What is a construction trust?
A construction trust is a legal arrangement used for the purpose of protecting funds paid for construction work in Alaska. A construction trust ensures that money provided by a client to pay for construction work is held in trust for the benefit of the contractor and its subcontractors. The client’s payment is held in the trust account until the contractor or subcontractor has fulfilled its contractual obligations to the client. A Construction Trust Agreement must be in place in order to create a construction trust in Alaska. The agreement must be signed by both the contractor and client. This agreement details how the trust funds will be managed and administered. The funds are then placed into escrow with a trustee who is responsible for ensuring the contractor and subcontractors receive their payments in a timely matter. A construction trust also protects the client from potential legal action by unpaid contractors or subcontractors. By providing a trust account to receive funds, it guarantees the contractor or subcontractor will be paid for services completed, and any subsequent legal action can only be taken against the trust.
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