Trust accounts are used in different situations, such as when someone inherits money but isn’t old enough to manage it themselves or when a parent wants their child’s inheritance managed by someone else until they reach adulthood.
Trust accounts can be held by a bank, credit union or trust company. They can also be held by an individual, business or other entity (such as a trustee).
The account may be used to hold a variety of assets, such as cash, stocks, bonds, or real estate. The trustee has a fiduciary responsibility to manage these assets in the trust account in the best interests of the beneficiaries, and the account is generally protected from creditors, legal judgments, and other claims.
Examples of Trust Account
You may want to set up an account for your child’s university education and deposit N5 million into that account each year until she graduates from high school. This would be considered a “grandparent” or “family” trust savings account because it is set up to benefit a family member.
Another example of a trust account is a special needs trust, also known as a supplemental needs trust. A special needs trust is designed to provide for the needs of a person with a disability.
If a parent has a child with a disability and wants to ensure that their child is provided for after their passing, they may establish a special needs trust. The trust account would be managed by a trustee, who would be responsible for investing the funds in the account and making distributions for the benefit of the child.
It’s common to think of trusts as being used exclusively by large corporations and wealthy individuals, but they can also be useful for holding assets when you have an important decision to make about how your own finances should be handled in the future.
For example, if you want someone other than yourself (such as your spouse) to manage all of your financial decisions after death, then putting money into a trust account may help protect it from those who might take advantage of your illness or incapacity by spending down those assets before they are needed later.
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