A trust and a trust fund in California seem like identical entities, but each one is defined by slight differences. Understanding the basic definitions comes before understanding the different types of trusts available for their owners and beneficiaries.
The similarities and differences
A trust is an estate planning arrangement that is funded by a trustor. The fiduciary duties are given to a trustee who manages, stores and distributes the property, on the trustor’s behalf, to one or more beneficiaries. The assets are distributed when and how the trustor chooses as specified in the plan.
A trust represents a legal agreement made in estate planning. Revocable trusts allow the terms to be changed while irrevocable trusts do not allow this option.
The specifics of trust funds
A trust fund represents the actual assets that are being held, including money, property, stocks, bonds, life insurance or personal belongings. A trust fund is a legal entity that holds funds. Neither trusts nor trust funds have to go through probate court, the assets are protected from creditors and the owners increase their tax savings.
Both trusts and trust funds are terms used interchangeably when planning an estate. Both involve legal arrangements that include the use of grantors, trustees and beneficiaries. However, there are slightly noticeable differences between trusts and trust funds. A trust is a type of relationship between two individuals in which an estate owner provides fiduciary duties to a person placed in a position of great trust and responsibility. A trust fund sounds like the same thing, but it is the account where the funds and assets are being held.