How to Establish a Living Trust
- 1). Designate the parties. The essential parts of a trust are the grantor, the trustee(s) and the beneficiaries. In a living trust, the grantor usually acts as a trustee in order to preserve control over the assets during their lifetime. The grantor might also designate a professional or institution to serve as co-trustee for their valuable management insight. A successor trustee should be appointed to take over when the grantor dies. The beneficiaries do not own the assets of the trust, but receive the benefits of them according to the terms of the trust instrument.
- 2). Execute a trust instrument. Most trust instruments are drawn up by lawyers, but do-it-yourself forms and kits also are available. In addition to identifying the parties to the trust, the trust instrument should describe the purpose of the trust and the rules governing how the trustee can manage the assets and disburse them to the beneficiaries. The document is usually signed, witnessed and notarized.
- 3). Fund the trust. Assets are an essential element of a trust and at least some nominal amount ($10 to $20) must be allocated to the trust for it to be valid. If the assets all are financial in nature, a trust account should be opened by the trustee and the assets transferred. If the trust contains other property, it should be retitled in the name of a trustee to avoid entering probate upon the death of the grantor.
- 4). Revise if necessary. The main benefit of creating a revocable living trust is the power to amend or revoke the trust if necessary. This could involve adding or removing beneficiaries or changing the terms of the trust.
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