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Setting Up a Trust 

The Elder & Disability Law Firm, APC April 25, 2024

Creating a trust is a great way to manage and protect your assets. It allows you to transfer ownership of your property to a trustee, who will then manage it on behalf of the beneficiaries named in the trust. This can provide a number of benefits, which will be discussed below, along with a comprehensive guide on the steps involved in setting up a trust.  

When you're ready to discuss your estate planning options, contact The Elder & Disability Law Firm, APC today. The California firm proudly serves clients in Redlands, Palm Springs, Rancho Cucamonga, Riverside, and nearby communities.  

Why Consider a Trust?

A trust is a dynamic estate planning mechanism that allows for the efficient transfer of assets, providing control over when and how your beneficiaries receive their inheritance.  

Unlike a will, which is subject to probate, a trust operates smoothly and privately, ensuring your assets are distributed without public interference and according to your specified terms. 

The Process of Setting Up a Trust

Setting up a trust involves several key steps, starting with a thorough evaluation of your estate planning goals and financial situation. Our attorneys work closely with you to: 

Determine the most appropriate type of trust for your situation. 

Determining the right type of trust depends on your specific goals, financial situation, and estate planning objectives. Here's a brief overview of some common types of trusts we help our clients set up: 

  • Revocable Living Trusts: These offer flexibility as they can be altered or revoked as long as you are alive and competent. They're an excellent choice for most individuals looking to avoid probate and simplify the management of their estate. 

  • Irrevocable Trusts: Once established, these trusts cannot be easily changed, offering advantages such as protection from creditors and potential tax benefits. They're often suitable for those with substantial assets and specific asset protection needs. 

  • Special Needs Trusts: Tailored to support loved ones with disabilities, these trusts ensure beneficiaries can receive inheritance without jeopardizing their eligibility for government assistance programs. 

  • Charitable Trusts: For those interested in leaving a legacy, charitable trusts provide a means to support charitable organizations while also offering potential tax advantages. 

Select trustees and successors who will manage and distribute your assets according to your wishes.

A trustee has the fiduciary responsibility to manage and distribute the trust's assets per the trust document's terms.  

When selecting a trustee, it's in your best interest to consider people who are not only trustworthy, but also have solid financial acumen and a strong understanding of your wishes.

It's common to select a family member or a close friend; but, you also have the option of appointing a professional trustee, such as an attorney or a financial institution, especially for more complex estates or when impartiality is essential. 

Successor trustees, on the other hand, step in to manage the trust in the event that the original trustee is unable to fulfill their duties due to incapacity or death. The selection of successor trustees follows a similar criterion to the initial trustees, with an emphasis on reliability and competency. 

It's also worth noting that the trustee's role is not just administrative but also involves significant legal and ethical responsibilities. So, discussing the responsibilities and expectations with your chosen trustees and successors prior to their official appointment is crucial to ensure smooth and effective management of your trust. 

Identify and inventory your assets that will be placed into the trust.

A critical step in the process of setting up a trust involves meticulously identifying and taking an inventory of all the assets you wish to include. This process is foundational for crafting a comprehensive estate plan that accurately reflects your intentions for your property and assets after your passing or in the event of incapacitation. 

Assets to consider for inclusion in your trust can vary widely, encompassing: 

  • Real Estate: This includes your primary residence, vacation homes, rental properties, and any other real estate holdings. Transferring real estate into a trust can help avoid probate and streamline the transfer to your beneficiaries. 

  • Financial Accounts: Bank accounts, investment accounts, and retirement accounts can be placed into a trust. For certain retirement accounts, it's essential to consult with a financial advisor or attorney due to specific legal and tax implications. 

  • Personal Property: Tangible personal property such as vehicles, jewelry, art, and collectibles, along with intangible assets like stocks and bonds, are also eligible for inclusion. 

  • Life Insurance Policies: While life insurance proceeds typically bypass probate and go directly to the named beneficiaries, there are strategic reasons to include them in a trust, such as providing for minor children or managing estate taxes more effectively. 

Complete and execute the trust document, officially transferring ownership of the selected assets to the trust.

After identifying the assets, the next segment of this step involves legally transferring ownership of these assets into the trust. This step requires preparing and executing various legal documents, such as deeds for real estate and change of ownership forms for bank and investment accounts.  

It's crucial to ensure correct titling of assets in the trust's name to achieve the intended asset protection, probate avoidance, and ease of management. 

Failure to properly fund the trust could lead to unnecessary probate proceedings or disputes among beneficiaries, undermining the very objectives the trust was meant to achieve. 

This phase also involves drafting a comprehensive and legally binding document that outlines the specific terms, conditions, and instructions for how the trust should be managed and how assets should be distributed among the beneficiaries upon your passing or under other specified conditions.  

This document must be meticulously prepared, often with the assistance of an experienced estate planning attorney who can ensure that all legal requirements are met and that the trust reflects your exact wishes. 

The document should detail important aspects such as:  

  • The naming of trustees and successor trustees.  

  • The identification of beneficiaries, instructions for asset distribution.  

  • Any specific conditions or stipulations you wish to impose.  

  • How the trust is to be managed if you become incapacitated. 

Once the trust document is drafted to your satisfaction, up next is the formal execution of the document.  

This usually needs your signature before a notary public to confirm the document is yours and you understand it. Depending on your jurisdiction, witnesses might also need to sign to verify its execution. 

After the trust document is signed and notarized, it officially becomes a legally binding arrangement.  

However, remember that the trust is not fully operational until it's funded with the assets you have identified.  

The completion of these steps marks the culmination of the trust setup process, establishing a solid legal framework that ensures your assets are managed and protected according to your wishes, providing peace of mind and security for both you and your beneficiaries. 

Rely on Experienced Guidance

The Elder & Disability Law Firm, APC understands that the process of setting up a trust can seem overwhelming. Their experienced estate planning attorney is here to make the process as straightforward as possible, and to help you structure your trust to provide maximized benefits. 

If you're in Redlands, Palm Springs, Rancho Cucamonga, Riverside, or the surrounding areas and considering setting up a trust, contact The Elder & Disability Law Firm, APC. They will help you understand your options and create a tailored estate plan that aligns with your goals and the best interests of your beneficiaries.