Setting up a trust is a popular method people use to safeguard their assets and ensure the fulfillment of their wishes after death. Earlier, a trust was considered an exclusive reserve for wealthy people wanting to avoid inheritance taxes. However, today, many people utilize trusts to safely distribute and protect their assets.
A trust in a nutshell
A trust is a fund set aside to establish a different legal entity from the rest of the entity the assets were removed. When setting up a trust, you are the truster, and you specify the rules of the trust deed stipulating how the fund or assets should be managed.
Note that setting up a trust is an irrevocable process which means that you no longer own the assets in the trust fund, and you cannot reclaim them at a further date. When establishing a trust, as a truster, you get to nominate the parties involved, including the trustees and beneficiaries.
Once you have placed some assets into a trust fund, the trustees become the legal owners of the property. They must manage them on behalf of the beneficiaries subject to the conditions stipulated in the trust deed. They are also responsible for paying the taxes associated with the trust fund and daily management.
The beneficiaries are the people you want to benefit from the trust fund ultimately. It might be a family, a single person, or an organization, and they may receive income per the rules you set up in the trust deed.
How to set up a trust
Setting up a trust is not a task you should take lightly, so you should learn more about trust planning lawyers. A trust carries many legal implications, and choosing trustees is a decision that requires serious forethought and consultation. Furthermore, transferring assets to a trust fund is an irrevocable decision which is why you should do it once you are certain of your decision.
According to trust law, a trust is legally valid only if it meets three requirements:
- The willingness of the trustee to set it up.
- The subject matter or assets that make up the trust fund.
- The beneficiaries who benefit from the trust.
You need the help of a trust planning lawyer to establish a trust that meets the certainties mentioned above beyond dispute. With extensive knowledge of legal, financial, and tax matters, they can advise you on critical aspects of the trust. They can also handle the paperwork of the process.
Some steps to take before setting up a trust
- Identify the funds or assets to place in a trust.
- Choose the individuals you want to nominate as the trustees. You should appoint persons who are honest and sensible enough to act in the interests of the beneficiaries of the trust.
- Decide on the beneficiaries or the persons you wish to receive the trust’s assets.
- Establish and evaluate the terms of the trust deed regarding how you want the trust to be managed.
Setting up a trust during estate planning in Arizona is a critical task that requires legal guidance, adequate forethought, and consultation to make the right decisions.