How to Make a Family Trust

By Christine Funk, J.D.

How to Make a Family Trust

By Christine Funk, J.D.

Creating a family trust is an effective way of managing family assets. There are two common types of family trusts: revocable and irrevocable living trusts. When someone sets up a revocable living trust, they transfer assets into the trust for the purpose of benefiting those to whom the assets ultimately pass, called the beneficiaries. After the creator of a revocable living trust passes away, the assets may remain in the trust for a period of time, such as until the beneficiaries reach adulthood or some other age as designated in the trust agreement, or the assets may be distributed directly to the beneficiaries. The creator can retain complete control over the assets of the trust while they are alive and can revoke the trust or amend its terms and conditions at any time.

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Assets placed in an irrevocable living trust, on the other hand, may not be removed. Further, the terms and conditions of the trust are difficult to modify after its creation. Families may consider an irrevocable living trust for an adult child with mental or physical disabilities, for example. However, families should know ahead of time that once an irrevocable living trust is funded, it is typically permanent.

Here are the important steps to follow to create either kind of family trust.

1. Decide what kind of trust you want.

For most families, a revocable living trust suits their particular needs. It is much less common to create an irrevocable living trust.

2. Decide which assets to put into the trust.

Many people choose to place all their assets in the family trust. This approach is fine for most people, however, it is not the best choice for all families and all situations. Consider, for example, a couple on their second marriage. They may wish to each have a revocable living trust funded with assets they possessed prior to the marriage and that have been identified as premarital assets in a prenuptial agreement. They may wish to have a second revocable living trust funded with their joint assets.

3. Identify the trustee and beneficiaries.

The trustee is the person in charge of managing the assets in the trust. If you are setting up a revocable living trust, you may name yourself as the trustee. This allows you to manage the assets, including making decisions about selling them, while you are still alive. You also need to name a successor trustee to take over managing the assets after your passing.

Next, consider the individuals or organizations that you would like to inherit your assets when you pass away. If you are setting up an irrevocable living trust to provide funds for the care of your disabled child after you are gone, identify that child as the beneficiary. If you are planning for the transition of assets to your adult children when you are no longer around, identify them as the beneficiaries.

4. Define the parameters.

Perhaps you wish to have your daughter inherit twice as much as your son, or perhaps you want one child to have the beach house and the other to have the family home. Maybe you want to place restrictions on the trust, such as that the money isn't distributed until the beneficiary reaches the age of 50. Whatever conditions you wish to impose, decide these now.

5. Select a name for your trust.

Most people set up their family trust using the family name, such as the Funk Family Trust. This makes transferring assets easier.

6. Create the trust document.

You may wish to consult with an estate planning attorney or an online service provider when you create your trust agreement. In either event, you should know that merely intending to place your assets into a trust is not considered legally sufficient. The paperwork must be drawn up, signed, and witnessed consistent with the laws of the state in which you create the trust.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.