The uncomplicated guide to creating a trust

A lot of us know that we really ought to create a will at some point — but we might not be asking ourselves whether we need to also create a trust. Trusts seem more complicated than wills, in part because trusts can be more open-ended than a standard last will and testament. Fortunately, there’s an easy and cost-effective solution.

Those who take out Haven Term, a term life insurance policy, also receive no-cost trust services with the estate planning company Trust & Will as part of the benefits offered through the Haven Life Plus rider. Typically, the trust process costs $599 for individuals and $699 for couples, so this is a significant money-saver. It might also provide some initiative for those who are intimidated by the trust-making process, or have just been procrastinating. (Not, um, that we know anyone like that.)

That all said, many of us might need a trust as part of our estate planning but simply don’t know how to create a trust. That’s why we reached out to Patrick Hicks, head of legal at Trust & Will, to understand exactly what trusts are, how they work, and how long it might take to set one up. What we found out? That the trust-writing process is less complicated than most people realize. Here, Hicks tells us how to create a trust with some surprisingly simple steps.

What is a trust, anyway?

Simply put, a trust is a way to manage your assets and final wishes while you’re still alive. A will goes into effect after you die, while a trust typically goes into effect immediately, while you’re still living. Essentially, you can transfer assets to a trust fund at any point, and that trust will then transfer those assets to your beneficiaries in the future, typically after you’ve died. This allows you to decide that, say, your daughter will receive her inheritance when she is 25, instead of immediately upon your death. A trust also allows you to avoid the probate process, which means your family will have more control of the assets, rather than risking that the state might take over after you die—a messy solution that could mean your wishes are not fulfilled. Finally, a trust can help you reduce any state or federal estate taxes you might incur.

Think of a trust as a sort of third-party account for your assets—you transfer your assets to the trust, which in turn is transferred to your beneficiary or beneficiaries.

Who needs a trust?

Ultimately, this is a conversation you should have with your estate planner or attorney—everyone’s situation is different, and therefore so are their needs. That said, a few common reasons to consider a trust include whether you own a business—you could write a trust that outlines how you hope to pass your business down to your children, including how to divide the percentage of interest in the business.

You might also want a special needs trust to help provide for a loved one who might need long-term care. With a special needs trust, you can set aside assets for a loved one without limiting their access to government benefits — which is one of the best ways to ensure your child or relative gets the financial support they need.

Another advantage is that you can use a trust to determine what happens if you become physically or mentally incapacitated. “With advancements in modern medicine, that’s of growing importance for a large number of people,” Hicks explains. “Stats range, but up to two-thirds of people will experience a period of incapacity during their lifetimes. Having documents in place to handle that is incredibly important, and of growing importance each passing year.”

What type of trust might I need?

There are many different kinds of trusts, but the most common type is a revocable living trust. The key words here are “living”—it goes into effect while you’re still alive—and  “revocable,” which means you can change your plans if and when the need arises. Essentially, this kind of trust gives you more control and flexibility over your assets as you age and your situation changes.

“Trusts give you a lot of control over what you want to do,” Hicks says. “A trust is really a blank sheet of paper, and you can make it anything you want it to be.”

How complicated is it to create a trust?

Creating a trust is a lot like creating a will — in fact, Trust & Will starts off by asking you a lot of the same basic questions about your family and your goals.

Since you can do a lot more with a trust than you can do with a will — the process of writing a trust can be more complicated than the process of creating a will. Don’t let that stop you from beginning the trust-writing process, though. “The trust [process] has a few questions that some people might not have thought about before,” Hicks says, “but they’re not stumbling blocks.”

If you’re worried about creating a trust because you’re afraid it will lock you into something for the rest of your life (and beyond), keep in mind that with a revocable living trust, like what is sold through Trust & Will, you can change the assets included at any time. If you create a succession plan for your small business and decide you want to adjust the percentages of ownership, for example, you can rewrite such a trust. Getting the trust in place is the most important step; once your trust is set up, you can continue to adjust it as life goes on.