Trust funds get a bad rap as an accessory for the silver-spooned, but there's no wealth threshold you have to meet to have one, or benefit from one.

In its most basic form, a trust fund is an account that gives you control over who will receive your money or property at your death, and in some cases during your lifetime, too. Many people use them to legally avoid or defer taxes and swiftly pass assets to their heirs.

There are various types of trust funds and some are more costly to maintain than others, which may be why they're often associated with the super-rich. But they all have the same underlying purpose: to ensure that a person's intentions for their money are met, however specific and conditional they may be.

What is a trust fund?

A trust establishes a veritable plan for transferring money and property to heirs, managing estate taxes, and giving to charity. A trust fund also has the ability to avoid the tedious probate process .

There are three people involved in any trust: the grantor who places their assets in the trust fund; the beneficiary or beneficiaries who receive those assets; and the trustee the person, group of advisers, or organization that is responsible for managing the trust now and after the grantor's death.

A grantor can place almost any asset into a trust, including real estate, bank accounts, investment accounts, business interests, and life insurance policies.

What are the types of trust funds?

Generally, a trust fund is set up as either revocable or irrevocable.

A revocable trust is flexible the grantor can make changes at any time and can generate income through the investments or property placed in the trust. Since the trust is open, in essence, all the assets are still included in the grantor's estate. The grantor is responsible for paying taxes on the assets now and at their death. Creditors can also access the assets for unpaid debts. Once a grantor of a revocable trust dies, it becomes irrevocable.

An irrevocable trust cannot be changed after it is set up and can only be accessed after the grantor's death. The trust is essentially closed; the assets placed in the trust are removed from the grantor's estate and they are not responsible for paying taxes during their lifetime or at death (that responsibility falls to the trust and the beneficiaries). In addition, creditors do not have access to any of the assets.

Within these two categories, there are special trusts for married people, charitable donors, and people who want to skip their children and pass money to their grandchildren instead, to name a few.

How do you set up a trust fund?

If you're considering setting up a trust fund, you may consider meeting with a certified financial planner. They can help you navigate the different types of trusts and choose one that's right for your needs, whether it's reducing estate taxes, making a specific plan for your heirs, or giving to charity.

In order to formally set up a trust fund, you need to visit an estate planning attorney. While you don't need to have millions of dollars to set up a trust fund, there will be legal fees and, in some cases, costs to maintain the trust fund.

Find a financial planner to help with a trust fund of your own using SmartAsset's free tool

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