For people who have just started to consider serious estate planning, the trust can be a somewhat intimidating tool. After all, most people still think of trusts as estate planning tools that are only beneficial for millionaire and billionaire families that want to avoid taxes and ensure that their wealth stays in the family when they die. While the rich still rely on trusts for those and other reasons, the trust has become more commonplace in the average American’s estate plan in recent years. In fact, chances are that your estate planning could benefit from using a trust too. Before you consider incorporating this tool into your estate planning strategy, however, it’s important to know how to create a trust the right way.
The Trust: Simple or Not?
On the surface, the living trust seems like a simple enough thing. At its core, it is a legal relationship involving three parties: the settlor who creates the trust and funds it using his own assets, the trustee who manages that wealth, and the beneficiaries who ultimately receive the benefits of the trust’s assets. Think of it this way: it’s like you giving the babysitter twenty dollars so that she can order pizza for your kids. In that relationship, you’re the trustor and you create the trust when you hand that sitter money to use on behalf of your children.
That certainly sounds simple in principle, and it is. But as with most things involving matters of a legal nature, there are certain things that add complexity to the trust relationship. There are terms that need to be created to define how the trust is managed. There are funding needs, since a trust without proper funding is useless. And there are legal matters to be tended to during the creation of any formal trust relationship, including those that could impact things like tax liability, asset protection, and other important concerns.
Once you understand that trusts are more complex than they might first appear, then you’ll more fully understand why we recommend that you only create yours in consultation with an experienced trusts attorney. Yes, there are downloadable trust packages that you can find on certain sites online. There are forms that you can fill out, and some websites promote them as being just as effective as professional legal documents. They’re not. And if you use them, you’re running the risk of eventually dying with a trust that cannot accomplish your goals. Contact a lawyer and do it the right way.
Creating a Trust
For the sake of argument, let’s assume that you do indeed consult with an attorney to get your trust created by a professional. What does that process then look like? Well, to create any trust in the state of New York, there are certain things that you and your attorney will need to do:
- Decide why you want a trust. While you might just want a trust to ensure that your estate can avoid probate when you pass away, it’s important to remember that you can accomplish that goal with any living trust. The bigger question is this: are there other things that you want to accomplish with your trust? The fact is that trusts can make your estate planning a lot easier by providing a formal, structured way to resolve many problems that cannot be addressed properly with just a Last Will and Testament. Do you have a disabled heir and want a way to leave an inheritance that won’t disrupt his or her benefits? Are you worried about an heir wasting his inheritance? Are you interested in planning for Medicaid, or just looking for a way to limit estate tax exposure? Do you need a vehicle for charitable contributions after you die?
- Decide on the type of trust. Once you know your need, your attorney will be able to choose the right trust to accomplish your goals.
- Choose a trustee. There’s no need to choose a trustor (also known as the settlor or grantor) since that’s you. You do, however, need a reliable person to serve as trustee. Make sure it’s someone you trust, since that person will be managing your assets and using them for your heirs’ benefit.
- Choose the beneficiaries. In all likelihood, you probably already know who you want to receive the trust benefits, but this is where you get to put that information to use.
- Create the trust document and include the terms that describe the purpose of the trust and how it is to be managed. Include instructions for distribution of assets, and don’t forget any special conditions that you may want to place upon the inheritances.
- Get the document signed. Since you’re at your attorney’s office, finding a notary public should be easy.
- Fund the trust by transferring assets. This can be complicated in some instances, so be sure to get advice from your attorney if you have any questions about how to properly complete the process.
- Review and update the trust as needed to ensure that it remains viable.
That’s it. Obviously, your attorney will ask you other questions about your finances and goals, to ensure that he or she is creating the right strategy to achieve your objectives. The good news is that your choice to get the trust done by a professional will ensure that it can withstand legal challenge and survive the test of time.
Of course, if you’re in New York and looking for help with your trust, you want an attorney you can rely on to provide you with the trust creation services you deserve. At the Law Offices of Mary A. Miller, P.C., our experienced trusts experts understand how to create a trust that will perfectly accomplish your unique goals. We’ll work with you to understand your needs, and help you choose the right assortment of estate planning tools to secure your end-of-life and legacy objectives. To learn more about how experienced trusts attorneys can help to ensure that your estate planning needs are met, visit us online or give us a call at (914) 939-6565 today.