What you need to know to set up a Trust

 What you need to know to set up a Trust

A trust is a legal agreement that involves the holding or managing of property, wherein the person who sets up the trust (can be called as grantor, trustor or settlor) gives his property to a trustee, who uses that property for benefit of others (called beneficiaries).

Know whether you need a trust or not?

Let’s go through a simple exercise which will decide whether a trust makes sense for you or not:

Think about all the property you own – real estate, life insurance, retirement account, brokerage account, and personal property. Now note down the people with whom you would love to share the property with either during your lifetime, or after your death. 

Are you clear about all the transfers? Are there any “if, but, or ands” in your mind regarding these transfers to your loved ones? Are there some limitations in your mind while offering your gifts to others, like:

  • Would love to give to my wife, but not to children from her first marriage.
  • To my husband, followed by the kids, but not in case of more estate taxes.
  • To my daughter, but not to son-in-law.
  • To my grandson, but not i if it disqualifies him from federal support which he gets because of disability.
  • Equal shares between all my children, but after college is paid for one of my children?

These terms and conditions can be accounted for in a trust and are a reason that you should seek a living trust Houston professional attorney for trust creation.

How can you set up a trust? 

Step 1: Pick the right trust as per your purpose

Before setting up a trust, decide its purpose. There are multiple types of trusts, including a revocable/living trust, irrevocable trust, and testamentary trust. Even for specific cases there is a specialized trust. Education trust covers the academic expenses. Spendthrift trusts also put limitations on the usage of funds by beneficiaries along with their distribution and protect from creditors. A special needs trust is used for people with disabilities. As per the name, a charity trust is given to the charitable organizations. So, find out the purpose you want to serve and decide accordingly.

Step 2: Outline the details

 

  • A trust creator can be called the grantor. If you are the one who creates the trust for your assets (your property) then you are the grantor.
  • Make a list of beneficiaries or asset recipients.
  • Appoint a Trustee who takes care of your assets. While you are alive, you may act as Trustee, but you should appoint a successor trustee who can manage or fulfil your wishes after your death.

 

Step 3: Make everything official

Never go with DIY trust services offered online. Trusts may include some complications, hence most of the grantors assign this work to living trust Houston attorney. You can also seek help from your friends and family members for finding a professional. If you have a financial advisor, he or she can show you right direction in this matter.

Step 4: It’s time to fund

Once the trust is created, you have to fund it. Open a trust fund bank account in a bank or financial institution. Give them the information on the trustees such as their names and contact details. Funds can be deposited as a lump sum amount or can be transferred with time.

Step 5: Register with IRS

Once the trust is set up, you need to complete the registration process for tax purpose, depending on the trust. Each trust will have its own taxpayer identification number (TIN) for tax returns. This number will either be an Employer Identification Number (EIN) or your Social Security Number (SSN).

How can a lawyer make the setup easier?

It’s true that you can set up the trust by yourself but hiring a lawyer for this work can make your work easier. You can avoid some costly mistakes during setup with the help of lawyer. For trust setup one should have good knowledge of state laws and federal tax laws, to ensure that the trust serves your purpose. 

Work of a trust lawyer

The role of a trust lawyer does not end after the creation and funding of the trust. He or she can also assist with property protection and distribution after the trustor’s death, so as the beneficiaries can avail maximum benefits. The attorney’s work will cover drafting of documentation and can include securing assets from lawsuits and minimizing taxes.

The foremost thing a living trust lawyer does is to make a plan based on your requirements. A living trust lawyer will take into consideration the marital status of the client, the number of children along with any incapacity issues for the trust’s terms and conditions. To start, the trust lawyer will have a bunch of questions. Once all the information is gathered, the lawyer will usually also provide four additional documents, namely a last will and testament, power of attorney, living will and advance directives in addition to any trusts.  

During the execution of a last will and testament, the trust lawyer is expected to take care of formalities related to wills, as all such things should secure the validity of said will. Also it is the duty of the lawyer to ensure that the will addresses concerns related to property division and manner of distribution.

Final Takeaway

Yes, trusts are complicated and may require significant time to create. But when it reflects your clear intention, you can attain a piece of mind that the legacy you want to give to your loved ones is in place. Many people have found that creation of a trust becomes easier by hiring a professional, as these experts can guide them about the various trust provisions. 

 

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