Learn something new every day
More Info... by email
There are two types of fixed trusts. The term fixed trust is most commonly used when discussing legal arrangements for the management of a person's assets. The second type is the fixed investment trust, which is a kind of investment organization. It is a financial organization that pools and invests money from different investors. A fixed investment trust is non-discretionary, which means the trust is limited to purchasing certain securities.
A fixed trust, also called a non-discretionary trust, is a type of legal financial arrangement in which a person or entity controls money and assets for the benefit of the trust’s beneficiaries. In a fixed trust, the creator of the trust, called the grantor, sets or fixes beneficiaries of the trust as well as the amount of money or benefits they are to receive. The person who manages the trust, called a trustee, has no discretion in the trust. Basically, this means he cannot change the beneficiaries or the benefits they are set to receive.
In a fixed trust, the grantor may choose anyone as his beneficiary, or he may select more than one beneficiary. For example, a trust’s grantor may fix his son and daughter as his trust's beneficiaries, or he may include his spouse and children as beneficiaries. The grantor of such a trust may also provide a benefit amount or percentage for each of his beneficiaries. For example, he may grant 60% of the trust's benefits to his spouse and 40% of the trust’s benefits to his daughter.
Often, a fixed trust is compared to a discretionary trust for which the grantor doesn’t set fixed beneficiaries or trust interest amounts. Instead, he may name beneficiaries or specify beneficiary classes or levels. The trustee of a discretionary trust, however, has the power to decide which beneficiaries will benefit from the trust. He also has the right to decide the degree of benefit they will enjoy. Generally, discretionary trusts are more common than fixed trusts.
A fixed investment trust, also called a unit investment trust, is a company that buys a fixed portfolio of securities. The company sells shares of the trust’s securities, but the portfolio of securities is not managed. The people who invest in the trust, called shareholders, receive dividends, interest, and capital gains periodically. The investments are considered low risk but also generally offer low returns. Investments are limited to those that were listed at the time the trust was organized.
@jholcomb - He needs a discretionary trust. My great-uncle did something similar. He can leave a letter specifying what he wants the money used for, but ultimately it would be up to the trustee what requests were granted.
A fixed trust would just allow him to name certain people to get certain amounts of money, so it would not have the flexibility he wants (sounds like he even envisions money going to offspring yet unborn).
The trustee could be a family member, but it might be better to use an established law firm. They would take a cut, of course, but that way emotion would not enter into it. (No guilt-tripping Aunt Janice about how she took your sister to Disney World and you didn't get to go, so now she should fund your gap year from the trust.)
My grandfather is interested in setting up a trust in his will that would provide money for the college educations of his great-grandchildren (and so on, as long as the money lasts).
It sounds like a fixed trust would not work for him because he only wants the money to go to educational expenses. He's envisioning something where his offspring who happened to be enrolled in college would be able to receive funds for their tuition, but no one would be able to access money for, say, backpacking around Europe.
What kind of trust would allow him to specify that?
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!