How Trust Funds Actually Work

Trust funds used to feel like something reserved for families with serious money. That's not true anymore. Millions of ordinary families set them up now because they let you bypass probate completely.

If you're going to inherit from one, understanding how payouts work actually matters. Beneficiaries screw this up all the time once the money hits their account.

Revocable trusts keep the grantor in charge. They can swap out beneficiaries, change the terms, or dissolve the whole thing whenever they want. The tradeoff is that the IRS still counts those assets as belonging to them. At death, everything in the trust gets folded into their taxable estate.

Irrevocable trusts work differently. Assets that go in can't come back out. The grantor gives up all control. That's the whole point, though: once the assets aren't theirs anymore, those assets dodge estate taxes and stay protected from creditors.

Either type keeps you out of probate. Your family's finances stay private instead of ending up in public court filings.