Setting up a Trust: Steps and Considerations

In estate planning, the creation of trusts helps individuals protect their assets, reduce estate taxes, and pave the way for a smooth and stress-free transfer of wealth. The flexibility of trusts allows them to be tailored to an individual’s specific requirements, and they typically include details regarding terms of the trust agreement, life insurance policies, and asset management.

But while trusts are a highly effective way of guaranteeing continuity and offering protection against the unforeseeable, creating one without professional guidance from a wills and estates lawyer is not recommended. With so many trust categories available, their advice can prove invaluable.

Here are the steps involved when setting up a trust:

Choose the right type of trust.

Your unique circumstances and goals will likely shape the type of trust you select, and there are several you can choose from, including:

• Revocable
• Irrevocable
• Asset protection and tax benefits
• Testamentary
• Posthumous asset distribution
• Special needs
• Living trusts

To find out which trust would be best suited to your circumstances and objectives, consult with a local wills and estate lawyer.

Choose appropriate key parties.

Every trust requires a trustee (guardian of the trust), a settlor (creator of the trust), and a beneficiary (the person or organization benefiting from the trust). For any trust to be successful, each party must be able to interact with the other harmoniously.

What can go wrong with trust management?

There can be many challenges involved in managing a trust, such as an absence of funds or a poorly drafted document. Updating the trust as and when necessary, making sure the trustee is competent, and being compliant with tax and reporting obligations are essential to avoiding any legal complications.

Is a trust right for you and your estate?

While trusts can be incredibly powerful and versatile, they may not be the ideal solution for every estate planning situation. When thinking about creating a trust, it’s important to do the following:

• Understand what a trust is

Trusts are of particular benefit to those with complex estate plans, or where the priority is privacy and control over the distribution of assets. Consider whether this type of legal structure is best suited for your needs, and if in doubt, consult with an experienced estate lawyer.

• Explore other alternatives.

Trusts aren’t always necessary or helpful, and in cases where estate planning needs are uncomplicated, a will can be a more practical and efficient solution. For the transfer of assets, designating beneficiaries on insurance policies and financial accounts can sometimes suffice, as can joint ownership.

• Seek professional help.

Setting up a trust is a decision not to be taken lightly. By seeking professional guidance from an estate lawyer, you can gain valuable insights into whether a trust is right for you and your circumstances.

Trusts offer flexibility, tax benefits, and asset protection, essential components of sound estate planning. However, they’re not suitable for every situation. To find out whether a trust, will, or beneficiary designations would best suit your needs, consult with an estate lawyer who will provide you with unbiased, up-to-date advice.