What You Need to Know to Set Up a Trust
A trust is a legal arrangement that involves transferring assets to a trustee who will manage the trust assets for the benefit of others, known as beneficiaries. There are different types of trusts, such as a living trust and a testamentary trust.
A living trust is set up while the grantor is alive. It can be either revocable (able to be changed or revoked) or irrevocable (unable to be changed or revoked). On the other hand, a testamentary trust is established through the grantor’s last will and testament and only becomes effective upon the grantor’s death.
The Benefits of Setting Up a Trust
Setting up a trust is an essential part of estate planning, along with preparing other documents like a will, power of attorney, and healthcare power of attorney. Trusts offer several benefits that cannot be achieved through a will alone. These advantages include:
- Probate avoidance
- Minimizing taxes
- Asset protection (for beneficiaries)
- Privacy
- Greater control over how an heir receives their inheritance
In addition, a trust can help qualify for certain benefits like Medicaid for long-term care, and provide financial support for individuals with disabilities, while preserving their eligibility for much-needed government benefits.
The decision to set up a trust will depend on your specific estate planning goals and circumstances. In some cases, a will may be sufficient for estate planning purposes, while in others, a living trust may also be necessary. Understanding the differences between the two is essential to determine which option best suits your needs.
Setting up a Trust
Setting up a trust involves a two-step process. First, the grantor (owner of the trust) creates a trust agreement that names the beneficiaries and the trustee(s). This agreement will also outline the roles of the grantor, trustee(s), and beneficiaries and specify how the trust assets will be managed and distributed.
The second step, called funding the trust, involves transferring assets to the trust. The method of funding will depend on the type of property. For example, funding a trust can involve executing a deed for real estate, transferring title documents for vehicles and securities, or creating a transfer document that lists other personal property that the grantor transfers to the trust.
How Long Does it Take to Set Up a Trust?
The time required to set up a trust can vary depending on whether you work with a lawyer and the complexity of your plan. Generally, it is possible to establish a functioning trust within a few days to a couple of weeks, but our typical process is a three-meeting process that takes 6-8 weeks, on average. It’s possible to go faster, but 6-8 weeks is a dignified, comfortable amount of time for it to take.
Funding the trust after you set it up is a function of how many assets you have that need retitling and how diligent you are in following up. Typically, a trust is initially funded with either $10 cash-in-hand, or with the grantor’s tangible personal property. We typically execute a deed into trust for real property on the same day as the client’s signing ceremony, but sometimes additional follow up is needed in that respect, as well.
How Much Does it Cost to Set Up a Trust?
The cost of setting up a trust also varies depending on factors like the complexity of your financial situation and whether you engage a lawyer. Hiring a lawyer to create a trust can cost anywhere from $1,000 to $7,000 or more, depending on the cost of living in your area, the type of trust, how many different trusts you might need to achieve a comprehensive estate plan, and the complexity of your estate.
Contact an Experienced Virginia Estate Planning Attorney
Setting up a trust by yourself is possible, but it can be confusing and complicated, with many traps for the unwary or inexperienced. So, it may be in your best interest to hire the assistance of an attorney. An experienced estate planning attorney can provide the necessary guidance, experience, and support to ensure the trust is set up correctly, and so that it achieves the estate planning goals for which it was created.
Call our law firm today at (703) 553-2577 or use the contact form to schedule a consultation with an experienced Virginia estate planning attorney.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.