How to Set Up Family Trusts in the USA

A family trust is a device that people use to distribute assets to family members under terms established in a trust deed. Assets are administered and distributed to beneficiaries by a trustee. If the trust is irrevocable, your creditors cannot reach trust assets. If you set up the trust correctly, the creditors of your beneficiaries cannot reach trust assets until they are distributed to the beneficiaries. If you set up the trust before you die (rather than in your will), trust assets that you contribute before you die will not have to go through probate.

Step 1

Appoint a trustee and obtain his consent to the appointment. You may appoint either an individual or an organization (such as a trust company) as your trustee. You may also appoint yourself as trustee.

Step 2

Identify your beneficiaries. The trust must have at least one beneficiary to be enforceable. You do not have to notify your beneficiaries of the existence of the trust.

Step 3

Draft the trust deed in duplicate. State whether the trust is revocable or irrevocable, identify the trustee and the beneficiaries by their full names, provide instructions to the trustee on how to distribute the trust assets, and state that a list of trust assets is provided in the Property Schedule attached as an appendix to the trust deed. State that the beneficiaries may not pledge, assign or sell their interest in the trust assets, to prevent creditors of the beneficiaries from seizing these assets to satisfy debts.

Step 4

Draft a Property Schedule that lists trust assets and states that they belong to the trust. Prepare this document in duplicate, sign both copies in the presence of a notary public, and attach them to the trust deed.

Step 5

Sign both copies of the trust deed in the presence of a notary public. Deliver one copy to your trustee, and keep the other copy for your records.

Step 6

Retitle all titled trust assets in the name of the trustee: retitle automobiles and real estate, for example, reissue share certificates, and open a bank account specifically for cash owned by the trust. To the extent permitted by the law of your jurisdiction, include the name of the trust in the title, and indicate that the trustee holds the assets in trust: for example, the record owner of real estate owned by the trust might be "John Smith, Trustee of the Jack Wilkinson Trust Fund."