How To Set Up A Trust 2023 Guide – London Reviews

You will need to create different types of trusts depending on your goals so you’ll need to consider what you hope to achieve. Some of the common reasons include:

• Asset protection. Transferring ownership of assets can help to protect them from creditor claims or from being lost by an heir due to irresponsible spending or divorce. Those who are concerned about having to pay for nursing home care may want to transfer their assets as part of a plan to qualify for Medicaid nursing care coverage without spending down their wealth to qualify for means-tested benefits.
• Providing for loved ones with special needs. Individuals with special needs often qualify for means-tested programs like SSI. Inheriting a substantial amount of wealth could affect their ability to get these benefits unless a special needs trust is created.
• Avoiding probate. Assets can sometimes pass outside of probate, which can simplify the transfer of wealth, help to ensure it occurs more quickly, and keep the transfer of assets private.
• Reducing estate taxes. In some cases, it is possible to avoid estate taxes.

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:

• Irrevocable trusts. These cannot be changed or modified without a court order and approval from all beneficiaries. If you want to ensure your assets won’t have to be spent down to pay for nursing home care or you want to avoid estate tax, this is a good option.
• Revocable or living trusts (RLT). This can be modified whenever you desire. The asset protection isn’t as strong with this option, but assets can pass outside of probate.

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.

You’ll next need to create the appropriate documents to put the right legal arrangement in place. There are templates online 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 should contact an attorney ASAP for help so you can get this arrangement in place.