A trust agreement is one of the most popular of all estate planning tools due in large part to the flexible nature of a trust. For those who are contemplating the addition of a trust into their estate plan, the Londonderry trust attorneys at DeBruyckere Law Offices discuss five things you need to know when creating a trust.
- Your stated trust purpose guides the administration of the trust you create. It is important to understand that defining your trust purpose with as much specificity as possible will greatly increase the success of your trust. Narrowing down your trust purpose and goals is a critical first step given that trusts have evolved to the point where there is now a specialized trust to help meet almost any estate planning goal. Every trust must have a trust purpose that can ultimately be referred to by the Trustee, or even a judge if necessary, when making critical decisions relating to the trust.
- Not all trusts are the same. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, activates during the Settlor’s lifetime. Living trusts can be sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time and for any reason. An irrevocable living trust, on the other hand, cannot be modified or revoked by the Settlor at any time nor for any reason once active. Testamentary trusts are always revocable because the Will that triggers activation is always revocable until the Testator’s death. To a large extent, your trust purpose, determined in step one, will dictate which type of trust you need to create.
- Your choice of Trustee can make, or break, your trust. Given the importance of the duties and responsibilities your Trustee will have, choosing your Trustee should be done with care. Your Trustee is responsible for managing and investing trust assets as well as administering the trust. The duties and responsibilities of a Trustee are numerous and diverse, requiring you to spend a considerable amount of time deciding who to appoint as your Trustee. Ideally, your Trustee should have a legal and/or financial background to ensure that he/she is capable of administering the trust successfully. Depending on the size and complexity of your trust, choosing a professional Trustee may be your best option.
- Using a DIY trust agreement form will not save you money in the long run. In the internet age, it can be tempting to try and go it alone using DIY legal forms found online. In the long run, doing so is likely to cost you and your loved ones a considerable amount of time and money. Instead, allow your estate planning attorney to draft the trust for you. As the Settlor of the trust, however, you will decide on the terms used to administer the trust. You will use those terms to decide when assets can be distributed, how assets should be invested, and how much discretion you want your Trustee to have, among other things.
- Almost anything of value can be used to fund your trust. Every trust must be funded. You can use almost any type of assets to fund your trust; however, the trust purpose and type of trust created may dictate the type of assets you use. Then you must actually convert the assets into the name of the trust. This can be as simple as transferring cash into the trust or as complex as re-titling real property into the name of the trust.
Contact Londonderry Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about creating a trust, contact the Londonderry trust attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
It may be tempting to appoint someone close to you as your Trustee; however, be sure to discuss appointing a professional Trustee with your trust attorney before making a final decision.
Trying to create a trust without the assistance of an experience attorney can dramatically increase the odds of making a serious mistake. Working with an attorney, however, should make the process relatively simple and stress-free.
If you created a revocable living trust or a testamentary trust you can modify or revoke the trust at any time and for any reason. If you created an irrevocable living trust, however, you may need court approval to modify or revoke the trust.