How to Set Up a Trust

A trust is a legal arrangement that grants a third party the power to manage your assets on behalf of the beneficiary—the person who will receive the assets. The main objective of a trust is to protect and eventually transfer assets from a grantor to an inheritor. 

To set up a trust, first decide on what assets you want to distribute. Common assets protected by trusts include real estate properties, bank accounts, and other investment assets. Choose who will be the beneficiary, and determine the conditions of your trust. 

When arranging your trust, you can identify more than one beneficiary if you have multiple inheritors. You’ll then need to find a trustee, typically an unbiased third party, to manage the trust. The final step will be to draft your trust document with an attorney. 

What are the Benefits of a Trust?

Trusts are a flexible way to preserve your assets and customize how your wealth is distributed. The main advantage of creating a trust is maintaining control of how your assets are distributed. You’ll be able to specify the precise terms of the trust and decide when the assets will be available to the beneficiaries. 

By setting up a trust, you can avoid probate—the judicial process in which a court reviews the assets of the deceased and determines inheritors. The trustee will follow the specific terms of the trust and distribute the assets without court involvement. There’s also a possibility of saving money that would’ve been spent on court fees and taxes. 

Other benefits of setting up a trust include:

• Creating flexible terms
• Protecting your assets
• Maintaining privacy
• Minimizing estate taxes

Types of Trusts

There are two main types of trust: revocable and irrevocable. Revocable trusts can be altered at any time during the grantor’s lifetime as long as they are competent. These types of trusts can be modified or even canceled until the grantor’s death, at which point the trust becomes irrevocable. 

On the other hand, irrevocable trusts can’t be changed once the papers are signed. If a modification is requested, all of the beneficiaries must be in agreement, and any changes to the terms will need to go through a lengthy court approval process. 

Although they are more permanent, irrevocable trusts can help minimize estate taxes. When you transfer the ownership of your assets through an irrevocable trust, you may be able to protect them from estate tax. If the value of your estate is at or above the federal tax exemption requirements and you’re confident about the terms of the trust, then an irrevocable trust could be a beneficial option.  

At Lonich Patton Ehrlich Policastri, we have decades of experience with family law and estate planning. Having assisted families in San Jose and the greater Bay Area, we can help you determine which type of trust will work best for your situation. Contact us for a free 30-minute consultation at 408-553-0801, and one of our attorneys will guide you through how to set up a trust. 

Disclaimer: This article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.