How to Draft a Trust Agreement

Reviewing a trust document.

A trust agreement is an instrument designed to transfer ownership of your property. There are two general types of trust. An irrevocable trust permits you to transfer ownership of certain assets on a permanent basis. Through an irrevocable trust you protect assets from your creditors and avoid certain taxes and the probate process entirely upon your death. A revocable trust allows you to transfer your assets with the ability to terminate or alter the trust as you desire. Because you can change or alter the trust, you do not enjoy the same protection from creditors or tax and probate benefits.

Things You'll Need

• Written trust agreement
• List of assets included in trust

Instructions

1. Decide what type of trust best meets your goals and objectives. The options available to you are a revocable or irrevocable trust.

2. Make a list of the assets that you want transferred to and included in the trust agreement.

3. Determine whom you want to be the trustee. The trustee named in your trust agreement is the individual or institution designated to oversee the affairs of your trust on a day to day basis. In addition to individual trustees, financial institutions also commonly serve as trustees.

4. Select the beneficiaries of your trust. These are the individuals who benefit from the proceeds (revenue or income) generated by the assets in your trust. You can name yourself a beneficiary of the trust.

5. Determine the manner in which income or revenue from the trust is to be distributed.

6. Establish a method for an ultimate distribution of the assets of the trust either upon your death or at some future point in time.

7. Commence drafting the trust agreement by listing yourself as the grantor, identifying the trustee and naming the beneficiaries in the initial paragraphs of the document.

8. Insert the list of assets you desire included in the trust.

9. Add provisions setting forth your decisions regarding payment of revenue or income to beneficiaries as well as the ultimate distribution of the assets at a future point in time.

10. Execute the completed trust agreement in accordance with the requirements of trust law in your state. The law in your state likely requires signing the trust agreement in front of a notary public. Additionally, there may be a requirement that you sign the instrument in front of a witness or witnesses.

Tips & Warnings

• Drafting a trust agreement requires a solid understanding of applicable law. Even what might seem to be a slight mistake in drafting a trust agreement can cause the entire instrument to fail and be declared invalid. Therefore, consider seriously engaging the services of an experienced trust lawyer to draft a trust agreement for you. Local and state bar associations maintain directories of attorneys in different practice areas, including trust law. Contact information for these organizations is available through the American Bar Association.

• American Bar Association

• 321 N. Clark Street

• Chicago, IL 60654-7598

• 312-988-5000

• abanet.org

References

• "The Complete Book of Trusts"; Martin M. Shenkman; 2002
• "Make Your Own Living Trust"; Denis Clifford; 2009
• Investopedia (Forbes Digital): Revocable Trusts
• Investopedia (Forbes Digital): Irrevocable Trusts

Resources

• DIY Estate Planning: Trusts
• American Bar Association: Directory of State and Local Bar Associations