Ensuring your assets go to the right beneficiaries is tricky business, which is why setting up a Trust is the best way to simplify that. Not only is it an excellent way for you to manage your assets even after death, but it also offers tax benefits for the beneficiaries.
In simpler words, a Trust helps maximize wealth for your future generations. Creating a Trust is relatively straightforward, as long as you know the five steps. Here’s all you need to know about setting up a Trust.
What is a Trust?
A Trust can be described as a legal document that ensures that your assets are distributed to the right beneficiaries at a particular time. The creator of the Trust is known as the grantor, who puts their assets under the Trust and appoints a third party, the trustee, to administer the Trust’s guidelines.
The trustee is responsible for lawfully distributing the assets under the Trust to the right beneficiaries. A complete Trust contains all elements which help save paperwork and time on the trustee’s end. It may also eliminate certain estate taxes for heirs.
It’s commonly misconstrued that only wealthy people have a Trust. In reality, anyone can set up a Trust. This document simplifies estate planning and ensures the right people receive your assets after your passing. One of the main benefits of a Trust is that your assets won’t have to go through probate after your death.
Three essential parties are involved in a Trust: the grantor, the beneficiaries, and the trustee. The grantor leaves their assets under a Trust and appoints a trustee to distribute the assets to the beneficiaries accordingly.
How to Set Up a Complete Trust
Setting up a Trust is relatively simple. You can set up trust online with the help of digital services, or you can do it yourself by writing up a proper legal document with the help of a qualified attorney.
Here are five steps to setting up a complete Trust.
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Decide the Assets
Of course, the first step is to decide which assets you want to place under your Trust. Since you’re planning to set up a Trust, you’ve likely already decided on this aspect. You may include cash, stocks, real estate, bonds, business interests, or investments.
You’ll also need to transfer the assets into the Trust. This process depends entirely on the assets and your ownership over them. For example, if you own the asset title, you’ll need to change the ownership from your name to the Trust’s.
Transferring automobiles to a Trust requires a visit to the DMV. On the other hand, you’ll need to create a new property deed under the Trust’s name if you want to put a property in a Trust.
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Identify the Beneficiaries
The next step is to identify the beneficiaries who will receive your assets. Any number of people can serve as beneficiaries in your Trust, including your children and spouse, a charity, or any other business you want to support.
You must detail each beneficiary’s legal name and address in the Trust so the trustee can quickly locate them when the time comes.
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Determine the Rules
Next, you must detail the rules of your Trust, which allows you to control how your funds and assets are distributed to the beneficiaries. Again, there are endless opportunities to take in this aspect of your Trust.
For instance, you could set up a Trust for your grandchildren, which they only receive when they start college. You could also place a Trust for your children to receive after your passing. Finally, you may set up a Trust for your favorite charity to receive installment funding over several years.
It’s essential to set up these parameters in your Trust, especially the time of distribution of the assets. In this case, contact a qualified estate planning attorney to discuss how to complete this section of your Trust lawfully. You may also discuss these details with your trustee.
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Select Your Trustee
This is the most critical aspect of setting up a complete Trust. Selecting your trustees can be a difficult decision, which is why you mustn’t rush into it. Of course, the obvious option is always a friend or family member, but we recommend opting for an unbiased third party.
You’re free to select your family members as your trustee, but choosing a professional trustee has multiple benefits. For example, professional trustees such as banks aren’t influenced by family dynamics, allowing them to administer your assets lawfully according to your Trust.
Selecting a financial institution as your trustee means their trust administrators have adequate experience with family dynamics that arise in such situations. Unfortunately, trust administrators cannot write or set up your Trust for you. However, they may recommend qualified attorneys that can officially draft a Trust in your name. When working with a qualified attorney, you can also question any possible drafting options or potential tax implications.
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Draft the Document
Finally, you can draft your Trust document with the help of a qualified attorney. You may want to create a power of attorney to handle the assets not mentioned in the Trust. This person will legally manage your assets if you become unable to make decisions about your assets due to disabilities or other issues before your death.
Your spouse, child, or other chosen individual can take on this responsibility. We’d also recommend a healthcare power of attorney, as they would make the right healthcare decisions on your behalf before your death.
How Much Does Setting Up a Trust Cost?
The cost of setting up a Trust depends on the estate attorney you choose, but it typically costs at least $1,000. If your Trust has complex guidelines, it may cost even more to set it up.
It also costs extra to include credit shelter or asset protection in your service, as these factors complicate the setup of your Trust. It’s worth noting that a standard revocable Trust costs less than an irrevocable Trust. However, setting up a Trust online costs less than writing a legal document.
Conclusion
Knowing your role and responsibilities as a grantor can simplify things for the trustee and beneficiary when it’s time to administer the assets. Follow these steps to set up a complete Trust and ensure your funds or assets are received by the right people.