Trust Attorneys Answer 3 Common Questions About Setting Up a Trust

Financial planning for the future takes some serious thought and organization, especially if you intend to keep on providing for the people you love when you're no longer around. This is why more people are advised to set up a trust while they're still young and able. 

Unfortunately, only about 33 percent of Americans have some form of estate planning in place in case of disability or death. The rest are leaving it up to the state to decide what happens to all their assets. 

Most people don't set up a trust because there are so many misconceptions about the process. To help fix that, here are some experts’ take on the matter as they answer three frequently-asked questions about setting up a trust. 

1. Are Trusts Only for the Wealthy?

According to trust attorneys from Hays Firm LLC, one of the most common misconceptions about trusts is that they're only for rich people. The truth is that anyone, regardless of income level, can benefit from a trust. A trust protects your assets and ensures they're distributed according to your wishes. So, it wouldn’t matter if you come from a family with generational wealth or if you're a small business owner who worked hard to save money for your loved ones. 

Moreover, trust attorneys say typically there’s no set amount of money or assets required to set up a trust. If you have significant assets to protect, that's generally all you need to start setting up this type of estate planning tool right away. Common assets people can include in the trust are bank accounts, financial investments such as stocks and bonds, real estate properties, and life insurance. Other tangible assets can include art collections, jewelry, or furniture. 

2. How Does a Trust Fund Work?

There are three parties typically needed to establish a trust fund — the grantor, the beneficiaries, and the trustee. 

• The grantor sets up the trust and decides which of their assets are included in it. 
• The beneficiaries are the individuals the trust is managed for. 
• The trustee is in charge of managing the assets on the grantor's behalf. 

More on a Grantor’s Responsibilities

In a trust, the grantor makes arrangements that the trustee will carry out in case of incapacitation or death. For instance, they can arrange for certain assets to be bequeathed to selected family members while the rest is given to a charity of their choice. 

The grantor can also give directions on how certain assets are delivered; it's the trustee's job to double-check these are followed to the letter. For example, to safeguard children, a specified amount of money can be released yearly to fund a minor child's education until they graduate from college. 

Or, to prevent an heir from blowing through an inheritance all at once, a grantor can include a spendthrift clause in the trust. This limits the amount of money given to an heir, and the grantor can choose to set up the payments to be given on a monthly or quarterly basis. 

A trust can stipulate benefactors can only use assets for specific purposes. You can include wording in the trust so the money can only be spent on things like medical expenses, college education, or buying a home. 

A trust can also be set up in such a way as to prevent certain people from benefiting from it. For instance, let's say you have an adult child you'd like to name as an heir. You can structure a trust to protect your child's inheritance from their spouse in the event of a divorce or your child's passing. 

Simply put, a trust enables you to protect your assets so they’re disbursed properly and go to the right people. It also protects your beneficiaries, helping provide for them after you’re gone.

3. Is There a Way To Change a Trust?

Most people don't want to create a trust because they think that once everything is on paper, it's impossible to adjust it should they have a change of heart. This is true in the case of an irrevocable trust, but thankfully, you can always opt for a revocable living trust. 

With a revocable living trust, you can make changes to the provisions and retain control of the assets while you're alive. A living trust not only allows you to change or add beneficiaries as you see fit but also enables you to keep records of your assets private after your death. 

Final Thoughts on Setting Up a Trust

Establishing a trust can protect your family and your hard-earned assets in case you become incapacitated, as well as after your passing. Consult expert attorneys to walk you through the entire process of creating a trust and to help ensure your wishes are properly carried out.