Creating and Funding a Trust

For many people, creating a trust is an important step in the estate planning process. Having a trust is beneficial because (depending on the type of trust) it can manage an individual’s assets both during life and after death. However, creating a trust is simply the first step in the process. After establishing a trust through a trust agreement, the grantor (i.e., the creator of the trust) must transfer assets to (i.e., fund) the trust. Below is a high-level list of steps to create and fund a trust.

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1.       Choose the type of trust that is right for you.

First, choose the type of trust that is best for you. Common types of trusts include revocable, irrevocable, and testamentary trusts. For more information on types of trusts, checkout Types of Trusts: Which One Is Right For You?. To the extent you want to establish a trust during your lifetime that affords more flexibility, a revocable living trust is likely the preferred option.

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2.       Decide on the key details of the trust.

Second, formulate the key details of the trust by answering several questions, including: Who will be the trustee(s) and successor trustee(s) of the trust? Who will be the beneficiaries of the trust—family members, friends, charities? What assets do you want to transfer to the trust? How should the principal and income of the trust be handled or distributed? Do you have any specific terms or restrictions you want to incorporate in the trust agreement?

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3.       Work with an attorney to draft and execute the trust agreement.

Next, your estate planning attorney will draft the trust agreement. The agreement will establish the grantor(s), trustee(s), beneficiaries, assets, and general terms of the trust.[1] Generally, you will sign your trust agreement in the presence of a notary public, and the trust agreement must comply with the legal requirements of your state.[2]

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4.       Transfer assets into the trust.

Once you formalize and execute the trust agreement, you can transfer assets into the name of the trust. Transferring assets into a trust is generally the same process for any type of trust, whether revocable or irrevocable. Many different types of assets can be transferred into a trust. Some common types of assets include real estate, bank accounts, and tangible personal property.

Real Estate: In order to transfer real estate into the trust, you will need to sign a deed that names the trustee as the legal owner of the property. Once you sign the deed, you must record the deed in the county clerk’s office. Once recorded, the real property is effectively transferred to the trust.[3]

Bank Accounts: In order to fund your trust with money, you will need to set up a trust bank account. This is important if you are setting up a trust fund that will provide money to beneficiaries. To set up the bank account, you can create a new bank account or register a current bank account in the trust’s name.[4]

Tangible Personal Property: In order to transfer personal property into the trust, the grantor should execute an assignment of his or her interests in the property. Generally, the personal property should be named in the document, and the document should state that the trust now has ownership of the property.[5]

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Conclusion

Trusts can be an effective estate planning tool to help manage your assets. If you would like more information on estate planning or assistance with setting up a trust, contact Montgomery Legal today. Schedule a Consultation or call (214) 432-6100.

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[1]Elissa Suh, Your Guide To Setting Up A Trust, Policygenius (December 2021), available at https://www.policygenius.com/trusts/how-to-set-up-a-trust/.

[2]Matt Carey, How To Set Up A Trust Fund, Empower (January 2024), available at https://www.empower.com/the-currency/life/setting-up-a-trust-fund.

[3]Erik J. Martin, How, and Why, To Put Your Home In A Trust, Bankrate (February 2023), available at https://www.bankrate.com/real-estate/putting-home-in-trust/#pros-v-cons.

[4]See Suh, supra note 1.

[5]Brette Sember, A DIY Guide To Transferring Assets Into A Living Trust, LegalZoom (May 2024), available at https://www.legalzoom.com/articles/transferring-assets-into-a-living-trust-can-you-do-it-yourself.

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