How Long Is a Trust Account Protected From the Investment Date?
A trust is a legal entity distinct from the person who creates it. A trust isn't an account like a bank account because the creator --- known as a grantor --- transfers ownership of the assets to the trust, as opposed to placing them in an account for safekeeping. However, by creating a separate entity, the assets receive certain protections that they wouldn't had they stayed with the grantor. These protections last indefinitely or until the trust expires according to the guidelines that govern the trust. The length of the protections don't depend on the date that the assets go into the trust.
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Trusts
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A trust is a legal entity created when a grantor and trustee sign papers establishing the entity along specified guidelines. The trustee is the person who administers the trust. The trust can be revocable, meaning that the grantor retains control over the assets in the trust, or irrevocable, meaning that the trustee makes the decisions and the grantor has no control over the assets in the account. A grantor can name beneficiaries, people who can receive distributions of trust assets.
Legal Protections
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A trust protects investments and other assets by removing them from the grantor's ownership. Transferring ownership means that any creditor or plaintiff in a lawsuit can't go after the assets because they're no longer part of the grantor's wealth or property. However, attorney Robert Mintz states that aggressive litigation can sometimes touch trust funds in the United States; one type of trust fund, the asset protection fund, completely isolates assets and can move them overseas to escape litigation.
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Tax Protection
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A trust can also bring tax benefits. For example, investments placed in a trust up to the estate tax exemption limit are tax free --- even if they grow to be over the exemption limit while in the trust. Similarly, a residential trust can remove a home from the value of an estate, while a dynasty trust allows grantors to transfer money tax free to descendants two generations younger.
Time
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Trusts don't necessarily have expiry dates or end dates on protections. A trust and its protections end when conditions written into the trust's guidelines are met. Commonly, the death of the grantor or a beneficiary's 18th birthday trigger an end to the trust and a distribution of assets to beneficiaries, but a trust could go on indefinitely protecting assets.
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