Retirement trust funds can be established by individuals or through employers and government agencies to provide a stable retirement income. A trustee manages the assets and disburses them as needed, and holding assets in trust can facilitate transfers at death. Trust funds can also protect assets and ensure eligibility for government assistance. Consult a financial planner for advice on the best savings options and asset ownership structure.
A retirement trust fund is a fund established for the purpose of providing people with money to pay for retirement. People can create their own retirement trust funds or they can participate in funds set up by their employers and government agencies for the purpose of creating a mechanism to save money for retirement and disburse these funds when the time comes. The retirement trust fund is one of many tools that can be used to plan for retirement.
In a trust fund, a person known as the donor establishes a fund on behalf of a beneficiary or beneficiaries. A couple could, for example, create a retirement fund where they are the donors and are named as the beneficiaries. A third party, known as the trustee, manages the assets in the trust fund and makes sure they are disbursed as needed. The retirement fund can also name a beneficiary upon the death of primary beneficiaries, allowing the fund to be passed on to children, siblings or other family members.
Establishing a retirement trust fund can have several advantages. By creating a trust fund, people officially give up their assets and their assets are not in their name. This may create eligibility for government assistance that would not otherwise be available. People who are concerned about paying for health care, accessing disability services, and other issues can create a retirement trust fund to ensure a stable retirement income while remaining eligible for these services.
Savings plans like 401(k) plans leave assets in the name of the person creating the account and count as an asset that can exclude people from eligibility for certain government services. Paying for disability, chronic illness, and other sudden expenses in retirement can eat up quickly through a carefully planned retirement fund. Having a retirement trust fund allows people to protect assets, ensuring that they can support themselves and their families in retirement.
Holding assets in trust can also facilitate transfers at death. Assets such as houses and securities can be transferred to a new beneficiary and the trust can be dismantled, if necessary. People planning for retirement should consult a financial planner for advice on the best savings options and the best way to structure ownership of their assets. People should be aware that depending on how assets are transferred at or around the time of death, there may be substantial red tape combined with financial penalties.
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