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A trustee account is a bank account that has both an owner, the beneficiary, and a manager, the trustee. The trustee, often a relative or a financial planner, is legally obligated to work solely in the beneficiary's behalf. Trustee accounts are quite common in estate planning and are typically used to ensure the financial well-being of a spouse, a child, or organization. Trustee accounts can be tailored to different estate planning needs. The advantage of a trustee account is that the benefactor who sets up the trustee account controls the distribution, taxation, and location of finances that are destined for the beneficiary.
Otherwise known as a trust account or trust fund, a trustee account is a means of protecting assets through a trustee while transferring them to another party. The trustee cannot make any personal gains from managing the fund. It is his or her fiduciary duty to represent the best interests of the beneficiary. Someone who is financially mature, has some familial ties, or is a reputable financial manager is a good choice for a trustee.
The beneficiaries are the legal owners of the trustee account. They may receive a pension from the fund, or they may receive full ownership at a later date or after a certain event. Charitable organizations may receive an annual allowance to pay for operating expenses. Children might become full owners when they turn 21 or marry. Spouses may receive funds when they become widows or widowers. In some cases, the beneficiary never receives a savings distribution, in which case the trust becomes part of the beneficiary’s estate.
Often they are a simple savings account or a brokerage account, although a variety of more complicated trustee account types are possible. An after-death account will come into play at the death of a benefactor as a means of transferring assets. A living trust is set up and operational while the benefactor remains alive and is often a means of financially helping someone who is not capable of handling funds himself or herself, such as a mentally handicapped child. A revocable trust can be changed during the benefactor’s lifetime, while an irrevocable trust once established cannot be modified.
Depending on the legal jurisdiction and the type of the trustee account, it may have different advantages. Often accounts are set up to avoid costly probate court and to avoid paying estate taxes. The benefactor may decide on elaborate regulations for the beneficiary to receive payouts, such as remaining unmarried, finishing college, or remaining a citizen of a certain country.