How to Set up a Trust

A trust is set up to protect your assets during your lifetime and beyond to provide financial security for your wife and children and any other loved ones you want to cover. Many people set up a living trust, which is one where the assets are both used and controlled by you during your lifetime and then are distributed when you  die according to the terms of the trust. It is a technique for avoiding the probate process for any assets put into the trust. Probate is a legal process to validate a person's will and to resolve who will get the proceeds of the estate. It can take up to a year and generally costs at least five percent of the value of the estate.

The living trust is just one example of a trust and you should investigate the various trust options that you have. A testamentary trust will take effect when you die. It connects to a will and though it will not avoid probate, it does help to eliminate or reduce the estate taxes that your beneficiaries would otherwise have to pay. This exemption is not automatic and if the value of your estate exceeds $650,000, you should consult a tax attorney and an estate planning expert to create the best situation. You will have to select a trustee to administer the trust. This is often a certified financial advisor or an attorney, but you may select anyone you trust. Above all your trustee should have financial expertise and be impartial. Even in a living trust, you might want to have a trustee standing by to step in if you ever become incapacitated. The trustee must be available, even after your death. So it is a good idea to designate a successor trustee in case the primary trustee dies or becomes unable to fulfill the duties of the trust.

Once you set up the trust, you will have to decide which of your assets to put into the trust. You will need to change the titles to these assets to support that they are owned by the trust. There are software programs available online that will take you through setting up a trust. Though it may be more prudent to consult your attorney and have him draft it. Trusts are far more complicated to draft than a will and a poorly drafted trust can be impossible to execute. And definitely consult an estate planner to go over the advantages and disadvantages of creating a trust as opposed to a simple last will and testament. Remember that the trust will take effect immediately and can handle certain circumstances that occur during your lifetime that wills cannot. By avoiding probate you avoid unnecessary delay, expense and the publicity that can flow from a probate proceeding. Trusts are easier to change than will and you may be able to use the trust to create favorable tax treatment and other financial benefits. The will, on the other hand, is less expensive to create and you don't have to change title documents to your assets.