A trust is something often associated with wealthy people, but any person or family can create a trust to protect the family’s assets. One of the more significant benefits of a trust is that the assets can be passed on to surviving family members when one member passes away without going through the time-consuming process of probate. There are other reasons for using this type of legal structure, but it is first important to understand how this type of legal vehicle is put into place.
Revocable And Irrevocable Trusts
The first step is to decide what type of trust is best for your situation. The two most common options are revocable and irrevocable trusts. A revocable trust allows you to protect your assets and leave instructions to a trustee to distribute your assets after you have passed away. The trustee would also be the person who executes your decisions for your assets while you are alive. In a revocable trust, you still own your assets.
An irrevocable option is its own entity that takes over ownership of your assets once you make them part of the trust. You set up the trust in the way that best fits your needs, and then you give up all ownership of your assets when you place them within this legal structure. Some states allow you to make changes to an irrevocable trust, but those changes must be approved by the courts. The biggest benefit to an irrevocable trust is that any income generated by your assets is generated tax-free.
Setting Up The Structure
Once you decide what type of trust you want, you then go about creating the rules by which the trust will be run. This means assigning a trustee, designating beneficiaries, and determining all of the administrative action that will make up the trust’s legal structure. All of the members of the trust must agree to these rules, and they also must agree to allow the trustee to run the trust as they see fit.
Assigning Your Assets
With your structure in place, it is time to assign assets to your trust. Once you assign an asset to the trust, all legal actions for that property are done on behalf of the trust. You can assign any assets to a trust you want, but you need to be sure that you want an asset under the direction of the trust before you assign it. Once you put an asset into a trust, it is a long and complicated process to remove it. In the case of an irrevocable trust, you may not be able to remove the asset at all.
A trust can be extremely complicated, which is why you should utilize the services of an experienced professional. Once you choose the person to create your trust, you will spend a great deal of time formulating the paperwork that will determine the future of your assets.