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4 Answers

Difference between inheritance and trust fund?

Asked by: megan 1530 views YA Discussion

OK so my aunt is setting up a trust fund for me, but also said her all her inheritance in her will, would probably all be taken away from Obama. So will he be able to take my trust fund money too, even tho it’s in my name or is it different than a will.

4 Answers

  1. FaZizzle on Aug 19, 2011 Reply

    From what I know:

    An inheritance is anything provided in a wall. For example, you could receive a house as her inheritance.

    A trust fund is set-up for you to receive once you reach a certain age. In other words, she has money set aside just to give to you once you reach conditions like you’re 18 and she’s dead. Something like that.

    She’s most likely worried about the death/estate tax. Fun times.

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  2. Mom on Aug 19, 2011 Reply

    A trust Fund must have money put in it immediately when set up. So that money your aunt places in there for you does NOT get entered into her will.
    If she means she is leaving you some money in her will which goes into a trust fund then yes after inheritance taxes are paid there might not be anything left. All taxes and debts are paid before heirs receive their inheritance

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  3. Jared on Aug 19, 2011 Reply

    a trust is completely different from a will. a will (dying) is one way to set up an estate. she may be referring to inheritance taxes (estate taxes / death taxes).

    if she puts money into a trust fund, then that money becomes yours — it is no longer hers, and is not affected by her death. the trust will be managed by a trustee until the trust is dissolved or you reach a certain age — all of that is detailed in trust documents.

    when i was a minor, i had inheritance. this was managed by my mother as my guardian (she had a guardianship over my funds). many people would consider that a trust fund, but it was not technically a trust. the term “trust fund” is sometimes used just to refer to an account.

    for instance, i can set up an account in your name (know as a minor-by account, and sometimes by a totten trust). you don’t have to have any trust documents. the title of the account reads, “Your Name, minor by My Name” — which means you have no control over the funds, because you are a minor, and I am your trustee or custodian, and I have control over the funds. Not until I release the funds to you do they become yours.

    How the account is set up — minor-by (not governed by trust documents) or trust (governed by trust documents) — tells you a bunch about how it will play out.

    in either case, when the money is put into the account, it no longer is considered part of your aunt’s estate, and thus is exempt from any estate taxes upon her death, and is unrelated to her will. so no, Obama will not take your money away. :) — I don’t Obama is going to do that to your aunt either, but that’s beside the point.

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  4. tro on Aug 19, 2011 Reply

    your aunt needs to make arrangements with her lawyers about the distribution of her assets, and yes if she has a sizeable estate, that estate will pay the taxes on it
    if she has set up a trust fund for you that means when she dies, that trust fund is your inheritance, and she probably if she is wise to have it distributed to you annually and not all at once

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