Setting up a trust can make transferring assets easier and less expensive for your family after death. But first, decide what type of Trust you want. Generally, trustees must fulfill the grantor’s wishes outlined in the trust documents. The exact process varies depending on the type of assets and beneficiaries you wish to include.
Decide on the Type of Trust You Want
Whether you’re interested in preserving your wealth, reducing taxes or ensuring your loved ones are provided for, a trust can be an effective way to accomplish your goals. However, it’s important to realize that a trust will take longer than a simple will and incur additional costs. This is because a trust requires transferring ownership of assets, a trustee and other legal documentation. Thus, it’s essential to understand the exact process of how to set up a trust.
The first step is to determine the type of Trust you want. A lawyer with experience creating trusts can help you understand your options and choose the best style for your situation. You’ll also need to decide if you want an individual or a company to serve as a Trustee and the beneficiaries you’d like to receive assets from the Trust.
Finally, you’ll need to fund the Trust by transferring ownership of your assets to it. This will require the help of an attorney.
Choose a Trustee
The choice of trustee is one of the most important decisions you will make for your Trust. Your trustee controls how and where your assets are distributed after you pass.
Choosing someone you trust is important, but it’s also necessary to consider the person’s outside influences that may impact their actions as trustees. For example, if you chose your sister as your trustee and were living paycheck to paycheck and working manual labor, her financial choices could be affected by outside forces unrelated to the Trust’s investment portfolio. She might be tempted to steal from the Trust or favor her children over others regarding distributions.
You will want a trustee who is good at record keeping. In addition, your trustee will need to transfer ownership of assets into the name of the Trust. For example, a property deed must be changed into the name of your Trust and stock certificates and bonds must be reregistered. Your lawyer or an online service can do this.
Set Your Goals
One of the most important things you can do to ensure your loved ones’ financial security is to set up and fund a Trust. However, this process can be confusing and expensive if not done correctly. The first step is to set your goals. This means determining what property you want to put into your Trust and how you want it distributed to your beneficiaries. This could include real estate properties, cash accounts (checking and savings), investments, and family heirlooms. It would help if you also considered any taxable assets that you may have, such as 401(k) accounts or life insurance policies. It would help if you also thought about when you want your children to get access to the Trust funds and property. For example, do you want them to gain access after several years or at a certain milestone, such as graduating college or getting married? This can help your trustee manage the Trust funds prudently and by fiduciary duty to your beneficiaries. This can help avoid contested inheritances.
Create the Documents
When you are ready to write your Trust, working with an attorney is a good idea. This will ensure that your Trust includes all necessary documentation and is 100% legal. You may also want to draft a power of attorney for any property or assets you keep outside your Trust, as this person will be able to manage these assets for you should something happen and you become incapacitated. Finally, you should create a list of beneficiaries to receive your assets. These can be people, organizations or charities you want to support. Often, you will name more than one beneficiary; it is common to include spouses, children, other family members, friends, and other loved ones.
Once you have your list, gather all the relevant documents of your assets and prepare to visit your attorney. This includes deeds, titles, leans, stock certificates and life insurance policies. Having these documents together will allow your attorney to transfer the ownership of these items into the Trust sooner rather than later. Also, make sure you have a bank account opened in the name of your Trust to hold the assets that are transferred into it.
Sign the Documents
A Trust is a legally binding Estate Planning tool to protect and benefit you and your family financially. It can help you avoid probate, delay or reduce taxes and preserve your assets. The process begins with a trust agreement, a Declaration of Trust. This legal document names the grantor (you), trustee, and beneficiaries. It also outlines how the trustee should manage and distribute trust assets during your lifetime and after your death. You’ll need to transfer assets into the Trust, including bank accounts and investments. You can do this by opening new bank accounts under the trust name, moving money into existing ones, or adding the Trust as a pay-on-death or transfer-on-death beneficiary for your IRAs, 401ks and other retirement assets. Depending on your state’s laws, you may need to file paperwork and register the Trust. Some transactions involving the Trust must be recorded with your local government, and you’ll likely need to have the trust documents notarized.