Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Dec 13, 2019

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The term “fixed trust”commonly refers to two different types of trusts. The first type of fixed trust is an actual form of trust with very specific instructions for the trustee. The second type of fixed trust can also be referred to as a “fixed investment trust,” which is a type of mutual fund. Both types of trusts are investment options, however they each act differently with regard to the trustee, beneficiaries, investments, and distributions.

Fixed trusts are an established form of living trust available for estate planning purposes. Unlike a regular discretionary trust which offers the trustee guidelines as to how money should be distributed, a fixed trust gives specific instructions for the distribution of funds for each individual beneficiary. As with any trust, the trustor has the discretion to name any beneficiaries they desire and can place multiple beneficiaries into the trust. When using a financial institution as the trustee instead of a trusted friend or family member, a fixed trust is a good option because it limits the discretion of the trustee and ensures that they follow your precise wishes.

Advantages and Disadvantages of a Fixed Trust

A fixed trust is useful for estate planning when you are unable to find a trustworthy trustee, and must use a financial institution instead. A fixed trust ensures less conflict among beneficiaries because their percentage payment amounts are specified in the trust document. For instance, you could assign your wife and two children as beneficiaries and state that your wife receives 60 percent of the trust’s income and your children each receive 20 percent.

On the other hand, a fixed trust is less flexible than other trusts and may neglect an actual need of a beneficiary. With a discretionary trust, the trustor will typically specify that the trust is for the health, education, and welfare of the beneficiaries, allowing the trustee the freedom to provide for those needs. With a fixed trust, each beneficiary only receives their specified amount regardless of their need.

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Fixed Investment Trust

A fixed investment trust is a type of mutual fund or unit investment company that purchases a fixed portfolio of securities for the benefit of the investors. The company sells and distributes shares out of the trust’s securities. This form of mutual fund is not actively managed and the investments never change. The beneficiaries who invest in this trust are shareholders. These shareholders are paid through dividends, interest, and occasional capital gains within the invested companies. The investments are always considered low risk. This means that they are a safe investment but they will also generally offer low returns. The only people allowed to invest in the fixed investment trust are the people who were listed at the time the trust was organized. This requirement makes the fixed investment trust a closed investing form. In short, a fixed investment trust is not an actual trust, but a form of mutual fund that people invest in while living.

Getting Legal Help

To learn more about fixed trusts or fixed investment trusts and to use these tools for your portfolio, contact an estate planning attorney or wealth management specialist for a consultation.