You can create a trust without a lawyer. However, there can be many pitfalls when setting up and funding a trust. Making a minor mistake could invalidate your trust or cost your beneficiaries dearly in higher tax liabilities and potential legal challenges. Therefore, even if you want to create a trust on your own, consider getting the paperwork checked by an experienced trust attorney who can review the documents to ensure the trust is legally valid and functions as intended.
In almost all cases, hiring a qualified estate planning attorney who is familiar with the laws in your state and knows estate tax issues can be an excellent idea. The time and money you invest can pay off later and prevent complications and unintended liabilities for your beneficiaries.
Morgan & Morgan’s qualified trust and estate planning attorneys can help you create a tailor-made trust that protects your assets and supports your beneficiaries and charitable causes. Contact us now for a free consultation.
What Is a Trust?
Trusts are often used in estate planning to hold assets and reduce tax liabilities for the heirs of an estate. The grantor, the individual setting up the trust, determines who will profit from the trust in the future. Trusts can benefit individuals, charities, organizations, future generations, and other entities. Trusts can hold assets such as:
- Mutual funds
A basic trust requires the following three parties:
- The grantor who establishes the trust with their assets
- The beneficiaries who stand to benefit from the trust
- The trustee who manages the trust
Grantors may assign several trustees who could be relatives, close friends, or paid professionals. It is worth noting that beneficiaries do not own the assets held in trust. Instead, the trustee manages the trust according to the grantor’s wishes.
Do You Need to Set up a Trust?
Creating a trust may be unnecessary if you have few assets and no children. However, compelling reasons for setting up trusts include:
- Avoiding the expenses, length, and complexities of the probate process
- Reducing estate tax liabilities
- Protecting assets for minor children or relatives with special needs
- Determining exactly how the assets are distributed upon your passing
- Managing your assets in the event of your incapacitation
Anyone who owns property and assets should consider creating a trust. Trusts can streamline the probate process, reduce estate tax burdens, and protect your assets for future generations.
The Benefits of Trusts
Trust funds can have several advantages beyond ensuring that your assets are distributed according to your wishes. Other vital benefits of trusts include:
- Potential reduction of tax liabilities
- Protecting your assets from litigation
- Reducing probate expenses
- Keeping information about your assets private
- Allowing you to designate assets for future generations
Moreover, the trustee can manage your affairs and assets if you become incapacitated due to an accident or illness. There can be additional benefits of trusts, depending on your specific situation. Our legal teams and attorneys are here to advise you comprehensively if you consider establishing a trust.
The Most Common Estate Planning Trusts
If you are asking yourself, “Can I create a trust without a lawyer?”—consider that there are many different options for estate planning trusts. Knowing which trust serves your needs best can be challenging without the advice of a qualified attorney.
Trust funds can be revocable or irrevocable. A revocable trust can be altered or canceled by the grantor during their lifetime. However, an irrevocable trust cannot be changed once created. Revocable trusts usually become irrevocable when the grantor dies. Some of the most popular revocable and irrevocable trusts include:
According to Forbes, revocable living trusts are some of the most common trust funds. A living trust is created and funded by a person in their lifetime, and the assets are managed for the grantor’s benefit while alive. Often, the grantor of a revocable living trust also acts as the trustee, handling their own trust and assets. Since a living trust is generally revocable, the grantor can amend or dissolve the trust whenever they wish.
When the grantor dies, a named successor trustee is responsible for managing the transferral of the assets to the beneficiaries. One significant advantage of a living trust is avoiding lengthy and costly probate.
A testamentary trust is created after an individual passes away, according to the provisions contained in their will. Testamentary trusts provide instructions for distributing the assets to the estate’s beneficiaries. The advantages of testamentary trusts can include:
- Providing a lifetime income for the surviving spouse
- Protecting assets for children from previous relationships or marriages
- Providing for beneficiaries with special needs
- Arranging for contributions to charitable causes
- Reducing estate tax liabilities
However, one major disadvantage of a testamentary trust is that it must go through the probate process and becomes a public record.
Spendthrift trusts are usually set up to protect assets from irresponsible beneficiaries. A spendthrift trust ensures that the beneficiary receives some assets or income while restricting access to the trust’s principal. This prevents the beneficiary from squandering the trust’s funds and keeps the assets safe from creditors.
However, spendthrift trusts are not legal in all states. Moreover, they can be tricky to manage in practice, especially if the beneficiary gets themselves into trouble such as gambling or addictions. The role of the trustee could become burdensome if they have to decide as and when to make payments to a beneficiary.
Special Needs Trusts
Individuals with relatives or children with special needs can create so-called “special needs trusts” to protect and plan for their loved one’s future. A special needs trust allows the beneficiary to enjoy assets held in trust while preserving their eligibility for public programs, such as Social Security.
When You Should Consider Using a Lawyer for Creating a Trust
While drawing up and funding a trust may be relatively easy when you have a small estate, consider that a minor mistake could invalidate your efforts. A trust lawyer can ensure that the trust is correctly created, funded, and legally valid. You should strongly consider working with an attorney if:
- You are unsure how to best fund the trust
- You have a close relative or child with special needs
- Your estate’s worth is close to the estate tax exemption amount
- You want to determine specifics about when and how your heirs inherit the assets
- You have a large estate including businesses or commercial property
Working with an experienced estate planning attorney can save you money in the long term and protect your family in the future. If you have already created a trust, consider asking a trust lawyer to review the document to ensure that it serves the intended purpose.
Setting up a Trust on Your Own
There are various online templates available for creating a trust. Generally, a trust document needs to contain variations of the following information:
- The grantor
- The trustee managing the trust
- The names of successor trustees
- The beneficiaries
- Details regarding the distribution of assets
Once the paperwork is complete, you must sign the documents before a notary public. The next step is to re-title assets such as properties and vehicles and transfer them into the trust.
Avoid Pitfalls When Creating Your Trust
Setting up a trust may seem straightforward. However, re-titling assets and funding a trust can be a legal minefield. Assets must be transferred correctly for the trust to be legally valid.
Our seasoned estate attorneys can protect your interests and those of your beneficiaries. We can review your documents and ensure that your trust is legally valid. We can also evaluate your estate’s tax liabilities and ensure that you and your beneficiaries will not pay more taxes than necessary.
The Drawbacks of “Do It Yourself” Trusts
Templates for various estate-planning needs abound online. However, these documents are typically generic and appeal to a broad audience. Your unique estate planning needs may be more sophisticated than a “one-size-fits-all” template allows. Since no two estate plans are identical, what works for your situation may not work for your neighbors or friends. Generic templates can give you an idea of the type of information and documents required to create a trust but may fail to address your unique situation and concerns.
State Laws Can Vary Widely
State laws can diverge on numerous issues critical for estate planning and setting up trusts, including:
- Property and business ownership
- Estate taxes
- Inheritance taxes
Moreover, a trust that may be an option in one state could be legally invalid in another. Estate-planning software and templates typically do not consider where you reside unless you ensure that they apply to your specific state laws and regulations.
“Do It Yourself” Might Not Save You Money
Some individuals consider doing their own estate planning without an attorney’s help because they want to save time and money. However, the reverse is usually the case. Trust and estate attorneys have studied for many years to understand the intricacies of inheritance and trust laws. Making a seemingly insignificant mistake when setting up your trust could cost you and your beneficiaries far more than the attorney’s fee.
Prevent headaches and costly mistakes by seeking advice from a qualified local estate planning attorney who knows your state’s probate, estate tax, and trust laws.