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Establishing a trust fund: 3 critical steps to follow

On Behalf of | Oct 31, 2022 | Trusts |

A crucial step in the estate planning process in California is establishing a trust. Understanding the steps that go into creating trusts should make this process less overwhelming.

Choosing the right type of trust

Before people can open trusts, they must choose what type of trust they want. Typically, people choose between revocable, irrevocable, living or testamentary trusts. A special needs trust is also a good option for someone wanting to protect a family member with special needs.

Most people choose an irrevocable, revocable, or living trust. Grantors of revocable trusts can terminate this agreement if they want to. However, you can’t terminate an irrevocable trust. Living trusts remain active until the grantor passes away.

Funding your trust

Another crucial step to establish a trust is to fund it. This step involves transferring a grantor’s assets into a trust. If you set up a revocable trust, you serve as the trust’s grantor and trustee. You can fund a trust with money, properties, vehicles and other valuable assets.

Choosing beneficiaries and trustees

Unless you establish a revocable trust, you’ll need to set up someone who is a beneficiary. Beneficiaries directly benefit from having access to what’s in a trust. A trustee is a party who follows through with your trust’s requests. You’ll also need to decide whether or not you’re paying your trustee, which is more common when the trustee isn’t a family member or close friend.

Setting up a trust allows you to care for your loved ones in life and when you’re no longer living. Properly setting up your trust now also saves your loved ones a lot of time and stress in the future.