I Have a Trust Fund — Now What?

by Sophia Bera on December 7, 2016

There’s a lot of advice out there for people who are looking to set up a trust for their younger family members. Setting up trusts can be a great way to pass your money down to the next generation.

But what do you do if you find out you’re receiving money from a trust?

Coming into a large amount of money is life-changing. You might have known about your trust your whole life, or it might be something you didn’t know about until you were older. Either way, it can provide a financial cushion that can allow you to afford things you wouldn’t have been able to on your own.

But whether you have a trust worth thousands of dollars or millions of dollars, it’s important to make a plan for that money.

What Is a Trust, Anyway?

A person can set up a trust in order to pass down their money (or stock, real estate, or other assets) to people or charitable causes. The assets you wish to pass along are placed under the care of a trustee (which could be your estate attorney, for example).

Now, trusts do cost a few thousand dollars to set up because you need to hire an estate planning attorney to help you create one, but their expertise can be priceless. There are many different types of trusts and some of them have additional tax benefits so you’ll also want to consult with your CPA before setting up a trust.

Some trusts allow you to specify not just how the assets in the trust are distributed to your beneficiaries, but also what age they must reach to gain access to the trust, what kind of payment schedule they can expect, and other stipulations. This can be helpful if your beneficiaries will be young when they get that money, and you want to make sure they don’t spend it all in one place.

I’m Receiving Money From a Trust. How Can I Be Responsible About This?

Getting money from a trust fund is similar to receiving an inheritance or settlement payment. There can be a lot of emotion surrounding this money.

First, understand the terms of the trust. Will you receive the money in one lump sum, or in smaller regular payments? Will you need to pay any taxes on the money?

Second, be thoughtful in how you spend or save the money from your trust. It’s far too easy to blow it all, especially if it’s more money than you’ve ever had.

I highly recommend taking a long time (at least six months) to get used to the idea of having this money in your life, and map out a plan before you actually spend anything. Coming into trust fund money is a great time to work with a financial planner, attorney, and accountant.

This money is a gift, and if you have a strong sense of what you value, you can use this gift to help you fulfill your dreams! Get a team of professionals on your side to help you know how to spend, save, and invest your trust.

What Not to Do

Getting access to your trust fund is not the time to treat your friends to weekly bottle service, buy a Tesla, or tell your boss where, exactly, they can shove your job. Use this money at a sustainable pace so it lasts a long time!

You may decide to use the trust to turbo charge your other financial goals like paying off debt, building up savings, and getting on track for retirement. Depending on the amount of money you get, you might need to keep your day job and live frugally, but maybe you can wipe out your student loan debt! Take the time to carefully work this new asset or source of income into your life.

Remember, I am not an attorney. As such, this blog post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.