Simple Steps to Setting Up a Trust

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Contributor, Benzinga
November 17, 2023

A trust is a legal structure that contains a set of instructions that includes how and when to pass assets to your beneficiaries. Dozens of trust structures are available, and only after research and consideration of your personal financial situation should you determine the type of trust that works best for you.

Setting up a trust isn’t only for the super-rich, although if you have considerable assets, a trust might be a good move. 

To make sure your trust is what you want, it’s important to choose the right service for the right reasons. Here’s information on the types of trust, the way to create a trust and a description of some of the benefits you and your family can gain as a result.

How to Create a Trust: The Basics

  • Seriously consider why you want to set up a trust: Most people underestimate how many assets they have and the benefit of passing them down to others.
  • Outline your goals when setting up a trust: Based on the financial supplement you want to provide your family in the future, you can set up your trust to reflect those goals.
  • Determine the structure of the trust: Determine the structure of the trust, how you wish to pass on certain assets, and restrictions or special rules you wish to apply to specific beneficiaries.

Steps for How to Easily Set Up a Trust

Setting up a trust can seem like a daunting task, but it doesn't have to be. Here are simple steps you can follow today to set up a trust.

Step 1: Get Documents in Order

Get all of the titles and deeds of property, stock certificates and life insurance policies to transfer everything into the trust. A trust is only valid when you put assets into it. Gather them now and have them ready so the process can go more smoothly and quickly.

In addition, consider ahead of time who will be the sole grantor, your beneficiaries, your successor trustee and the person responsible for managing the property for your minority children.

Step 2: Set Your Goals

Setting your goals is an important next step in getting your trust set up. What do you want to accomplish with your trust? Help a child with his or her education? Accomplish charitable giving? Give everything to your beneficiaries? Leave most of your assets for your grandchildren? This part of the process takes some considerable thinking: you’ll need to consider your dreams and wishes for your assets.

Determine the type of trust you’d like to consider, though these types of recommendations are best provided by legal counsel.

Spendthrift Trust

This type of trust is protected against the creditors of a beneficiary. In other words, a spendthrift trust protects trust property from an irresponsible beneficiary and his or her creditors. It’s a type of property control trust that limits the beneficiary's access to the principal in the trust.

Third-Party Special Needs Trust

Special needs trusts are usually specialized spendthrift trusts created for a beneficiary who suffers from a disability. It may include instructions about the beneficiary’s public benefits, like Supplemental Security Income or Medicaid.

Bypass Trust

A married couple can take full advantage of the federal estate tax exemption amount so that they can pass up to twice that amount to their heirs on the second death.

At the first spouse’s death, a portion of the couple’s assets is transferred to the bypass trust irrevocably, with some limitations on the use of the money during the rest of the surviving spouse’s life.

Revocable Trust or Revocable Living Trust

Any trust that can be revoked (usually by the person who established the trust) is called a revocable trust or a revocable living trust. A revocable trust is a document that can be modified by the person who created it at any time while they are still alive. If the only person who can revoke the trust has died (or become permanently incapacitated) then the trust becomes irrevocable.

Irrevocable Trust

The opposite of a revocable trust is an irrevocable trust. In this case, no one has the power to revoke the trust, even if the assets held by the trust are spent or distributed, don’t exist anymore and even though it was originally irrevocable.

Grantor Trust

A grantor trust is a trust that involves the elements of control listed in the federal income tax code. It includes the power to revoke the trust, the right to receive the trust’s income or principal and the role of trustee. Grantor trust rules are complicated and often need a lawyer’s interpretation to be sure you are aware of how they work.

Step 3: Determine the Structure of the Trust

The structure of the trust outlines how money or assets are to be distributed in any given situation. Work with an adviser when you research how to create a trust so that you can review all available structures. You could pattern yours after a wealthy individual you’re familiar with.

Step 4: Choose a Service

What type of service will you entrust with your money? A lawyer or online service such as Trust & Will? Or will you try to tackle this on your own in true DIY fashion?

The biggest difference will be the cost, but you could run into more problems with a DIY version over a trust that’s crafted by a lawyer. If you do decide to do it yourself, it’s essential that you get a book or reliable online advice about drawing up your own trust and following it closely.

  • You’ll need to include your own name (as the grantor or trustee) and who will manage the trust (you).
  • The name of who will take over as trustee and distribute property in the trust when you die or become incapacitated (this person is called the successor trustee). Most people choose their spouse, grownup child or friend.
  • Your beneficiaries, or the people who will receive the assets in your trust.
  • People’s names who will manage the property on behalf of young beneficiaries.

Step 5: Review Your Assets

This step involves figuring out what you own and what you will transfer into your living trust. Your assets could include real estate property, including any homes you own (including second homes or rental property). Include cash accounts in your round-up, and be sure to include checking and savings accounts.

Next, include personal property such as boats, vehicles, furniture and other collectibles.

There are some tricky considerations with retirement accounts, pensions and life insurance policies. Look into the tax consequences that could be imposed on you with these items; ask a tax adviser before you stick these types of accounts (and some cannot even be put in there) into your trust.

Step 6: Choose a Successor Trustee

Your trust must name someone to serve as your successor trustee. You can name a trust beneficiary — that is, someone who will receive trust property after your death. Once you decide who it will be, let the person you’ve chosen know ahead of time so you make sure he or she is willing to be responsible for it.

Step 7: Prepare the Trust Document

Work with the service you’ve chosen to create your trust document. If you’re not sure which service you prefer, consider Trust & Will for a trust beginning at $159 for planning.

You can create a trust for your spouse for $100 more. All documents have been designed and vetted by attorneys with decades of estate planning experience.

If you are dissatisfied with your completed documents, contact Trust & Will within 30 days of your purchase for a full refund, no strings attached.

Step 8: Transfer Title of Property to Yourself as Trustee

Transferring the title of the property to yourself as a trustee is an important step that often is not executed. When you officially make your trust effective, you must hold title to trust property in your name as trustee.

Let’s say you want to hold real estate in your trust. You’ll need to prepare and sign a new deed that transfers your real estate trust in your name and also includes the date.

Reasons to Consider a Trust

There are some excellent reasons to consider creating a trust, not only to make it easier for your loved ones when you die (though that is the primary reason a trust is an A+ idea!)

Preserve and Pass On Wealth Quietly

You may have already debated the pros and cons between a will versus a trust, and a factor that puts trusts squarely in the pro column is that it’s one of the best ways to make sure you pass on your assets more smoothly and privately. When you transfer your assets to your beneficiaries through a will, your estate is settled through a procedure known as probate, which is conducted in state courts. Probate proceedings can incur delays; probate fees can be quite costly; they also become public records. In other words, anyone curious enough could look up any information they wanted to if you opt for a will.

Control Over Distribution of Assets

You can put conditions on how and when your assets are distributed before and after you die. If you become incapacitated, a living trust provides for a successor trustee to take over the control of the trust. The successor trustee takes care to invest the trust funds and heeds the instructions you’ve included in the trust.

Create the Right Situation for Each Beneficiary

Irrespective of the wealth you possess, you want to create the right situation for each beneficiary. Some trusts might match a percentage of a beneficiary’s annual salary, others might pay for housing and others could pay for specific expenses that you believe are important. For example, you might set up a trust for a grandchild that specifically pays for their college education/vocational training.

Avoid Estate Taxes

Both a living trust and will, if properly drafted, can be used to reduce or eliminate estate taxes under certain circumstances and especially for married couples.

In Most Cases, It’s Revocable

A will only becomes effective upon your death, but a living trust goes into effect during your lifetime and in most instances is revocable, which means you can change, amend it or terminate it.

Set Up a Trust for Your Future

Anyone can learn how to create a trust, and you can start today. Think of everything you own, whether it’s real estate, retirement accounts, brokerage accounts, personal property and more — it might add up to more than you think. What are you planning to leave to each and every one of your beneficiaries, and how will you execute it in the most thoughtful way possible?

After all, setting up a trust can be a saving grace for your family when you pass away. Once your family is confronted with the reality of your death, it’s obviously a very emotional time. When you have all of your assets figured out and your wishes ready to act upon, a trust takes some of the burden away. It’s an extremely well-intentioned way of thinking ahead and considering the legacy you’d like to leave behind.

Are you interested in learning more about organizing your assets? Check out some of Benzinga's insurance and investing guides.

Frequently Asked Questions


Why create a trust?


One key benefit of creating a Trust is that your loved ones will avoid probate — a long, complicated court process. When you transfer assets to your trust, you own everything in your trust while you’re still alive. After you die, your assets go directly to your beneficiaries.


How is a trust different than a will?


Wills allow you to name guardians for kids and pets, designate where your assets go and specify final arrangements. Trusts offer greater control over when and how your assets are distributed, apply to any assets you hold inside the trust and come in many different forms and types.


Should you set up a will?


Setting up a will is important as it allows for the distribution of assets and belongings according to one’s wishes after death, preventing disputes among family members. It also provides peace of mind and reduces stress for loved ones.