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How to Set up a Trust

Provided by Robert Warther, Warther Private Wealth

Man signs a trust document

Planning for your future requires you to think ahead about how you will be living in retirement and what you will need to support yourself. Thinking about your future also requires you to consider what will happen to your assets after you pass. Estate planning will help you minimize the amount of estate taxes due while ensuring your beneficiaries get as much as possible. One way many people control their assets is through a trust, which will completely avoid the probate process after death.

What is a Trust?

A trust is an agreement between 3 parties. These are the Trustor (you), the Trustee (third party) and the beneficiaries. In this agreement the trustee holds your assets for the beneficiaries. Your assets are then distributed following the instructions created when you set up the trust. This could include how and when to distribute your assets to the beneficiaries.

Types of Trusts

There are several different types of trusts, but which one you choose depends on who the beneficiary will be and how flexible you want the trust to be. Typically, there are 2 main categories, revocable and irrevocable trusts. In a Revocable (living) trust, you can make changes to it while you are still alive. It is also possible to name yourself as the trustee, passing on these trustee duties after your death. Any assets in a revocable trust will bypass probate court proceedings but might still be subject to an estate tax.

An irrevocable trust on the other hand is one that cannot be changed once it is created. Your assets are transferred to the trust and controlled by a trustee. Once the trust is created it cannot be changed or canceled without permission from the beneficiaries. Irrevocable trusts do have some benefits, however. One of the biggest reasons many people use irrevocable trusts is to protect their assets, especially individuals with high value estates. Any assets in an irrevocable trust are property of the trust, which means that if the grantor is sued, any assets in the trust are safe. Irrevocable trusts are technically considered an independent entity, which means that all assets and income are taxed to the trust, reducing the tax liability of you and your estate. This might even help you hit a lower tax bracket.


Irrevocable and Revocable trusts can also fall into a number of subcategories:

Marital Trust: A trust that benefits your spouse

Testamentary Trust: A trust that is created using directions from your will after death

Charitable Trust: Charitable trusts can help avoid taxes on assets in the trust and provide a potential tax deduction. This is because some of your assets will go to your beneficiaries, while the rest will be donated to a charity of your choice, which you can use as a tax write off.

Why set up a trust?

Many people think of trusts as something only extremely wealthy people have access to, when this just isn’t true. Anyone who is looking to retain some control while avoiding taxes and probate could benefit. Here are some reasons why you might create a trust.

Control who gets your assets after death: When you set up a trust, you are clearly defining who the beneficiaries are and how they will receive your assets.

Financially support a disabled family member: Assets in the trust can be used to support a family member who may not be able to support themselves. When setup correctly assets in a trust will not count as the beneficiary’s income or savings, allowing them to continue receiving government disability.

Avoid probate: Probate is the process of verifying and administering your will after your death. Often this can be a long and expensive process, so using a trust allows you to skip probate and ensure your heirs receive their inheritance sooner.

Keep your assets private: Depending on the type of trust, your assets would be property of the trust, which would protect this property if you were sued. Trusts are also a private document, where as a will become public record after your death. Trusts can prevent people seeing what you had and who got it.

Minimize Taxes: Irrevocable trusts transfer assets out of your estate, reducing your estates size and your tax obligation.

How to Set up a Trust

Although its possible to set up a trust on your own, we recommend getting help from a professional. A professional can help you choose the correct type of trust and ensure that it is set up properly.

Choose the Type - The first step to creating a trust is determining what type of trust is best for you. As we discussed earlier, there are two main types of trusts, Revocable and Irrevocable. A revocable trust can be modified at any time, while an irrevocable trust cannot be modified after creation without the permission of the beneficiaries. A common type of trust is a revocable that converts to an irrevocable trust after your death. A professional will be able to advise you one which type of trust would be best for your situation. This is also when you can choose some other rules for the trust, such as how long it lasts and when assets will be transferred to beneficiaries. Many people set up their trusts to benefit their grandchildren, maybe to fund their college or provide them with a gift after a major life achievement, such as marriage. A trust can ensure that these wishes are executed properly.

Choose your Trustee and Beneficiaries - Step number two of creating a trust is to determine who your trustee and beneficiaries will be. As discussed earlier certain types of trusts will determine who your beneficiaries are such a marital or charitable trust. Choosing your beneficiaries should be the simple part, just choose who you want your assets to benefit! The more difficult part is choosing who will be the trustee of your trust. Some types of trusts allow you to choose yourself as the trustee, but otherwise you will need to pick a person or business to administer the trust for you. It is the trustee’s responsibility to ensure all stipulations and rules in a trust are completed. Sometimes people pick a family member or close friend while others use a professional as the trustee. Another possibility is naming another party as a contingent or co-trustee. This ensures that if something were to happen to the trustee you would still be covered. This co-trustee could also be a professional who could advise and help the primary trustee who you know and trust already.

Funding your trust – This part is pretty self-explanatory; you need to determine what assets to include in the trust. Some common assets people often assign to trusts include real estate, personal property and investment or bank accounts. Assets like real estate or vehicles will require you to transfer the title or deed over to the trust. For bank accounts you will have to contact your bank and have them put the trust name on the account. For personal property that doesn’t have a deed or title, simply include a description of the asset in the trust document.

Register your trust - For irrevocable trusts you must register it with the IRS because it is considered its own legal entity and requires a tax id number. Revocable trusts do not require registration because they do not create a separate entity to hold assets, it simply uses your social security number.

Final Considerations

Despite what many people think, you do not need extreme wealth to form a trust. Trusts can benefit most people that are looking to pass on assets to someone. Trusts also do not take much time to set up, but may cost some money, depending on how you form it. Some trusts may only be a few hundred dollars while some might be a few thousand. This cost should be viewed as an investment, as a trust might reduce your taxes and can protect your assets for your heirs. It is very important to set up the trust correctly, so a higher up-front cost is usually worth it in the end. If you are considering a trust we recommend you reach out to a financial professional. I would be more than happy to answer any questions you have regarding trust, please do not hesitate to reach out to me!

Robert Warther may be reached (239) 276-7939, or

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

Securities offered through Independence Capital Company, Member FINRA/SIPC, a registered broker-dealer. Investment Advisory services offered through Warther Private Wealth, LLC, a Registered Investment Advisor ("RIA"), registered in the State of Ohio. Independence Capital Company, Inc and Warther Private Wealth are not affiliated. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The information contained herein is based on sources we believe reliable but is not considered all-inclusive. Past performance is no guarantee of future results. Please contact your Financial Advisor with information regarding specific investments. Opinions are our current opinions only and are subject to change without notice. Generally, investments are NOT FDIC INSURED, NOT BANK GUARANTEED, and MAY LOSE VALUE.


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