Setting up a trust allows you to preserve assets you want to pass down to your loved ones. In addition, the trust allows your beneficiaries to receive their inheritance faster. You may also shield certain assets from taxes by transferring them to a trust first.
Establishing a trust is also recommended if you want to exercise complete control over the asset distribution process. Whoever is in charge of managing your trust will need to fulfill your wishes as you detailed them.
Does the idea of creating a trust sound appealing to you? If so, feel free to continue with this article so you can learn more about that process.
The Steps Involved in Creating a Trust
The process of creating a trust is not especially difficult or time-consuming. However, you should complete the process from start to finish in about a week or two.
To make the process simpler and faster, we have outlined the things you need to do. Those essential steps are detailed below.
Hire an Estate Planning Attorney
If you want to get your trust set up as quickly as possible, then your priority should be to find an estate planning attorney.
An estate planning attorney can help with every aspect of creating your trust. They can help draft your trust documents, move your assets around, and even serve as your trustee if that is your wish.
Even if you only involve your attorney during the process, they will still prove crucial because they can help get things going faster. So if you want to establish your trust quickly, you should enlist the help of an attorney early on in the process.
Choose the Type of Trust You Want to Create
After hiring your estate planning attorney, you can turn your attention to the next step of setting up a trust. This step involves choosing the specific type of trust you want to establish.
As the grantor, you will have the choice of creating either a revocable or irrevocable trust.
The main difference between the two is how easily you can amend them. As you have probably guessed, revocable trusts can be easily changed.
You can use a trust amendment form to change your revocable trust. Request that form from your lawyer and make the changes you desire.
Once the amendment form has been signed and attached to your trust document, the changes will immediately take effect.
New York State allows residents to make changes to irrevocable trusts. However, the process is more complicated since you will first need to obtain the consent of the “persons beneficially interested” in the trust before you can make your changes.
So, why would you ever choose to create an irrevocable trust over the alternative? Irrevocable trusts can protect some of the assets from certain taxes so that they may be more appealing.
Still, you should probably go with a revocable trust if you are setting one up at a relatively young age. That way, you can make changes to the document without much trouble.
Identify Your Beneficiaries
Now that you have decided on the type of trust you want to create, you can start listing your beneficiaries. The beneficiaries are the parties that will receive the assets housed in your trust.
Most of the time, grantors name their spouses and children as their beneficiaries. You can also name your parents, siblings, and other relatives if you want to leave them something when you pass away.
Grantors also have the option of naming charitable organizations as beneficiaries. Use your trust to continue your mission of helping the less fortunate even after your death.
In some cases, it may also make sense for you to name a different trust as a beneficiary.
For instance, you may want to leave assets behind for your disabled child, but you are worried that doing so may disqualify them from receiving certain government benefits. In that scenario, you can create a special type of trust specifically meant to help people with disabilities receive financial support.
By setting your trust up that way, you can maximize the financial support that your child can receive.
New York State does not limit the parties you can name as the beneficiaries in your trust; that decision is entirely up to you.
Name Your Trustee(s)
This next step in the process of setting up a trust is the one that will require the most thought and consideration. This is the part where you will name your trustees.
To drive home the importance of getting this decision, let’s examine the role of a trustee, the characteristics a trustee ideally possesses, and the options that warrant consideration. We can start by taking a closer look at the trustee’s responsibilities.
The Responsibilities of a Trustee
Trustees must take on various responsibilities related to the managing and distribution of your estate. Chief among those is following their fiduciary duty.
Any trustee you name is legally bound to act in the best interests of your estate and your beneficiaries. They cannot use the estate assets for personal gain unless you allow them to do so beforehand. Trustees that fail to meet their fiduciary obligations may find themselves in legal trouble.
Managing the assets in the trust is also a part of the job description for trustees. They should maintain physical assets to keep them in good condition. Trustees can also invest financial assets in the trust to facilitate growth.
Your trustees will also need to settle the affairs related to your estate. That typically means paying off your remaining debts.
Trustees are also tasked with distributing your assets. Therefore, they are obligated to follow your instructions for distribution.
The Ideal Characteristics of a Trustee
Given the responsibilities that an estate trustee will have to take on, the party you name as a trustee must be able to handle the work related to that role. Name a party willing to approach the role of a trustee like a full-time job.
Trustees should also be on good terms with your beneficiaries. Those trustees will be more inclined to follow the rules you set forth instead of using the assets to benefit themselves.
You have several options to consider when selecting a trustee.
For starters, you can name a family member or a close friend as a trustee of your estate.
On the one hand, naming a friend or family member makes sense because you know more about their character. You are probably confident that they will not do anything that disadvantages your estate or your beneficiaries.
On the other hand, the people close to you may not have the time to devote to being a trustee. They may also have mixed feelings about your beneficiaries which could complicate matters.
To avoid potential conflicts, hire professionals to serve as your trustees. Some popular candidates include lawyers and accountants. In addition, some companies specialize in managing trusts.
Consider hiring one of those unbiased parties to handle your estate.
You can also opt to name co-trustees for your estate. The co-trustees could be people you know personally or someone you know and a professional. By naming co-trustees, you can entrust your estate to someone who knows your beneficiaries well, along with a party focused on doing their job.
Set the Guidelines for Your Trust
Trusts are appealing estate planning devices because they give grantors control over their assets. You can outline how you want your assets distributed to your beneficiaries. After setting those guidelines, your trustees can follow your instructions.
Be as detailed as you can be while drafting the guidelines for your trust. Lay out exactly how you want the assets in the trust to be distributed and name their specific beneficiaries.
If some of your beneficiaries are still minors at the time you wrote your trust, you can set things up so that they would only gain control of their inheritance after reaching a certain age. In the meantime, you can leave control of those assets in the hands of your trustees.
Do not stress out about setting the guidelines of your trust the first time around. If circumstances change in the future, remember that amending your trust is an option. You can account for the behavior of your beneficiaries and decide if you still want to leave them an inheritance.
Also, if you have created certain guidelines related to managing the estate’s assets, you should discuss them with your trustees. Give them some added guidance so they can understand what you want them to do.
Create the Documentation for Your Trust
At this point, your trust should already have most of the necessary components. You can now start writing down the terms of the trust to make things official.
Be careful when drafting the trust document, so it reflects your wishes exactly. Repeat things with your lawyer to ensure they carry your intended meaning.
You can also enlist the help of your lawyer while writing the trust document. With their help, you should complete the trust document faster.
Sign Your Completed Trust Document in front of a Notary Public
To officially create your trust document, you must sign it in front of a notary public. Sign the trust document in front of the notary public, then have them notarize it.
You do not need to bring any witnesses along for this part of the process. The seal provided by the notary public will suffice.
After finding a notary public in your area, you can use this resource provided by New York State to check if the party in question is licensed to serve in that capacity. Use that resource before you complete any transactions to ensure that you are working with a trustworthy party.
Transfer Assets to Your Trust
It is now time for you to start transferring assets to your trust. Remember that you need to transfer ownership of the assets to the trust if you want them to end up in the hands of your beneficiaries. With many assets, it is not enough to only indicate in the document that the trust now maintains ownership of them.
Transferring your assets will vary based on the type of asset you are trying to move.
To move financial assets such as bank accounts or stocks to a trust, you must first fill out some forms to facilitate the transfer. Get in touch with the specific institution in control of the financial asset you wish to move and ask them which form you need to complete. They may also ask you to provide certain documents to prove that you are the owner of that specific financial asset.
Note that you can also create a bank account for your trust. Creating that bank account should make the task of funding the trust significantly easier.
If you want to transfer a real estate property ownership, you will need its deed. Transfer the real estate property ownership using the deed so your beneficiary can claim it later.
You can also pass on other valuables to your beneficiaries by housing them inside the trust first. Then, changing the ownership status of those assets is easier because you can simply use the trust document and a corresponding attachment.
Consult with your lawyer so you can transfer those valuables to your trust without any issues.
Continue transferring assets to the trust until you are satisfied with the inheritance you are leaving behind.
Setting up a trust is easy if you are working with the right estate planning attorney. Work with us at the Alber Law Group if you want to make that task as easy as possible.