Trust funds are an excellent way of providing a secure legacy to the next of kin and generations. When you set up a trust fund, you make a legal access way to transfer your wealth, properties, and assets to the person of your choice. It is basically a tool to outline an actionable plan on how finances will be distributed and managed after you pass. Keep on reading to learn how to set up a trust fund.
- Define your goals for the trust.
It is imperative to understand why you are establishing a trust fund. With clarity of goals in mind, you will have a clear picture of what and how many assets you will be putting in the trust to provide financial security for your loved ones.
For example, you want to leave the house to your son and the gold jewelry to your daughter. You can also direct your fund to be used for specific reasons, like a college fund for your kids or a limited allowance from the fund.
- Choose the type of trust you wish to establish.
There are different types of trusts that you can choose depending on your goals and requirements. Most trusts can be classified into one of two categories: revocable trusts and irrevocable trusts.
Revocable living trusts (RLTs) are the most common type of trust. They’re flexible and allow you (as the grantor) to make changes at any time, like adding or removing beneficiaries or changing the trust’s provisions.
Irrevocable trusts are more rigid. Once an irrevocable trust is created, it’s not simple to make changes, and the trust can’t easily be undone or canceled.
- Select the terms of the trust.
Now that you have decided on the goals and the type of trust you want, it is time to establish the terms of the trust. Deciding the terms includes the following factors:
– Determining a trustee: A trustee will manage the trust and oversee the distribution of assets to your beneficiaries. Therefore, it’s essential to pick someone you trust who’s willing and able to serve.
– Deciding the distribution of assets: If your trust fund has multiple beneficiaries, dictate the terms of distribution so everyone receives a fair share according to your terms. You should clearly outline these distribution instructions in your trust documents.
– Setting conditions: Setting up provisions will ensure that the financial means reach the beneficiaries when you believe the time is right for them. For example, your son will have her share of trust when she finishes college. That is called setting conditions for distribution.
- Legalize with the documents.
You’ll need to make your trust legally binding. This means completing your trust documents and executing them according to the laws in your state. In most states, this involves signing your trust document in the presence of two witnesses, who should also sign.
Make the trust legally binding with proper documentation, and get your trust notarized and registered with your county.
- Fund your trust with assets.
Funding your trust with assets is an important step. Your trust can’t function as intended until you fill it with assets. Depending on the trust type, these assets may include real estate property, bank accounts, life insurance policies, non-cash assets (like stocks, bonds, and mutual funds), digital assets (including cryptocurrency), and any personal items that are valuable or important to you.
Transferring assets into a trust can take time and effort, but it’s necessary. You should start by contacting the institutions that manage your assets.
A trust fund provides more control, privacy, and specificity. It can help you minimize estate taxes and avoid probate, saving your beneficiaries time, money, and piles of paperwork. At Family Law Richard E. Young & Associates, we are ready to do the legwork and are committed to singularly working for you. Find more about our services here or call us at (949) 951-9529.