In a revocable trust, the grantor keeps control of all the assets in the trust fund. They might manage the funds themselves or have an unrelated third party manage the account. The latter is known as a blind trust.
With a revocable trust, the grantor is liable for taxes on the trust's earnings. Additionally, creditors may pursue the trust's assets.
An irrevocable trust requires the grantor to permanently transfer assets to the trust fund. Those funds are later disbursed to beneficiaries per the terms outlined in the trust agreement. Irrevocable trusts are more commonly used to gift an estate to children and grandchildren or help pay for education.
Since the grantor permanently transfers assets to the trust fund entity, they're not liable for taxes on earnings generated within the trust fund. Additionally, creditors cannot pursue funds in an irrevocable trust fund, and the beneficiary's creditors cannot go after trust fund money until it's disbursed.
Managing the trust fund
A trust fund is managed by the trustee, which may be an individual or a trust department at a financial institution. The trustee's role is to execute everything laid out in the trust agreement. That may include acting as a fiduciary by making investments in the best interest of the beneficiaries.
The trustee is also responsible for reinvesting income generated by the trust and managing disbursements. Disbursements can occur on a fixed schedule -- every month or year, for example -- or they can be triggered by an event, such as the grantor's death or the beneficiary attending college.
The trustee is also responsible for recordkeeping, filing necessary tax forms, and paying any taxes due. The type and structure of the trust determine who pays taxes on the trust's income, and the burden could fall to the grantor, the beneficiaries, or the trust itself.
For all that work, the trustee is paid a fee. The fee may be a flat annual price, an hourly rate, or a percentage of assets under management. Trust departments at financial institutions typically charge between 1% and 2% of the trust's value.
How estate planning and trusts impact beneficiaries
Trust funds are a great tool for estate planning and minimizing tax liability. If your estate is valued above the estate tax threshold ($13.99 million per individual in 2025) or you expect it will be after appreciation, you can set up an irrevocable trust and move assets into a trust fund to protect your heirs from having to pay the estate tax.
