Steps to Setting Up a Trust for Your Estate Plan 

Trusts can be valuable for families of all sizes and income levels. However, establishing and administering one is a lengthy process.

The first step is to meet with an estate planning attorney with experience creating trusts. They can help you decide on the type of trust to establish and how to transfer assets into it formally.

Decide on the Type of Trust

Trusts come in a wide variety of types, with each type offering different benefits. A qualified estate planning attorney can help you understand the various options and determine whether a trust suits your situation.

One benefit of setting up a trust is that it may allow assets to pass outside of probate. This can save time and court fees and potentially reduce estate taxes. Additionally, a trust can provide greater control over when and to whom assets will be distributed. This can be particularly beneficial when navigating complex situations such as children from multiple marriages.

A trustee is a person who manages a trust and oversees the distribution of assets to beneficiaries. Trustees can be individuals or institutions such as banks or financial companies. Beneficiaries of a trust are those entitled to receive help from the trust based on how the grantor (the person who creates the trust) directs. Typically, there are current beneficiaries who receive payments from the trust while you are alive and future beneficiaries who will inherit assets at some point in the future.

A revocable trust can be modified during your lifetime, but once you die, the trust becomes irrevocable. If you choose a revocable trust, it is essential to retitle any assets into the name of the trust properly. This is necessary so that the trust avoids probate and can be managed if you become incapacitated.

Decide on the Trustees

Choosing your trustees is one of the most critical steps in creating a trust. The trustees oversee the trust, distribute it to beneficiaries, and comply with all legal requirements. This can be a complicated task and requires someone with experience.

Many choose a family member as their trustee to “keep it in the family.” However, this can lead to problems if that person has trouble managing finances or doesn’t understand family dynamics. Furthermore, a trustee must be able to balance the needs of current beneficiaries (who may be receiving payments from the trust’s income) and future beneficiaries, such as children or grandchildren.

Additionally, the trustee must ensure that all legal requirements are met, including taxes. This can be difficult since rules about how assets enter and leave a trust differ from state to state.

Finally, the trustee must be able to act quickly. This can be challenging since transferring assets into the trust takes time, especially if real estate or other titles must be shared. Moreover, if you create the trust while you are still alive, your trustees will have to act for an extended period until your heirs reach the age at which you want them to receive their inheritance. Choosing a trustee who is close in age to you could mean that they will also be in their late fifties or sixties when the trust is needed, which can cause delays in distributions.

Decide on the Beneficiaries

In addition to controlling how assets are distributed, trusts can offer benefits such as reducing estate tax liability and keeping private matters out of the public records (as is the case with a will). In some cases, trusts also protect beneficiaries from their creditors.

For these reasons, trusts are generally preferred by those with substantial money to pass on to their heirs. Whether a belief is correct for you, however, comes down to how much control you seek over the distribution of your assets and the value of those assets.

Deciding on beneficiaries is one of the most important steps when planning your estate. While naming beneficiaries is typically a simple process, there are some things to remember.

Beneficiaries can be people, entities such as a charity or school, or a combination of both. There are also several types of beneficiary designations, including primary and contingent. Beneficiaries can be current beneficiaries, who will receive payments from the trust now, or future beneficiaries, who are entitled to the proceeds of the trust upon the grantor’s death. The grantor can also name alternate beneficiaries in case the primary beneficiary is unable or unwilling to accept the inheritance. Often, it makes sense to use professional trustees to manage the trust because they can be independent of family dynamics and ensure that all assets are administered fairly.

Decide on the Funding

Trusts are useful in transferring wealth to family members to avoid costly and public probate proceedings, taxes, and conflicts. However, the expense of establishing and maintaining trust throughout your lifetime and beyond is significant. It is important to weigh this against the financial benefits to determine whether a belief suits your situation.

The process of transferring ownership to a trust can take time, especially when you are trying to set up a trust with real estate or other assets that have to have their titles changed. It also takes a lot of planning to ensure your assets are appropriately accounted for and transferred to the trust.

It is not uncommon for people to forget to formally change the title to the property they own or buy new assets after they set up a trust and neglect to transfer those new assets. This can result in property not being distributed according to the terms of the faith, exposing your heirs to creditor claims.

Once the trust is fully funded, the trustees will manage all the assets and distribute them to the beneficiaries based on the provisions you laid out in your trust documents. The timing for distributing these assets can vary, depending on how long you want to wait before your children receive their inheritance and what age you want them to be when they receive the funds.