Christy Bieber has a JD from UCLA School of Law and began her career as a college instructor and textbook author. She has been writing full time for over a decade with a focus on making financial and legal topics understandable and fun. Her work has.
Christy Bieber, J.D. ContributorChristy Bieber has a JD from UCLA School of Law and began her career as a college instructor and textbook author. She has been writing full time for over a decade with a focus on making financial and legal topics understandable and fun. Her work has.
Written By Christy Bieber, J.D. ContributorChristy Bieber has a JD from UCLA School of Law and began her career as a college instructor and textbook author. She has been writing full time for over a decade with a focus on making financial and legal topics understandable and fun. Her work has.
Christy Bieber, J.D. ContributorChristy Bieber has a JD from UCLA School of Law and began her career as a college instructor and textbook author. She has been writing full time for over a decade with a focus on making financial and legal topics understandable and fun. Her work has.
ContributorAdam has resided at the intersection of legal and journalism for two decades. An award-winning journalist and legal strategist, he’s covered high-profile trials in Florida. After law school, Adam and spent two years clerking for a U.S. District Co.
Adam has resided at the intersection of legal and journalism for two decades. An award-winning journalist and legal strategist, he’s covered high-profile trials in Florida. After law school, Adam and spent two years clerking for a U.S. District Co.
Adam has resided at the intersection of legal and journalism for two decades. An award-winning journalist and legal strategist, he’s covered high-profile trials in Florida. After law school, Adam and spent two years clerking for a U.S. District Co.
Adam has resided at the intersection of legal and journalism for two decades. An award-winning journalist and legal strategist, he’s covered high-profile trials in Florida. After law school, Adam and spent two years clerking for a U.S. District Co.
Updated: Nov 27, 2023, 1:53pm
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A trust is a legal arrangement in which you separate the ownership of your assets from the possession and management of those assets.
You put assets into a trust, which becomes the legal owner of the money or property transferred into it. You name a beneficiary who the assets are intended to benefit. You also choose a trustee, who is in charge of managing the assets and using the money or property for the designated purpose.
Many people create this type of arrangement in order to protect their assets from being lost to creditors or other claims. People also create trusts as part of their estate plan to facilitate the transfer of assets outside of probate and sometimes to avoid estate taxes.
If you’re thinking about using this legal arrangement, you may wonder how to set it up. This guide will explain the steps you’ll need to take.
You will need to create different types of trusts depending on your goals, so you’ll need to consider what you hope to achieve.
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Some of the common reasons include:
Identifying the purpose will help you to decide what kind of trust you need to create. So, consider your goals first and foremost.
Broadly there are two different categories of trusts:
If you want more flexibility, an RLT is generally the better choice. But if you want stronger protection of assets, you’d likely want to give up the flexibility and opt to create an irrevocable trust.
You will need to name a trustee who is in charge of managing assets and a beneficiary who is the one who will receive or benefit from the money or property.
You may wish to name yourself as the trustee of an RLT and then identify a successor who will take responsibility for management of assets upon your death or incapacity. Whomever you select should be someone you can count on to manage your wealth effectively and to appropriately distribute assets to beneficiaries.
Beneficiaries will receive the assets that you’ve transferred to the trust, so choose them carefully. This could be relatives or friends, or you could choose a charitable organization as the beneficiary. You can also choose secondary beneficiaries in case your first choice can’t inherit for some reason.
You will need to formally transfer the ownership of your assets to the trust in order to benefit from this type of arrangement.
You may decide to transfer many different assets including real estate and financial accounts. Be aware that if you transfer a property with a mortgage that’s not a primary home, this could sometimes trigger a due-on-sale clause on your loan that forces you to pay the entire balance.
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You’ll next need to create the appropriate documents to put the right legal arrangement in place. Forbes free templates that you can use, as the specific language you need to include can vary by state.
It is often best to speak with an experienced attorney to help you. If you make mistakes, these errors may not be discovered until it is too late to fix the problem. For example, if your goal was to avoid estate taxes and it turns out you didn’t transfer the right properties into the trust, this may not be discovered until after you pass so your estate could end up getting hit with a big IRS bill.
An estate planning attorney can guide you through the entire process and help to ensure that you get the full benefits of trust creation.
You may need to create a trust if you hope to protect assets from creditor claims, avoid estate taxes or facilitate the transfer of assets outside of probate. An estate planning attorney can help you to determine if this is the appropriate legal tool for you to use to protect or transfer your wealth.
It can take time and cost money to create this type of legal arrangement. You may also need to give up some control over your assets if you are hoping to get the maximum protection for your money and property. Often, the benefits outweigh the downsides but it’s best to talk with an attorney to find out if trust creation is right for you.
You may be able to act as the trustee of your own revocable living trust, but should name a successor trustee who will manage assets after your death or in case you become incapacitated. When choosing a trustee to manage your assets, you should select someone who you can count on to follow your wishes and safeguard your wealth.
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By Christy Bieber, J.D.
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ContributorChristy Bieber has a JD from UCLA School of Law and began her career as a college instructor and textbook author. She has been writing full time for over a decade with a focus on making financial and legal topics understandable and fun. Her work has appeared on Forbes, CNN Underscored Money, Investopedia, Credit Karma, The Balance, USA Today, and Yahoo Finance, among others.
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