What Is Involved In Setting Up A Living Trust

Posted by: Adair M. Buckner

Setting up a living trust may be the best way to ensure your assets are passed onto the right people if you pass away. So how do you start the process? 

The first piece of advice I would give you is to consult an estate planning attorney. This is an area where self-help and online resources like LegalZoom may not be the best course of action. If the drafting of the trust agreement and follow-up steps are not done correctly, the time and money you invested in this do-it-yourself effort will have been wasted. Your heirs could end up having to spend a great deal of money straightening out the mess.

A living trust is not always the best tool for your estate planning. Many considerations go into determining whether a living trust is a good fit for your situation or not, as explained in this blog

If you have decided after talking with a qualified attorney that a living trust is a good estate planning tool for you, there are several steps that will aid you and your attorney in drawing up the trust. These are outlined below.

Steps For Setting Up A Trust

1. Gather Together Information About The Assets To Be Placed In The Trust

Good descriptions of all the assets you want to place in the trust are a must. You will need them to implement the transfers of assets into the trust. You should provide your attorney with:

  • Account numbers for investments, bank accounts, bonds, and retirement accounts
  • Legal descriptions for real estate and mineral interests
  • If you own valuable personal property such as jewelry, artwork, coin collections, and things of that nature, you should give your attorney a detailed description of that property as well, so the trustee will be able to identify and transfer it upon your death.

2. Determine Who You Want To Have As Primary And Successor Trustees

A key function of a living trust is to provide for someone else to take over management of the assets you have placed in trust if: 

  1. You become incompetent, or 
  2. You wish the trust to continue after your death

You must give serious thought to who this trustee should be. The trustee will have to manage the assets in the trust and be responsible for distribution to the beneficiaries as you have set out in the trust agreement. It is not always wise to put a loved one in the position of having to deal with the demands of the beneficiaries. Sometimes, that is a very unpleasant position in which to put a loved one. It might be best to name a bank, another third party, or a non-family member as trustee instead. 

Most people will name themselves as the initial or primary trustee so they maintain control of their assets as long as possible. If you do this, you decide if you want all of the income from the trust distributed to you during your lifetime or not. You also control whether you want to be able to use the principal of the assets for your support, if necessary.

If you become incapacitated or incompetent, you will need to have designated who you want as a successor trustee to take over handling the trust. If the trust is to continue after your death or that of your spouse, a successor trustee will be necessary. I strongly recommend naming at least one, if not several alternate trustees, to take over in these situations.

3. Determine How You Want The Trust To Operate After Your Death

Some people want the assets of the trust distributed as soon as possible after their death to the intended beneficiaries. Many couples have a joint living trust, which continues until a surviving spouse passes. 

Some people want to control what happens to the distribution of the principal and interest of the assets as long after they are in the grave as possible. They envision a dynasty trust to preserve assets like a generations-old family farm, ranch, or mineral interests so that they will remain in the family for as long as possible.

The interests of minor beneficiaries should also continue to be held in the trust until they're of an age when you believe they will be smart enough to manage on their own. You can determine whether that is 18, 21, or even 50 under the terms of the trust. Distributions can be spread out over a period of years, for instance, a part at age 25, another part at age 30, and the final distribution at age 40.

4. Finalize The Trust Agreement And Transfer Documents

Once these decisions have been made, the attorney can finalize the trust agreement and have you sign it. The final step is to prepare transfer documents, such as assignments of investments and deeds to real property interests, to place the assets in the trust.

The transfer documents are a key element of this process. If an asset is not placed in the trust, probate will be necessary to pass that asset on. Too many people have learned this sad lesson. You must keep up with assets you acquire over your lifetime to be sure they are placed in the trust if that is how you want them to be dealt with after your death.

Other Considerations In Drafting A Living Trust Agreement

These are just a general outline of considerations that go into drafting a trust agreement. Many other details you may want to consider are covered in this blog.

To get a better idea of the information we will need to discuss with you to decide whether a living trust is a good legal move for you, download my free living trust questionnaire.

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Take The First Step: Find Out If A Living Trust Is Right For You

If you are considering setting up a trust and would like to discuss your needs and the likely cost, please contact Adair M. Buckner to schedule a free initial consultation.*

Schedule A Free Consultation

*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)

** Please remember that the cost estimates given are only general, ballpark numbers for the Amarillo area and the costs can vary widely depending on many variables in your individual situation.

*** This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal, or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.


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