How to Create a Revocable Trust

By Tom Streissguth

A revocable living trust allows you to provide for the distribution of your property after your death. When you set up a trust, you help your heirs and family avoid the probate courts, which must review and authorize any will. “Revocable” means that you can change the trust at any time, or cancel it altogether. Creating a trust is a straightforward matter of preparing and signing a document, which contains certain provisions and conforms to the law.

A revocable living trust allows you to provide for the distribution of your property after your death. When you set up a trust, you help your heirs and family avoid the probate courts, which must review and authorize any will. “Revocable” means that you can change the trust at any time, or cancel it altogether. Creating a trust is a straightforward matter of preparing and signing a document, which contains certain provisions and conforms to the law.

Step 1

Set up a revocable living trust by creating a trust document, or having your attorney draw one up. You must identify yourself as the grantor of the trust, and designate a trustee to manage the assets, which you will place within the trust. You may name yourself as the trustee, although taking this step provides no protection for trust assets against the claims of creditors. If another person or organization is your trustee, you should also name a successor trustee who will take over responsibility should the trustee withdraw or otherwise become unable to carry out your instructions.

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Step 2

Identify the assets that the trust will contain. A trust can include cash, stocks, mutual funds, real estate, business interests and anything else of value that you wish to control as part of your estate. The trust should name the account in which the assets are held, as well as the custodian of the account, whether a bank, investment company, broker or other entity.

Step 3

Name your beneficiaries – the individuals or organization that will inherit your property after your death. You can specify how the trust will distribute those assets, or provide other instructions that the trustee will be legally bound to follow in the event of your death. You may include or append a power of attorney, which gives the trustee or another individual the authority to act on your behalf if you become incapacitated. You may also disinherit any beneficiary who challenges the trust -- an option not usually available with a standard will.

Step 4

Fund the trust by transferring title to your property to the trust. In the case of cash, investments, savings accounts and other monetary instruments, you simply move the assets from your own accounts into an account established with the trust as owner and the trustee as custodian. In the case of real estate, you must have the property title transferred through a procedure established by the local bureau of records.

Step 5

Make the trust legal by signing it in the presence of witnesses. A witness should not be a beneficiary of the trust.

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The Oath and Acceptance of a Successor Trustee

A trust is a legal entity in which a trustee serves as custodian for the property of an individual, known as a grantor, who may also act as the trustee himself. The trustee holds legal title to the trust property; he also has the responsibility to manage the property for the benefit of the grantor and the trust’s named beneficiaries. When a trustee is no longer willing or able to carry out these duties, a successor trustee assumes the role.

How to Manage a Living Trust

The trustee, who is bound by several legal requirements, manages a trust. For a living trust, the trustee is often the person who originally created the trust, known as the grantor or settlor. Trusts operate under state law, which varies. The American Bar Association endorses the Uniform Trust Code, which is enacted in 23 states and being considered for adoption by three more as of March 2012. The UTC is a good framework, but you should review the laws of your state prior to undertaking the responsibility of being a trustee.

Can You Transfer Debt Into a Living Trust?

A living trust is an agreement in which you transfer your assets into the ownership of the trust. You can retain control of those assets by naming yourself as trustee until your death, at which time a successor trustee takes over and distributes your assets to your beneficiaries. While you cannot transfer debt into a living trust, creditors might be able to reach the assets in the trust during your lifetime and after your death.

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