How Much Money Do You Need to Start a Living Trust?

By Vanessa Padgalskas

A living trust is used for estate planning and acts as a holding area for property. The person who creates the trust can retain control over his property in a revocable living trust. A trust can be created for many purposes, including caring for a child or elderly person or avoiding probate, which can be a lengthy process. The terms of the trust dictate when the trust beneficiaries receive the property in the trust. A living trust can be revocable, which means it can be amended or terminated by the person who created the trust, or irrevocable, which means it can be amended or terminated under limited circumstances, if at all. A grantor -- the person who creates a trust -- gives up all control over property in an irrevocable trust, whereas the grantor retains control over property in a revocable trust.

Cost of Setting Up a Trust

A trust may require money to set up. A grantor can create a trust without professional help -- for example, by using an online legal documentation service. If the grantor has many assets and is seeking to set up a complex trust, legal services may be required. The cost of legal services can vary depending on the location and hours required to set up the trust.

Funding a Trust

Transferring property into a trust is known as funding the trust. Every trust must have property for the trust to have a purpose. A trust does not have to be funded immediately after it is created, and it does not have to be funded all at once. A grantor can add property to a trust gradually. Property that is not retitled to a trust will be subject to probate when the grantor dies. Property within the trust does not have to go through the probate process, unlike the property named in a will. Property the grantor intends to be in the trust but does not actually re-title to the trust or name in the trust is subject to probate.

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Which Assets to Transfer to a Trust

A grantor can add many types of property to a trust, including bank accounts, real estate, personal items, brokerage accounts, expensive jewelry, and valuable collections. Any property with a title should be retitled in the name of the trust. For example, if John Smith created a living trust, he can title his car in the name of his trust, "John Smith Trust, Trustee John Smith." Assets that already have a named beneficiary, such as life insurance and retirement accounts, do not need to be added to a trust. Those assets will avoid probate because they will automatically transfer to the named beneficiary.

Uneconomic Trust

A grantor or trustee can terminate a trust if the value of property in the trust does not justify the costs of administration. A trust may require work from an accountant or a lawyer, which may be costly. In the Uniform Trust Code -- which is a uniform set of laws regarding trusts adopted by nearly half the states -- a trust can be terminated for being uneconomical if the value of property in the trust is less than $100,000. States that have not adopted the Uniform Trust Code may still have a law applying to termination of uneconomic trusts. Grantors may want to keep this in mind when deciding whether to set up a trust and the value of property to put in the trust.

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Can a Revocable Trust Be Changed With a Will?

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Removing Real Estate From a Revocable Trust

Revocable trusts are often implemented to avoid probate. A trust's maker, or grantor, retains the power to fully revoke or amend a revocable trust. A trust is governed by its terms and adding or removing real estate from a trust is a power that is usually specifically listed. If a trust lacks this provision, an amendment may be legally required before real estate can be added or removed. Trust requirements may vary, depending on state law.

What Is Diversion of Property From a Trust?

Diversion of trust property is a legal term used to describe the misapplication or misuse of trust property. Not only does diversion of trust property violate the terms of the trust itself, but it's often a criminal act. A trust agreement forms a contract between the person who sets up the trust in the first place, the trustee and the beneficiary. The trustee has a fiduciary duty to act in the best interests of both the trust and its beneficiary.

Can a Deceased Person's Estate Give Property Under a Trust?

Normally, trusts are used to keep property out of an estate. Having property included in probate delays its distribution to the heirs and beneficiaries of a decedent. Placing property in trust prior to a person’s death keeps it out of this probate process. However, a person may decide to have property placed in a trust after his death for other reasons. In such a case, a deceased person’s estate may give property under a trust.

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