Naked Trust

A A A

DEFINITION

A straightforward type of trust into which a trustor transfers assets (money or property) in order to pass them on to beneficiaries. The initial owner of the assets (the trustor) loses all control over them once they are placed in the trust. The trustee has only nominal control of the assets in the trust. The trust's beneficiary has absolute entitlement to the assets once he or she turns 18.

Also known as a "bare trust," "dry trust" or "passive trust."


INVESTOPEDIA EXPLAINS

This estate-planning tool is commonly used by parents or grandparents to transfer assets to children or grandchildren. The college financial-aid implications of putting money into a naked trust for children should be considered before establishing the trust.


RELATED TERMS
  1. Naked Writer

    An options seller who does not own the underlying security for the options contract ...
  2. Named Beneficiary

    This term refers to any beneficiary named in a will, a trust, an insurance policy, ...
  3. Designated Beneficiary

    The person who determines how long the retirement plan will survive as a tax-deferred ...
  4. Trustor

    An individual or organization that gifts funds or assets to others by transferring ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. In the financial ...
  6. Trust

    A fiduciary relationship in which one party, known as a trustor, gives another ...
  7. Guarantee Company

    A form of corporation designed to protect members from liability, but which ...
  8. Laughing Heir

    A distant relative who has inheritance rights despite not having a close, personal ...
  9. Ultimogeniture

    A system of inheritance whereby the youngest son gains possession of his deceased ...
  10. Crummey Trust

    An estate planning technique that can be employed to take advantage of the gift ...
Related Articles
  1. Special Trusts For Special Needs
    Personal Finance

    Special Trusts For Special Needs

  2. Can You Trust Your Trustee?
    Home & Auto

    Can You Trust Your Trustee?

  3. Establishing A Revocable Living Trust
    Retirement

    Establishing A Revocable Living Trust

  4. Refusing An Inheritance
    Retirement

    Refusing An Inheritance

  5. Pick The Perfect Trust
    Retirement

    Pick The Perfect Trust

  6. How To Plan For The Charitable Giving ...
    Investing News

    How To Plan For The Charitable Giving ...

  7. Surprising Uses for Trust Funds
    Personal Finance

    Surprising Uses for Trust Funds

  8. Can my spouse and children collect my ...
    Insurance

    Can my spouse and children collect my ...

  9. Day-Trading Gold ETFs: Top Tips
    Trading Strategies

    Day-Trading Gold ETFs: Top Tips

  10. Must-Do Financial Moves For Same-Sex ...
    Taxes

    Must-Do Financial Moves For Same-Sex ...

comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center