By now, you’ve probably heard that you need a trust to really provide your estate with the protection that it needs to stand the test of time. There’s been a powerful marketing campaign underway for a while now, and its goal seems to be to convince everyone that we can all benefit from including a trust in our estate planning efforts. While we would love to have the opportunity to create trusts for every client in the state of Florida, the fact is that not everyone actually needs this powerful tool. For many individuals and families, simple estates often require nothing more than a Last Will and Testament, living will, and powers of attorney to protect against incapacity. With that noted, however, it is also a fact that many people can realize a variety of benefits from the use of either revocable or irrevocable trusts. As trusts have evolved in recent decades, they have become ever more flexible, and thus offer a wider range of benefits to different types of clients. Whereas trusts were once the province of the super-rich, they are now an effective and reliable estate planning tools for many middle income Americans as well. So, if you’re considering a trust for your estate planning needs, here are the essential steps needed for setting up a trust.
Determine Your Goals
Even if you’ve come to the conclusion that you need a trust, it’s still important to narrow down your goals. Are you just trying to avoid the probate process to ensure that your heirs receive their inheritances with a minimum of fuss when you die? Are you expecting tax benefits from the use of a trust? Do you have legitimate concerns about losing assets to litigation, bankruptcy, or future creditors? Or do you have a special distribution need that you want to manage – such as structuring an inheritance for a minor child, an heir with special needs, or even a beloved pet?
There are trusts that can manage all of these needs and many others. The important thing is to identify your unique needs and your desired results, so that you will be able to choose the right trust vehicle to meet your goals. And don’t be alarmed if you discover that you need several different types of trusts to accomplish all of your goals. That’s fairly common too.
Draw up the Basics of Your Plan
You might also want to take the time to flesh out the basics of your plan. A trust is a legal relationship between you (as the trustor), a trustee who oversees the assets you transfer to the trust, and the beneficiaries for whom those assets are held. You need to identify your choices for all those roles, as well as the trust assets that you want to use to fund the trust. That last part is important to remember: have at least some idea as to the type of assets you want to transfer to the trust. Without proper funding, your trust is a waste of time.
If you’re opting for a revocable living trust, you’ll likely be naming yourself as the trustee so that you can still maintain control over those assets even after you transfer ownership. You will, however, still need to name a successor trustee to take over that role when you die – or if you lose the capacity to make your own decisions due to illness or severe injury. Select the beneficiaries the trust is designed to benefit. Again, you could be listed as the primary beneficiary while you’re alive, with secondary beneficiaries who will receive the benefit of the trust’s assets after you die.
Contact an Attorney
If you listen to those marketing campaigns we mentioned earlier, you might have gotten the impression that you can create your trust on your own. That’s bad advice. The reality is that trusts are complex legal relationships created through documents that are too complicated for most average people to manage without assistance. Locate an experienced trusts attorney in your area and get professional assistance with the creation of your trust.
Create the Trust
Work with that attorney to determine which trust type or types you need, and get the trust document created the right way. Your attorney will be able to ensure that the language used in the trust document meets the legal requirements, and that the trust terms are written in a way that facilitates your goals being met. He or she will also help you to make sure that the document is executed properly when it is complete.
Fund the Trust
This is the one essential step that gets glossed over more than any other: funding the trust. The fact is that your trust may as well not exist if you fail to properly fund it. Remember those assets that we told you to identify in an earlier step? Well, this is the point at which you go beyond the mere identification of the assets and actually take an affirmative step to legally transfer ownership of those assets to the trust.
Consult with your attorney to make certain that you’re doing those transfers correctly, since improperly transferred assets could be left outside of the trust’s protection and end up being subject to probate when you die. You should also work with that attorney to ensure that you are only transferring ownership of assets that you actually want to transfer. Sometimes it’s easy to get so excited that you start transferring everything you own. Before you do that, be sure that you know exactly what that means.
At Kulas & Crawford, we have the estate planning experience needed to ensure that you get the sound counsel and assistance your trust’s creation requires. Setting up a trust can be a complicated process, but we’ll work with you to simplify the effort and help you meet your goals. To find out more about how our team can help you create the ideal trust for your estate planning needs, contact us at our website or call (772) 398-0720 today.