How do I set up a Trust?

Setting up a trust is a lot easier than you think (as long as you have the right help, of course).

There are generally three steps involved in setting up a trust.

STEP 1: GOALS

The first step is to write down your objectives, concerns and worries. These items will serve to determine the best type of trust to suit your needs and whether additional trusts (or subtrusts) are required to fully accomplish your goals.

STEP 2: KEY ROLES

The next step is to determine who will play each key role in the trust.

Trust Maker

The first role is generally filled by you, the “Trust maker” (also sometimes referred to as the Grantor, Settlor, or Donor). If you’re married, you’ll have to decide whether you want your trust to be joint with your spouse or if you prefer to have a separate trust from your spouse.

Trustee

The next role is the “Trustee” - whether or not you are able to serve as the initial trustee or need someone else you trust to serve as trustee will depend on your objectives for the trust.

For example, if you’re doing a revocable trust, then you can be the initial trustee, and you’ll need to determine who will be successor trustee after you can no longer serve. But if you are doing an irrevocable trust, then you’ll need to determine who will be the initial trustee and who will be their back up trustee if they are no longer able to serve. The reason being that most irrevocable or asset protection trusts do not function properly if you serve as trustee (although there are some scenarios where you may serve as a limited co-trustee).

Beneficiary

The final role is the beneficiaries or the persons who will benefit from the income and principal placed in trust.

In many scenarios, you, the trust maker, are also the beneficiary during your lifetime and then after your death, you may have, a certain number of other beneficiaries (for example your surviving spouse or children). Once again, depending on your objectives and the type of trust you decide on, you may have a wider pool of beneficiaries (as is generally the case with a family trust) as opposed to a single-beneficiary trust (like a marital trust or a supplemental needs trust).

STEP 3: ASSETS HELD IN TRUST

Now that you know the objectives of the trust and the person playing each role in the trust, you need to determine what you’re going to be putting into the trust. This is also known as “trustfunding.” I should also mention the obvious - if your objective/goal is to protect a certain asset from a certain issue (for example, your home from Medicaid), then you may have already thought this through in step one - but even if that’s the case, you may be curious what other assets should (or should not) be placed in trust so it’s still worth reading through this step.

Most clients trust funding usually starts with just their real estate. For example, deeding your property or retitling your property into the name of the trust. Other assets like checking, savings, investment / retirement accounts, and life insurance policies often require updating what is called your pay on death (POD), transfer on death (TOD), or death beneficiary designation to make sure it goes the trust upon your passing. But once again, depending upon your objectives and the type of trust you do, your trust funding strategy may differ.

Once you have these three things steps in mind, your attorney can take care of the rest and complete the formal documents to make sure your wishes followed.

Do you already have a trust, but aren’t sure how it works? I’d be happy to review it for you and answer any questions you may have.

Would you like to set up a trust? I’d be happy to help you create a trust that addresses whatever concerns you may have.

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