Basic Steps in Creating a Trust: Part One

All trusts have distinct characteristics. Even trusts that have similar structures are still unique because of the assets in them and the goals behind their creation. However, there are still some common steps to establishing a trust. Regardless of the type of trust you are considering, keeping these steps in mind can help you direct your efforts in investigating the type of trust that is right for you and eventually establishing it.

Identify Your Purpose

Why are you thinking about creating a trust? Are you concerned about a family member with special needs being adequately provided for? Are you worried about the costs of long-term health care? Do you want to protect your assets until certain conditions have been met? Do you simply want to protect your assets from the probate process to ensure your heirs have access to them? Whatever the reason for your interest in establishing the trust, it is important to have a clear and concise purpose for creating one. Doing so will help you narrow down your choices and provide needed direction when establishing the terms of the trust itself. At this point, it is also important to explore the potential tax consequences of the types of trusts you are considering. Doing so may open your eyes to some important nuances that can significantly affect your decision in choosing a trust.

Identify Those Involved

Sometimes this step goes hand in hand with the first, especially in the case of special needs trusts. No matter what type of trust you are considering, it is essential that you have a clear understanding of everyone that might play a role in the trust, including any potential heirs. You will need to consider a number of different factors related to the people involved when establishing the trust, such as age and capacity.

You will also need to select an individual or entity to administer the trust. There are many factors to consider when determining who should administer the trust, both during your lifetime and after your death depending on the terms you create for it. For some individuals, a trusted family member is the right choice. For others, a trust company or an attorney might be the best choice. This is a personal decision, much like the decision of those that will benefit from the trust itself. There are often rules in place governing who can serve in this role, so it is important to make sure that you comply with them.

Draft Your Trust

There are a number of drafting options available in creating a trust. However, the best bet for most people is working with an experienced estate planning attorney that can help you make sure the trust that is best for you fits into your unique comprehensive estate plan. Many qualified attorneys offer trust-related services that include periodic reviews of your entire estate plan and updates on changing laws that could impact your trust. This allows for personalized attention that can help you consider many aspects that generic forms may not highlight. When considering whether to go it alone in creating your trust, at this stage it is also important to keep in mind that any deficiencies in your trust, legal or otherwise, may not be able to be corrected by an attorney at a later date. Even the simplest of mistakes can end up having a negative effect on your assets and costing you a great deal financially. It is important to work with someone that can help you do it right the first time.


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