How To Get Money Out of a Trust Fund

Here’s a hypothetical situation.

Let’s say you’ve been named a beneficiary of a particular trust fund. You might be grateful for the consideration. But one question that might be on your mind is: how do I get money out of that trust fund?

It’s a good question. A trust fund isn’t a savings or checking account from which you can withdraw money at any time. Rather, you’ll receive money from a trust fund mainly through pre-set distribution agreements. 

What IS a Trust Fund?

A trust fund is a legal tool that allows an individual (the grantor or trustor) to put aside money or assets into a trust. Those assets are then distributed to specifically named others (the beneficiaries). All of it is under the control of a dependable individual or entity (the trustee).

The grantor determines what happens to the trust’s assets and how they’re to be distributed. The trustee carries out these directives. Again, this means you can’t just withdraw from a trust fund. Instead, you receive that money or assets through one of the following distribution types that are pre-determined by the grantor:

• Outright distributions, in which the beneficiaries receive the assets outright, generally in a lump sum, and without restrictions
• Staggered distributions, in which assets remain in a trust and are distributed over time, or based on the beneficiaries’ ages or specific dates or events
• Discretionary distributions, in which the trustee is granted discretion in distributing the trust’s assets to the beneficiaries

Approaching the Trustee

Another possible way to get money out of a trust fund is to request a cash withdrawal. This would require putting the request in writing and sending it to the trustee. The trustee might agree. But that individual or entity must also fulfill their fiduciary obligations. This means they’re responsible for complying with the trust fund’s terms. If sudden cash withdrawals aren’t allowed, the answer to your request might be a “no.”

If you really need that money, you could petition the court to remove the trustee and appoint another one. But this is a long, drawn-out, and expensive process. It should only be undertaken if the trustee violates the trust fund requirements.

The Basics of Trust Funds

Grantors set up trust funds for many reasons. One such reason is to protect assets from being frittered away by heirs or loved ones. This is why there are legal safeguards around trust funds, including a trustee who has a fiduciary responsibility to both the trust and the grantor.

As such, getting money from a trust fund isn’t based on inserting a card into an ATM machine and walking away with the cash. It requires understanding and following a grantor’s wishes and the trust fund requirements.