First, how trust pay out?
The simplest way is to get all of the trust's assets at once. The grantor may stipulate that the beneficiary receive the assets when reaching a certain age or life milestone.
Another way is to receive money from a trust in several large payouts. For example, if you are the beneficiary of a trust, some of the proceeds may have been used to pay for your college, then the rest might be paid out over the next few decades.
The third way is the grantor may divide up the trust fund payout into even smaller increments, for example, a monthly payout from the trust for the rest of your life.
In our next blog post, we will discuss how trust fund payouts are taxed.