Creating a trust involves a number of legal considerations.
One question we get asked often is around trust formation: what is a trust and how is it created?
In its broadest terms, a trust is a legal device created by an individual intending to hold property through for the benefit of themselves or others. Trusts are classified in various ways depending on their purpose or terms, and can be used for a wide array of assets.
The creator of the trust is typically known as the grantor or trust maker. The person who controls the assets in the trust is the trustee, the people who are entitled to benefit from the assets in the trust and are the beneficiaries.
The type of trust that many of our clients utilize is the revocable living trust. In a typical revocable trust structure, the creator of the trust typically performs all three roles, I.e. the grantor, the trustee, and the beneficiary.
The beauty of this kind of trust is that the trust creator stays in control of all his or her assets and the trust can be amended at any time that you change your mind.
In order to create a trust, you need to determine what assets do you want to place in the trust? Who do you want as a beneficiary? What parameters do you want to be utilized for your trust? For example, what rules and restrictions do you want the trustee to have to abide by before distributions can be made to a beneficiary? And who do you want to serve as trustee?
While the process might seem pretty straightforward, there are a lot of legal implications that can occur when creating a trust.
It’s therefore essential that you consult an attorney to determine the parameters of your trust and which type of trust best suits your needs.
