Creating a Trust: A Step-by-Step Guide

After years of building your financial portfolio, it's essential to plan for the future transfer of your assets to loved ones or charities. Setting up a trust is a crucial part of this process, offering control and flexibility similar to a will. By creating a trust, you can manage privacy, specify terms, and help your family avoid unnecessary taxes, probate, and paperwork.

What Is a Trust?

Before setting up a trust, you need to understand its purpose. The most common types of trusts include:

• Inter Vivos Trust (Living Trust): Established while the grantor is still alive.
• Testamentary Trust: Managed by a trustee according to the grantor’s last will and testament.
• Revocable Trust: A living trust that can be altered by the grantor.
• Irrevocable Trust: Cannot be changed without the beneficiaries’ permission, often used for tax savings.

Each type provides legal protection for your assets, ensuring they are distributed according to your wishes, saving time, reducing paperwork, and minimizing inheritance tax.

Why Create a Trust?

Setting up a trust is essential if you have significant assets and wish to control their distribution. Consider:

• Inventorying Your Assets: Identify all your assets and potential claimants.
• Decide on specific conditions for asset distribution, such as:
  • Leaving assets to your spouse but not their children from a previous marriage.
  • Allocating assets to your children, but not their spouses.
  • Providing for children upon completion of higher education.
  • Work with an attorney and your accounting firm to ensure your trust is durable and meets legal requirements.

Steps to Set Up a Trust Fund

1. Determine the Type of Trust

Choose the type of trust that best suits your needs. Consult with your certified accountant to make the best choice.

2. List the Details

Outline the following:

• The grantor (the person creating the trust).
• The assets to be distributed.
• The beneficiaries and conditions for distribution.
• The trustee responsible for executing your wishes.

The trustee holds a fiduciary responsibility. If you’re creating a living trust, you can be both the grantor and trustee, but appoint a successor in case of your incapacity or death.

3. Formalize Your Deed of Trust

While you can draft a trust online, it's safer to work with a professional, especially for complex estates.

4. Fund the Trust

With your Deed of Trust, set up a trust fund account at a bank or financial institution. Provide the names of the trustees and the funds.

5. Register the Trust with the IRS

Register the trust with the IRS to obtain a unique taxpayer identification number.

Organize Your Trust with Porte Brown

Setting up a trust is a vital part of estate planning, ensuring your wishes are honored and your finances are distributed as desired. However, creating a comprehensive trust can be complex. Our services here at Porte Brown can guide you through the process, ensuring your trust aligns with your wishes. Contact us today for expert assistance in setting up your trust fund.