A trust is an essential aspect of the estate planning process. It allows you to leave property to a third party who manages it on behalf of your beneficiaries. Trusts enable you to cater to the needs of children below 18 years. Besides, they are an ideal option if you would want to bequeath property to a critically ill or disabled beneficiary who cannot manage property.
Below is a guide on how to create a trust.
The Legality of the Trust
A wills and estates lawyer will assist you in setting up the trust deed. It is a document that details what property is covered by the trust, who the trustee and the beneficiaries are and how the trustee should pay the beneficiaries. Further, it explains the process of terminating the trust. For instance, it could be terminated once the beneficiaries are of legal age. Your lawyer will help you settle the trust, apply for stamp duty and obtain a business number to legalise the trust.
The Property You Should Include in the Trust
You are free to include tangible and intangible assets in the trust. Shares, real estate investments and businesses are commonly included in trusts since they guarantee constant income. You may opt to avoid depreciating assets such as vehicles or furniture.
The trustee is the individual who manages the trust. He or she should be someone you trust and who will work in the best interests of the beneficiaries. Your spouse is a preferable choice if you would want to put your children's inheritance in a trust. Some law firms and financial firms help their clients to manage trusts. If you would want to work with such an organisation, seek reviews from current clients and inquire if they have concerns about the management of their trusts.
The Type of Trust
In a discretionary trust, the trustee decides when and how to make payments to the beneficiaries. It is unlike a unit trust, where each beneficiary owns a specific number of shares in the trust. In a bare trust, the beneficiary has complete control over the trust.
Your situation will determine the suitable trust. For instance, a unit trust eliminates the possibility of conflict or suspicion between the beneficiaries and the trustee. On the other hand, a discretionary trust is ideal if you would want your spouse to determine how to share property among your kids.
You could add some contingencies in the trust. For instance, you could have an appointor. This is an individual with the power to change the trust's trustee. It is a sure way to protect beneficiaries from an incompetent trustee.
To learn more, contact a wills and estates lawyer.