A family trust is set up to pass on assets to family members. People set up family trusts when they are still alive or as part of a will. When you set up a trust, you can transfer your assets to it immediately or over time. You no longer have ownership of those assets, but you have control over a trust. A family trust is a good idea for people who are building wealth and want to keep it safe. A trust makes certain the assets you put there are protected from claims of creditors. It helps provide equality in treatment of children, grandchildren or other beneficiaries. A trust also avoids probate, a costly court procedure that determines the legal ownership of your property upon death. Details of your finances are kept private.
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Things you need
Choose a trustee to handle your family trust. This can be a family member or someone who is reputable and has experience in managing a trust. A person establishing the trust may also be a member of a trustee board overseeing the trust. The trustee maintains and is responsible for all records about the trust.
Decide who will be the beneficiaries of the trust. They will benefit from the assets of the trust upon your death or according to your wishes. Future children or in-laws may be added to the trust later.
Establish the kinds of benefits the beneficiaries will receive from the trust and make it clear how and when these benefits will be distributed.
Draft the terms of the trust.
Provide the trustee with the property and assets that will go to the beneficiaries.
Tips and warnings
- Get financial and tax advice from professionals on setting up a trust. You can get professional help in forming the trust or establish it on your own using professional legal services.
- Make sure your trustee has the expertise to handle the trust throughout its life. A lack of documentation could lead to loss of asset protection.
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