Trusts are a very useful estate planning tool which can be used in addition to, or to supplement, probate (wills). There are many benefits to choosing a trust over probate, such as the fact that trusts are more private and do not go on public record. They are also taxed less than assets passed through the probate process. Trusts are a very complicated legal entity, however, and they can be very expensive to open, so it is likely not worth it unless you have a lot of assets which you want to pass to a lot of beneficiaries.
#1: Requirements to Open a Trust
There are no specific requirements, per se. It is generally recommended that trusts are avoided unless a potential trustee has a large net worth (i.e. hundreds of thousands) and/or has a lot of assets in real estate.
This rule is not set in stone, however, and you can open a trust regardless of what assets you have or what you are worth, so long as you can pay the fees associated with opening the trust. Trusts are a fantastic option if you have some assets which you want to pass according to a very specific set of instructions. In addition to this, trusts minimize estate taxes and can protect your assets and estate from creditors.
#2: How Do I Get a Trust?
Trusts are legal instruments which can be created by anybody. Realistically, however, you should consult a specialist attorney when you want to have one created. Trusts are mere instructions on paper signed by you, but they have very specific wording and must closely follow trust regulations and laws, so it is best not to try and attempt to make one yourself. The last thing you want is to get your wording mixed up and your trust nullified on your passing!
There are plenty of trusts attorneys out there, so getting the legal help should not be a problem at all. Consult an attorney within your state to receive the very best advice.
#3: Trust Administration
As we have mentioned, trusts are very complicated, and the execution of a trust requires strict adherence to specific laws, in addition to a great deal of care and attention.
If the executor of a trust fails to properly adhere to these laws and rules, there is great potential for serious harm to be caused to your trust or estate. Appointing a specialist trust administrator is something which most people do and there are plenty of services out there – such as Trust Point – who can take care of the trusts process for you, even long after you are gone.
If you have a lot of assets or are a high net worth individual, trusts are the ideal way for you to pass your assets to your beneficiaries on the event of your death. Trusts are complicated legal instruments, so if you are considering setting one up, you need to consult a specialist attorney and arrange for a trusts administrator to take care of the process after you have gone.
Sources: thebalance.com / wsj.com / cnn.com