How to Make a Living Trust

Constructing Your Trust

Determine what type of trust you want to create. If you are married, you should decide whether you want to create an individual or joint trust. An individual trust includes only your property, while a joint or shared trust includes all property that belongs to you and your spouse. While you and your spouse can create two individual trusts, this can cause complications with shared assets. A joint trust, however, can dispose of both individual and shared property.

Make a list of your assets. You can use your list to decide how you want to distribute the assets you place in your trust. Keep in mind that you don't necessarily want to have all of your property in your trust. If you have retirement or investment accounts that allow you to designate a beneficiary, leave these out of your trust. Including them or designating your trust as the beneficiary only adds an unnecessary layer of complication. Use your list as you work on your trust so you have a good picture of your total estate and can figure out how you want it distributed.

Gather paperwork for your assets. You will need information such as account numbers and locations to transfer title in your assets from yourself to the trust. You also want to make sure that you have accurate information about your property in your trust documents.

Decide who will inherit your trust property. The people you want to inherit your assets when you die will become beneficiaries of your trust. If you've included children as beneficiaries, you also should name someone to manage that property for them until they reach adulthood. You also should consider naming alternate or back-up beneficiaries in case your primary beneficiary is either unavailable or refuses to take the trust property.

Choose a successor trustee. While you are alive, you will be the trustee of your trust. However, someone else will have to take over after you die to distribute the trust's assets. Most people choose a spouse or adult child as their successor trustee. You also may want to choose a back-up in case the person you've chosen as a successor has predeceased you or is otherwise unavailable or incapable of taking on the trustee's duties. Talk to the person you choose before you draft your documents, and make sure he or she is able and willing to be your successor trustee. You may want to name an additional alternate successor in case the person you name is unavailable or incapable of acting as trustee. You can name a bank or trust company to manage your trust after your death as well, but keep in mind there probably will be fees involved. Unlike with a will, your successor trustee doesn't have to live in the same state as you, or the state where your real property is located. For this reason, trusts often are preferred if you want a friend or relative who lives out of state to distribute your property after your death.

Drafting Your Trust Documents

Consider consulting an attorney. Although generally you can make a simple living trust by yourself, you may need assistance if you have complex or significant assets. You also may be able to buy a book or use an online trust preparation service, either of which typically cost less than $100. However, if you hire an attorney to prepare your trust documents for you, expect to pay upwards of $1,000. Keep in mind you can always draft your documents and then have an attorney look over them to make sure you've met your intent. Typically attorneys charge less to review documents than they would to prepare them. Each state has its own requirements for creating a living trust. While most forms will be sufficient, an experienced estate planning attorney licensed in your state will be able to determine immediately if your trust documents meet your state's requirements.

Search for forms or templates. If you want to draft your trust documents yourself, you should be able to find free templates or sample living trusts on the internet. Make sure the form is approved for use in your state, and that it will cover the assets you plan to include in your trust. Some forms may not work if you have a large estate that exceeds federal estate tax exclusion limits.

Name and identify the trust. The first sections of your trust include your name, the name of your trust, and the type of trust you are creating. Since you are creating the trust for your property, you will list your own name as the grantor. The name of your trust doesn't have to be fancy. Just use your own name and identify the type of trust it is. For example, the name of your trust could be "the Sally Sunshine Revocable Living Trust."

Establish the identity and responsibilities of the trustee and successor trustee. If you're using a form or sample as a guide, you can largely copy this language – but read through it and make sure you understand what it means. While you are alive, you are considered the trustee of your own living trust. After you die, your successor trustee will take over and distribute your property to the people you've listed as beneficiaries. As trustee, you have the same rights and abilities to use, transfer, or sell your property as you did before you created the trust. After you die, your successor trustee will manage and distribute that property to the beneficiaries you've named. Your successor trustee will be responsible for reporting any income earned from the trust assets and transferring property ownership from the trust to your listed beneficiaries.

List the beneficiaries of the trust. The trust's beneficiaries are the people who will inherit the assets you place in the trust after you die. You can list the property separately on your declaration, or you can create a separate schedule of property and refer to that document. For example, you might write "At the death of the grantor, the trustee shall distribute the trust property in accordance with Schedule A, attached."

Create your schedule of property. To list the property and assets included in the trust, write a separate document and attach it as a schedule to your declaration of trust. By creating a separate document, you can easily amend it later on without having to execute an entire declaration all over again. You generally have the ability to change the assets in your trust whenever you want. If at any time you decide to take something out, or if you acquire a new asset you want to add, just update your schedule and change the property ownership documents to reflect the trust.

Executing Your Trust

Sign your trust. Typically you must sign your declaration of trust in the presence of a notary. You typically can find a notary public at your local courthouse, but expect to pay a small fee. Many banks provide notary services free of charge to their customers. You may want to sign and have notarized more than one copy of your trust, so you have multiple originals. That way you can have an original copy for your records and you can provide another original copy to your successor trustee.

Record or file your trust documents as necessary. Although you typically aren't required by law to file your trust with a court or government agency, you do need to keep it safe. If you have a home safe, you can keep your trust there. You also may want to use a safe deposit box at a bank or post office. In addition to your personal copy, make sure your successor trustee has his or her own copy, or knows where your copy is located and how to access it. Unlike wills, trusts don't have to be filed with the court, and there will be no public record. For this reason, trusts are preferred by people who have privacy concerns.

Transfer title in your trust property. Your trust isn't finalized until you actually put the trust's assets in the name of the trust. Typically the property will still be in your name, but you must add language indicating that you are now holding it in trust. If real property is included in your trust, you will have to execute a new deed that includes the trustee language. For example, your new titles or deeds might read "Sally Sunshine, trustee of the Sally Sunshine Revocable Living Trust dated July 4, 2016." Just use your own name and the date you executed your trust. When you sign any documents related to the property, remember to add "trustee" after your signature.

Apply for an Employer Identification Number (EIN). An EIN is necessary to file a tax return for the trust. Although the IRS doesn't require you to file a separate tax return for your trust while you are still alive, a tax return may be required after your death if you have assets in the trust that earn income. Since you can get an EIN relatively easy for free, it's easiest to just go ahead and do it ahead of time rather than leaving it for your successor trustee to do. You can apply for an EIN online at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.