Though nearly all Americans have an estate, only 32% actually have a legal plan for where their assets will go in the future. Estate planning is essential for even those who have minimal assets since it ensures that their families are cared for after they pass.
Creating a living trust is an essential part of a comprehensive estate plan.
But do you need a lawyer to set up a trust? Read on for a complete answer to this question and to get insight into trust administration.
Do You Need a Lawyer to Set Up a Trust?
Legally speaking, no. You do not need to hire an attorney to set up a trust.
However, choosing not to hire an attorney means having:
- No legal expertise to help you approach a complex document
- A higher likelihood of missed clauses that could lead to future disputes
- Technical errors that may render the trust documents invalid
- Ambiguous and unclear wording in the trust, which leads to future disputes
- Incorrectly transferred assets that do not make it into the trust as they should
- An invalid document that does not comply with state laws
- More trust setup costs that a lawyer could have helped you avoid
- The potential for unnecessary taxes due to improper drafting
So, do you need a lawyer to set up a trust the right way?
The answer to that is a resounding ‘yes.’ Practically speaking, legal help is essential.
When to Set Up a Trust
There are many benefits of a living trust. Having one means easier asset distribution so you can provide for the beneficiaries who matter most to you. Trusts also help those loved ones avoid the probate process after you pass away.
To reap these benefits, set the trust up when you:
- Accumulate significant wealth
- Wish to choose when the beneficiary receives their inheritance
- You have minor children that you want taken care of in the future
- You are in a profession that comes with a high risk of legal issues
- Own real property in multiple locations
This ensures that the document will be ready when your beneficiaries need it to be.
Setting Up a Trust: A Step-by-Step Guide
Finding a reputable attorney is the first step toward creating a trust. Your lawyer will offer legal advice for trusts and help you determine what type of trust you need.
Some options to consider include:
- A single living revocable trust for unmarried individuals
- A joint marital trust for married couples, especially those with children
- A special needs trust for those whose beneficiaries do not want to jeopardize social security benefits because of the assets from that trust
Once your attorney reviews your options and guides you through making a decision, you can begin creating your trust.
Know Your Assets
Before you start setting up a trust, determine what assets you have for distribution. Some examples include:
- Your home
- Business property
- Furniture and expensive home items
- Original artwork
- Jewelry
You should also take stock of your investments, including:
- Stocks
- Bonds
- Cryptocurrency
- Real estate
- Precious metals
While you do this, gather documents that tie the assets to you. Titles for cars and homes are important, as are receipts and bills of sale for other assets. Bank account information and figures in retirement accounts also should go in the folder since they are assets, too.
Choose a Trustee to Manage the Trust
Your trustee is the person who will manage the contents of your trust. They are an administrator who eventually distributes the trust according to the terms that you set upon its creation.
A trustee:
- Has legal ownership of everything in the trust, but holds it for the beneficiaries rather than themselves
- Legally must act in the beneficiaries’ best interests (instead of their own) when managing assets
- Follows the terms of the trust document
- Keeps records of all transactions associated with the trust
- Files tax returns for the trust, if applicable
As the person making the trust and appointing the trustee, you are called a trustor.
Trustees are people close to you. Many married people choose themselves as the initial trustees. Others choose adult children, parents, siblings, or even close friends. Sometimes, trustors will appoint a banking entity as well.
Draft Documents With Your Lawyer
After choosing a trustee, your attorney will begin to help draft your trust document. This paperwork is legally binding and complex, so an experienced lawyer must ensure that all language is legal and unambiguous.
The document will include several sections. It will provide for your assets and beneficiaries. You will also lay out terms and conditions on the trust document that stipulate when beneficiaries will receive the contents of the trust and on what terms.
Distribution provisions that include the timelines and frequency of distribution make the document functional. The Duties and Powers provisions make it possible for your trustee to execute this distribution.
Your attorney will help you lay all of this information out in legally binding terms. They will also discuss possible amendments to the trust over time and discuss when they may be needed.
In the end, your lawyer will finalize the document. You will sign it, as will your trustee. Getting it notarized also ensures that the trust will be viewed as legally valid so there are no asset-related disputes later.
Consult With an Estate Planning Attorney
So, do you need a lawyer to set up a trust?
Assuming you want to ensure a legally binding document, the answer is a resounding “yes.” While it is technically possible to set up a trust independently, trying to DIY these important estate planning documents can create serious future problems.
Christopher L. Smith Law Office understands what goes into drafting trusts and a 100% success rate with clients. Our team has been operating since 1992, so contact us today to take advantage of over three decades of experience.
