Creating a Trust
There are several types of trusts that people can create and the purpose of the trust usually dictates the type of trust established. Each U.S. state has its own laws that relate to trusts and anyone thinking of creating one should familiarize themselves with state specific laws and hire a trust attorney. Trusts are legal entities and can own real property as well as cash assets. Generally, people establish trust accounts for tax reasons or to protect assets from lawsuits.
Choose a Type of Trust Decide what kind of trust you wish to establish. You can set up a trust under your own name, create a joint trust, family trust or a trust held in the name of another entity or organization. Additionally you must decide whether you want a revocable or an irrevocable trust. If you establish a revocable trust you can discontinue the trust or make amendments to it at any time. An irrevocable trust involves a trustee who administers the account and the person who created the trust cannot remove the trustee or make changes without the trustee's consent. Decide if you want a living trust that takes effect now or a testamentary trust that comes into effect when you die.
Transfer Assets Choose the assets that you wish to place into the trust. If you intend to transfer real property into a trust, you should consult a real estate attorney to determine the process for real estate ownership transfers in your state. If you intend to place cash or investment assets in a trust, make sure you keep sufficient assets on hand to cover your own personal expenses that are not covered by the stated purpose of the trust.
Select a Trustee Select a trustee and a successor trustee. Many people appoint themselves to act as trustee but you can choose another individual to handle the trust if you prefer. A successor trustee serves no function until the trustee dies or becomes incapable of handling the trust. Inform the individuals that you wish to appoint as trustees and gain their consent. Decide who the trust beneficiaries will be and how to divide the assets.
Hire an Attorney Provide a trust attorney licensed to practice in your state with the financial information about the assets that you intend to place in the trust. Ask the attorney to write a trust document that complies with state regulations in terms of explaining the function of the trust, naming trustees and listing assets. Sign the trust document along with the named trustee and successor trustee. Most states require trust documents to have two witnesses and the signature of a notary.
Distribute Copies of the Trust Give a copy of the trust to your bank, credit union or financial adviser. Ask financial institution representatives to change the titling of effected accounts to reflect the creation of the trust. If necessary, open new accounts under the name of the trust. File a change of ownership with your county to transfer any real estate to the trust.
Other Considerations If you establish a testamentary trust, you should regularly revise it to make changes, if and when named beneficiaries die. You should also replace the named trustee and successor trustee as and when it becomes necessary. You must provide your bank and financial adviser with an updated copy of the trust whenever changes occur.
