Over the last several months, we have shared with your informative content involving different sectors of Estate Planning. As legal experts in Estate Planning, we expressed that for many creating an estate plan that includes a trust, is the best way to accomplish their goals during their lifetime and after transitioning. In relation to our past written post, Here Is Why You Might Need a Trust, today we are going to provide you with the basics of where to start when creating a trust and a reminder of what a trust truly is. It is important to consider a trust as part of your estate planning process as it is beneficial for you or a loved one to include it in their long-term care and retirement plans.
As we have mentioned in previous articles, a trust is a document in which someone (the trustee) manages and distributes assets on behalf of the individual who created it. The trustee is a fiduciary, as such, they must act with reasonable care in administering the trust and selecting trust investments, avoiding any conflict of interest or self-dealing in holding, purchasing, and selling trust assets. To establish a trust, the individual (called the grantor or settlor) signs a legal document that creates the trust and specifies the terms under which it will operate. In the document, the grantor names a trustee to manage the trust assets and distribute the trust property to the beneficiary (or beneficiaries) named in said trust.
You may have started considering how to better manage your property and ensure your family will be taken care of after you are gone. If you are having these thoughts, you might want to think about setting up a trust. Here is a list of the basic steps to setting up a trust:
- Get Documents in Order. Gather all of your titles and deeds of property, stock certificates, and life insurance policies to be transferred into the trust. A trust is only valid when you put assets in it. In addition, consider ahead of time who you intend to name as sole grantor, beneficiaries, successor trustee, and who will manage your property for your minor children (if applicable).
- Set Your Goals. Setting your goals is an important next step in getting your trust set up. Consider what you want to accomplish with this trust? This part of the process takes some considerable thinking: you will need to consider your dreams and wishes for your assets and your family. Also, determine the type of trust you would like to consider, such recommendations are best provided by legal counsel.
- Determine the Structure of the Trust. The structure of the trust outlines how money and/ or assets are to be distributed. Work with an advisor when creating your trust so that you can review all available structure options.
- Choose a Service. What type of service will you entrust with your money? A lawyer or an online service? Or will you try to tackle this yourself? Obviously, cost will play a major role in this decision but setting up a trust by yourself can be complicated and you might encounter a lot of problems. If you do decide to do it yourself, it’s essential that you get a book and follow it closely or preferably hire a professional.
- Review Your Assets. This step involves figuring out what you own and what you will transfer into your living trust.
- Your assets could include real estate property, including any homes you own (including second homes or rental property), cash accounts including checking and savings accounts.
- Next, include personal property such as boats, vehicles, furniture, and other collectibles. There are some tricky considerations with retirement accounts, pensions, and life insurance policies. Look into the tax consequences that could be imposed on you with these items; ask a tax adviser before you include these types of accounts into your trust as some may not be eligible for inclusion.
- Choose a Successor Trustee. Your trust must name someone to serve as your successor trustee. You can name a trust beneficiary — someone who will receive trust property after your death. Once you decide who it will be, let the person you’ve chosen know ahead of time to ensure he or she is willing to take on the responsibility.
- Prepare the Trust Document. Work with the service or attorney you’ve chosen to create your trust document with.
- Transfer Title of Property to Yourself as Trustee. Transferring the title of the property to yourself as a trustee is an important step that is often not executed. When you make your trust effective, you must hold title to trust property in your name as trustee.
Trusts have important tax, governmental assistance, probate, and personal ramifications. It’s best to consult an experienced trust attorney who can help with any stage of the process, from preliminary discussions to the execution of trust documents. When you create a trust, you set up a plan to take care of your loved ones after you have lacked the capacity to assist them. The Law Offices of Marjory Cajoux, we provide a full range of services to estate planning, including trusts. Contact us today or use our contact form to talk with our experienced Estate Planning attorneys.
