Legal Definitions - fund

A fund is a dedicated pool of money or other valuable assets that has been set aside for a particular purpose or goal. It can be established by individuals, businesses, or governments to manage finances more effectively for specific objectives.

• Example 1: A family decides to save money specifically for their children's future education. They open a separate savings account labeled "College Education Fund." This illustrates a fund as money set aside for a specific future purpose.

• Example 2: A small technology startup allocates a portion of its annual budget to a "Research and Development Fund." This money is exclusively used to explore new technologies and develop innovative products, demonstrating a fund as assets reserved for a particular business objective.

Beyond this general meaning, there are many specialized types of funds in legal and financial contexts:

• Blended Fund: This refers to a fund created by combining income or assets from several different sources, typically for a unified purpose.

  • Example 1: After a person passes away, their will directs that the proceeds from the sale of their house, their investment portfolio, and their personal belongings all be combined into a "blended fund." This fund is then used to establish a charitable foundation in their memory, showing how diverse assets are merged for a single goal.

  • Example 2: A community development project receives financial contributions from individual donors, a corporate sponsorship, and a government grant. All these different income streams are pooled into a "blended fund" to finance the construction of a new public park, illustrating the combination of multiple sources for a common project.

• Changing Fund: This is a fund, often held in trust, where the specific investments within it are regularly bought, sold, and re-invested. While the overall value and purpose of the fund remain, its exact composition of assets changes over time.

  • Example 1: A university's endowment operates as a "changing fund." Its investment managers constantly adjust the portfolio, selling underperforming stocks and purchasing new bonds or real estate, to ensure the fund grows and can perpetually support the university's academic programs.

  • Example 2: A private pension plan for employees is structured as a "changing fund." The fund administrator periodically rebalances the investments, shifting assets between different categories like domestic equities, international bonds, and alternative investments, to manage risk and achieve long-term growth for retirees.

• Client-Security Fund: This is a fund, typically managed by a state bar association, designed to compensate clients who have suffered financial losses due to their attorney's dishonest actions, such as misappropriation of funds or other professional misconduct.

  • Example 1: A client discovers that their attorney has embezzled money from their settlement amount. After reporting the misconduct, the client can apply to the state's "client-security fund" to recover the stolen funds, providing a safety net when an attorney acts improperly.

  • Example 2: A lawyer mismanages a client's trust account, leading to a significant financial shortfall for the client. The "client-security fund" offers a mechanism for the client to seek reimbursement for the damages caused by the attorney's breach of trust.

• Contingent Fund: This term has two primary meanings:

  • 1. (Municipality): Money set aside by a local government for necessary expenses that arise unexpectedly during the year and do not fit into existing budget categories.

    • Example 1: A city's "contingent fund" might be used to cover the unforeseen costs of repairing a major water main break that wasn't included in the annual budget, allowing the city to respond to emergencies.

    • Example 2: During an unusually severe winter, a town uses its "contingent fund" to pay for additional snow removal services beyond what was initially allocated, ensuring public safety despite unexpected weather.

  • 2. (Business): Money reserved by a business to cover potential future costs or liabilities that are uncertain but anticipated.

    • Example 1: A software company establishes a "contingent fund" to cover potential legal expenses if they are sued for patent infringement, even though no lawsuit has been filed yet, preparing for future risks.

    • Example 2: A manufacturing company sets aside a "contingent fund" to address potential warranty claims on its products, anticipating that a certain percentage of items might require repair or replacement.

• Executor Fund: A fund established by the executor of a will to manage and pay the final expenses of a deceased person's estate.

  • Example 1: The executor of an estate creates an "executor fund" to cover the costs of the funeral, outstanding debts of the deceased, and legal fees associated with the probate process, ensuring the estate's obligations are met.

  • Example 2: An "executor fund" is used to pay for property taxes, utility bills, and maintenance for the deceased's home until it can be sold and the estate fully distributed to beneficiaries.

• Fund in Court: This term has two primary meanings:

  • 1. Money that is deposited with a court because its ownership or distribution is being disputed in a legal case.

    • Example 1: Two business partners are in a legal dispute over the profits from a joint venture. To ensure the money is preserved and not spent during the lawsuit, the disputed amount is placed as a "fund in court" until a judge determines the rightful owner.

    • Example 2: In a legal action where multiple parties claim the same insurance payout, the insurance company deposits the money as a "fund in court." This allows the court to decide who the legitimate beneficiaries are without the insurance company being caught in the middle.

  • 2. Money deposited with the court to cover a potential future legal obligation.

    • Example 1: A defendant in a civil lawsuit deposits a "fund in court" to cover a potential judgment against them, demonstrating their ability to pay if they lose the case and providing security to the plaintiff.

    • Example 2: A company appealing a large environmental fine might deposit a "fund in court" as a guarantee while the appeal process unfolds, ensuring the funds are available if the appeal is unsuccessful.

• General Fund: This term has two primary meanings:

  • 1. (Government): The main operating fund of a government entity, used for its day-to-day operations and discretionary spending that isn't tied to a specific revenue source.

    • Example 1: A state government uses its "general fund" to pay for public education, state police salaries, and the maintenance of state parks, covering a wide range of essential services.

    • Example 2: A city's "general fund" covers expenses like fire department operations, public library services, and administrative staff salaries, representing the core budget for municipal services.

  • 2. (Nonprofit): A nonprofit organization's money that is not restricted to a specific project or purpose, allowing for flexible use to support overall operations.

    • Example 1: A charity receives an unrestricted donation that goes into its "general fund," allowing the organization to use it for whatever operational need is most pressing, such as rent, utility bills, or administrative costs.

    • Example 2: Membership fees paid to a professional association typically go into its "general fund" to support overall activities like member services, advocacy efforts, and administrative overhead.

• General Revenue Fund: The primary fund from which a municipality pays for its ordinary and incidental expenses, typically sourced from general tax revenues.

  • Example 1: A city's "general revenue fund," primarily sourced from property taxes and sales taxes, is used to pay for street cleaning, park maintenance, and local government employee salaries, covering the routine costs of running the city.

  • Example 2: The "general revenue fund" of a town covers the costs of running its municipal offices, providing public safety services, and maintaining basic public infrastructure, funded by the general taxes collected from its residents.

• Guaranty Fund: A private insurance fund, typically supported by financial institutions (like banks or insurance companies), that protects depositors or policyholders in case a member institution becomes insolvent.

  • Example 1: If a state-chartered credit union fails, its depositors might be protected by a state-level "guaranty fund" that ensures they recover their savings, often covering amounts beyond federal insurance limits.

  • Example 2: In some states, an insurance company's policyholders are protected by a "guaranty fund" if their insurer goes bankrupt, ensuring that valid claims can still be paid up to a certain limit, providing a safety net for consumers.

• Imprest Fund: A small, fixed amount of money kept on hand by a business for minor, routine expenses. It is regularly replenished to its original amount as money is spent.

  • Example 1: A small office maintains an "imprest fund" (often called petty cash) of $200 to cover incidental expenses like postage stamps, office snacks, or emergency cleaning supplies. When the fund runs low, it is refilled to $200 after accounting for expenditures.

  • Example 2: A construction site manager uses an "imprest fund" for small, immediate purchases like extra nails, a replacement tool, or coffee for the crew. They submit receipts for these purchases to the main office to get the fund replenished to its original fixed amount.

• Joint-Welfare Fund (also known as Taft–Hartley Fund): A fund established through collective bargaining between a labor union and employers to provide health, retirement, and other welfare benefits to union members. It is managed jointly by representatives from both labor and management.

  • Example 1: A union representing construction workers negotiates with contractors to contribute a set amount per hour worked into a "joint-welfare fund." This fund then provides health insurance and pension benefits for all union members, managed by a board with equal representation from the union and the employers.

  • Example 2: Employees in a manufacturing plant, represented by a union, receive dental and vision benefits from a "joint-welfare fund." This fund is overseen by a board comprising both union officials and company management, ensuring benefits are administered fairly according to the collective bargaining agreement.

• Paid-In Fund: A reserve cash fund established by a mutual insurance company (which is owned by its policyholders) to cover unexpected losses. It serves a similar purpose to the capital stock account found in a traditional, investor-owned company.

  • Example 1: A mutual auto insurance company creates a "paid-in fund" from initial contributions by its policyholders. This fund ensures the company has sufficient reserves to pay out claims even during periods of unusually high accidents, maintaining solvency without external shareholders.

  • Example 2: A "paid-in fund" allows a mutual life insurance company to absorb larger-than-expected payouts due to unforeseen mortality events among its policyholders, ensuring the company's financial stability and ability to meet its obligations.

• Public Fund: This term has two primary meanings:

  • 1. The revenue or money belonging to a governmental body.

    • Example 1: Tax revenues collected by a county, along with its bank deposits and investments, constitute its "public funds" used for community services like road maintenance and public safety.

    • Example 2: The money held by a state's treasury, including cash and government bonds, are considered "public funds" available for state expenditures such as education and infrastructure projects.

  • 2. Securities (like bonds) issued by a state or national government.

    • Example 1: An investor purchases "public funds" in the form of U.S. Treasury bonds, which are considered a very safe investment backed by the federal government.

    • Example 2: A pension fund invests a portion of its assets in municipal bonds, which are a type of "public fund" issued by local governments to finance public projects like schools or hospitals.

• Revolving Fund: A fund whose money is continually expended and then replenished, often from fees, repayments, or sales, allowing it to operate without needing new appropriations for each cycle.

  • Example 1: A university operates a "revolving fund" for student loans. Repayments from former students are collected and then used to issue new loans to current students, creating a self-sustaining financial cycle.

  • Example 2: A government agency manages a "revolving fund" for equipment maintenance. Fees charged to other departments for repairs are used to restock parts and pay technicians, ensuring continuous service without needing a new budget allocation each year.

• Sinking Fund: A fund created by making regular deposits, often with interest, to accumulate enough money to pay off a large, long-term debt (such as a bond issue) at a future date.

  • Example 1: A city establishes a "sinking fund" by making annual contributions to ensure it can repay the principal of a 20-year municipal bond issue when it matures, systematically saving for a future obligation.

  • Example 2: A corporation sets up a "sinking fund" to systematically save money over time, allowing it to repurchase its outstanding bonds at maturity without needing to issue new debt or use its operating capital, thus managing its long-term liabilities.

• Strike Fund: A fund maintained by a labor union to provide financial support to its members who are on strike, helping them cover living expenses during the work stoppage.

  • Example 1: When unionized factory workers go on strike for better wages, the union draws from its "strike fund" to provide weekly payments to members, helping them pay for groceries and rent while they are not earning their regular salaries.

  • Example 2: A teachers' union builds up a "strike fund" over several years through member dues. If contract negotiations fail and a strike is called, this fund ensures members can receive financial assistance to mitigate the loss of income, strengthening their bargaining position.

• Trust Fund: A legal arrangement where assets are held by one party (the trustee) for the benefit of another (the beneficiary), managed according to specific instructions outlined in a trust agreement.

  • Example 1: A grandparent establishes a "trust fund" for their grandchild's future education, appointing a bank as trustee to manage the investments until the grandchild reaches college age. The trustee ensures the funds are used only for educational expenses as specified.

  • Example 2: A wealthy individual sets up a "trust fund" to support a charitable cause, with a board of directors acting as trustees. The trustees are legally obligated to ensure the funds are invested wisely and distributed solely for the intended philanthropic purposes, such as medical research or environmental conservation.

• Unsatisfied-Judgment Fund: A state-managed fund that compensates individuals who have suffered losses in an automobile accident caused by a driver who is uninsured or doesn't have enough insurance to cover the full extent of the damages.

  • Example 1: A driver is hit by an uninsured motorist and suffers significant medical expenses and vehicle damage. After obtaining a court judgment against the at-fault driver that cannot be collected, they can apply to the state's "unsatisfied-judgment fund" for compensation, providing a recourse when the responsible party cannot pay.

  • Example 2: A pedestrian is severely injured by a driver whose insurance coverage is insufficient to cover all their medical bills and lost wages. After exhausting the at-fault driver's policy limits, the pedestrian can seek additional compensation from the state's "unsatisfied-judgment fund" to cover the remaining damages.