How to Create a Trust
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What Are Some Tips on How to Create a Trust?
Learning how to create a trust can be made easier by following a few tips. First of all, you should first check to see whether you’d be able to meet the basic requirements for making a valid trust. These can include:
- Capacity: In order to be able to create a trust, the creator needs to have the mental capacity to do so, and they must be alive at the time (i.e., can’t create a trust on someone’s behalf after they’ve died)
- Trust property: There must be some form of property to be held in trust for a beneficiary
- Properly named party: The trust documents should name the parties involved, such as the beneficiary (the recipient) and the trustee
In addition, trusts cannot be created under conditions that involve some form of illegal action, such as fraud or the use of illegal force.
What Are Some Basic Trust Definitions?
A trust involves the transfer of money or property to one party, which will hold the funds until they are transferred to the intended recipient. Each of these parties has a specific name and definition:
- Trust Creator: This is the original owner of the property that has title to the property, and is seeking to transfer the property
- Beneficiary: This is the party that will ultimately end up with legal ownership of the trust property
- Trustee: This is a third party that is first receives the trust property. They then hold the property in “trust” for the beneficiary, until the stated time arrives for the beneficiary to finally assume legal ownership of the property
Lastly, in some jurisdictions, the trust property is referred to as the “trust res” or “res”. This is a legal term that is used to refer to the property being held in trust.
What Are the Advantages of a Trust?
You might be wondering, “What are the benefits of using a trust? Isn’t it easier to transfer the trust property directly to the beneficiary?” However, there are many benefits to using a trust, and certain life situations can actually make it necessary for a trustee to hold the property for some time.
For example, some situations where a trust can be advantageous include:
- The beneficiary is not of legal age or is not emotionally mature enough to receive the property yet
- Holding the property in trust will create certain tax advantages for the person’s estate
- You need to wait for certain conditions to be completed before the beneficiary can obtain the property (such as the completion of an educational degree, or the completion of a business project)
Other benefits of trusts include a greater amount of accountability of one’s own funds, as well as providing more overall management of personal funds. In other words, using a trust tends to make financial transfers more organized, and helps create a record of transfers.
Do I Need a Lawyer for Advice on How to Create a Trust?
Creating a trust can often be a major undertaking. If you need assistance with the creating, drafting, editing, or reviewing of trust documents, you may wish to hire a trusts lawyer in your area. Your attorney can assist you with the process to ensure that you’re meeting the various legal requirements for creating a trust. Also, your attorney can be on hand in the event that a lawsuit arises in connection with the trust.
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Last Modified: 01-09-2017 05:49 PM PST
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