Do It Yourself Living Trust

By David Carnes

A living trust is a legal device that places assets you contribute under the control of a trustee.The trustee then transfers trust assets to your beneficiary as you directed in the trust deed. A trust can be created as revocable or irrevocable. In many cases, you can set up a trust on your own without significant legal risk.

Parties

To create a living trust, you must appoint a trustee and at least one trust beneficiary. You may appoint multiple beneficiaries, and alternate beneficiaries in case beneficiaries die. If your trustee is an individual (yourself or another person) rather than a company, appoint an alternate trustee in case your original appointee resigns or dies. You may appoint a company, such as a bank or a trust company, as your trustee. You may also appoint a trust protector if you choose. A trust protector is entitled to fire the trustee without obtaining either a court order or beneficiary consent.

The Deed

The trust deed must name all the parties you appointed. It must instruct the trustee on how to distribute trust assets and outline any discretionary authority over trust assets, such as investment authority, that you wish to grant the trustee. It should specify whether the trust is revocable or irrevocable. You can unilaterally amend or revoke a revocable trust, but if the trust is irrevocable you permanently lose control over trust assets. If the trust deed fails to mention whether or not it is revocable, state law will determine the question. Different states apply different presumptions if the trust deed is silent on the issue: some presume it to be revocable, while others presume it to be irrevocable. The deed should be executed by state law, which varies from state to state. You execute the deed by signing it in the presence of a notary public or witnesses, who must acknowledge witnessing your signature and sign the deed.

Ready to start your LLC? Start an LLC Online Now

Trust Assets

To the extent possible, retitle all trust assets in the name of the trustee. This is not possible for certain items such as household furnishings; however, you may retitle assets such as real estate, bank accounts, automobiles and share certificates. This is particularly important if the trust is irrevocable; an irrevocable trust insulates you from estate and income tax liability with respect to trust assets, and you could lose these benefits if a court determines that the trust is a sham because you retained legal ownership of trust assets.

The Special Needs Trust

A special needs trust is an irrevocable trust in which the beneficiary is disabled and the trust deed specifies terms that are designed to meet the beneficiary's special needs. If the beneficiary receives government benefits due to his disability, gifting him money directly might disqualify him for benefits that apply a maximum income cut-off. To ensure that the beneficiary does not lose eligibility for benefits, the trustee should purchase products and services such as home furnishings or medical care on behalf of the beneficiary, and avoid distributing cash to him. Consult an attorney if you are confused about eligibility rules for government benefits and how to word the trust deed to avoid the disqualification of your beneficiary.

Ready to start your LLC? Start an LLC Online Now
A Living Trust Explained
 

References

Related articles

The Duty of a California Trustee to the Account Beneficiaries

Trustees owe a great responsibility not only to the person who created the trust, but also to the beneficiaries of the trust. In the legal context, this responsibility is referred to as a “duty.” There are several different duties owed by the trustee to the beneficiaries. If the trustee breaches one or more of these duties, the trust beneficiaries may sue the trustee for any damage caused by the breach.

Requirements in Illinois for Revocable Living Trusts

A revocable living trust transfers property from a living grantor, or creator, to a trustee through a written agreement. The trustee manages the property and distributes it to individuals, known as beneficiaries, subject to specific terms. A revocable trust allows the grantor to change the terms whenever he wants; an irrevocable trust does not. Illinois does not require that you file any documents with a state agency to create a valid revocable living trust, but you must meet several other requirements.

Can I Change a Successor Trustee Without a Lawyer?

A successor trustee of a trust is the party appointed to replace the trustee named in the original trust deed. There are a number of ways to replace a successor trustee and none of them absolutely require that you retain a lawyer. Keep in mind that state laws vary somewhat on the process of replacing a successor trustee.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

How to Create a Legal Trust

A trust is a legal instrument that is useful for tax and estate planning. Under a trust arrangement, a trustee manages ...

How to Change the Trustee of an Irrevocable Trust

A trust is a legal device that allows you to place your assets under the care of a trustee for eventual distribution to ...

What Is a Power of Attorney for a Trust?

A trust is a legal arrangement in which a grantor allows a trustee to manage the distribution of assets to trust ...

How Does a Blind Trust Work for Lottery Winners?

A blind trust is a type of irrevocable living trust in which the trustee has full authority to invest trust assets, and ...

Browse by category
Ready to Begin? GET STARTED