Creating a basic trust doesn’t always require a lawyer from a law office, but you must ensure it complies with state law.
Hiring a trust attorney costs $1,200 to $2,000, providing peace of mind and compliance.
Simple situations can use DIY options for under $100, sometimes with attorney review (limited-scope representation).
Understand trust basics to decide if you need legal assistance for trust setup or administration.
What Is a Trust?
Trusts allow individuals to dictate property distribution after death, granting control over assets while alive.
Complexity depends on assets and family situation.
A trust is a legal relationship managing assets for another, created through a trust document.
Unlike wills, trusts can operate immediately after signing and funding, aligning with the person’s wishes.
What Is a Living Trust?
A living trust is a trust created during life. A grantor creates a living trust to save tax money or establish a long-term way to manage the trust property.
Living trusts are designed to:
- Avoid probate
- Safeguard financial privacy
- Manage assets should the owner pass away or become incapacitated
The reasons for creating a living trust are highly variable.
Before undertaking the process, you should be clear on your reasons for creating and funding a living trust.
When Should I Have a Trust?
A trust may not be necessary for single individuals with no children, limited assets, and no significant property.
However, if you have minor children, special needs dependents, or substantial assets, a trust is wise.
Reasons for having a trust include avoiding probate, protecting assets for children, reducing estate taxes, offering more flexibility than a will, managing assets during incapacity, and maintaining financial privacy.
Estate taxes apply to large estates, but having a trust alone doesn’t guarantee lower taxes.
An irrevocable trust with specific terms can help reduce tax liability, requiring consultation with an estate planning attorney for those near the estate tax exemption threshold.
Living Trust Basics
The ease of creating a living trust is comparable to creating a last will and testament, which many people do without the help of a lawyer.
But funding and administering the trust make it more labor-intensive than a will.
Types of Trusts
Trusts can be revocable (modifiable) or irrevocable (fixed).
Revocable trusts allow changes, while irrevocable trusts offer tax benefits but can’t be altered easily.
Living trusts manage assets during one’s lifetime, while testamentary trusts activate after the person’s death through a will.
How Do I Create a Living Trust?
A living trust starts with basic information: the creator (settlor), trustee (often the same as the settlor), successor trustee (manages trust after the trustee’s incapacity), and beneficiaries (those benefiting from the trust).
Delegated trustees may manage property for young beneficiaries until they are capable.
After drafting, sign before a notary, then transfer property into the trust’s name following the trust’s terms.
Real estate needs a deed, and other assets should be retitled.
A will provision can ensure assets not in the trust or will transfer but go through probate.
Who Should Be the Trustee?
You should be the initial trustee to maintain control over your assets unless you create an irrevocable trust.
It would be best if you named a successor trustee.
The successor trustee will manage the trust after you die or become incapacitated.
It is also a good idea to name additional successor trustees.
They will manage the trust if your first successor trustee cannot serve.
Your successor trustees should be people you trust to manage your assets.
Do not micromanage your trustees.
It’s best to minimize lists of what the successor trustee can do.
Choose responsible, financially prudent people you believe will make good decisions.
This way, you can feel good about allowing the trustee discretion.
After all, it is called a trust, not a mandate.
When Should I Use a Lawyer?
Consider involving an estate planning lawyer if:
- Your situation is unique, or your estate is complex or large.
- You require a special needs trust or feel overwhelmed.
- Your net worth is near the estate tax exemption.
- You have a child with special needs or need advice on trust funding.
- You want to discuss using life insurance for trust funding or asset protection.
- You need complicated conditions for beneficiaries.
Though it costs more, legal advice can save money in the long run.
Even for simple trusts, consulting a lawyer is wise for reviewing and state-specific guidance.