people giving their children huge sums of money for lavish spending. However, this is not accurate. Almost any asset can be transferred to a trust fund, and anyone can be a beneficiary, explains an article “Trust funds aren’t only for the rich—here’s why anyone should create one (and how)” from CNBC. Some trusts even allow you to receive income from your own trust.

A trust is a legal entity created to hold assets, direct their management, distribute them and name beneficiaries. One difference between a trust and a will is that the assets in a will go through probate. The will also becomes part of the public record, and anyone can read it. Trusts remain private and don’t require court intervention when properly created.

There are three key parts to a trust: the grantor, the grantee and the trustee. The person who creates the trust is known as the grantor. The grantee is the person who benefits from the trust, often called the beneficiary. The trustee is the person or institution responsible for the trust.

An estate planning attorney creates the trust after determining which trust is the best for each person’s unique situation. The estate planning attorney drafts the trust documents, which include a list of assets to be transferred to the trust and the terms for managing those assets.

Here are some of the most used trusts.

Revocable Living Trusts allow the grantor to change the trust's terms or even terminate it at any time. The trust can become irrevocable upon the grantor's death if that is how the trust is drafted.

Irrevocable Trusts are not flexible and require court intervention to make changes. Many states today allow “decanting,” which is the process of pouring assets from one trust into another. However, there are benefits to an irrevocable trust even with the stricter rules. Assets in an irrevocable trust are better protected from creditors and litigation and provide more tax advantages.

Marital Trusts allow the grantor to transfer assets to a surviving spouse. There are two sub-sets within marital trusts, including AB trusts and Qualified Terminable Interest Property Trusts.

AB Trusts are a two-fold kind of trust. Trust “A” distributes assets to the surviving spouse, while Trust “B” protects assets from estate taxes. A surviving spouse has access to Trust “B” assets until their own death, when remaining assets are distributed to surviving beneficiaries.

QTIP—Qualified Terminable Interest Property Trusts are used to provide income and distributions to a surviving spouse until their own death. Upon their passing, the principal assets are passed on to surviving beneficiaries. The surviving spouse cannot access the principal in the trust; they can only receive income from it, such as dividends, interest, etc.

Charitable Trusts are used to generate income for a charity. A Charitable Remainder Trust (CRT) pays income to the beneficiaries, and the remaining assets go to a charity upon the grantor's death. The Charitable Lead Trust is the opposite, where the income generated from the trust goes to the charity of your choice, and the remaining assets go to beneficiaries.

There are many other trusts, but these are the most used. Your estate planning attorney will recommend the one best suited for you and your family. One last note: be sure to fund the trust; otherwise, the trust won’t achieve your goals, and your estate plan will be undone.

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Why Trust Funds are Used at All Income Levels

Reference: CNBC (Oct. 29, 2025) “Trust funds aren’t only for the rich—here’s why anyone should create one (and how)”