Starting a Family Trust

Protect your child's future with a trust fund.

A trust permits you to legally transfer assets to a beneficiary after death. Funding a family trust is a multistep process that requires planning and a moderate amount of paperwork. You don't have to be rich to start a family trust. In fact, any individual or household with a liquid asset -- an item that can be sold for cash -- can start one. Starting a family trust protects your assets against theft and ensures that minor and adult children are cared for as you see fit.

Instructions

1. Transfer title of your assets into the family trust. For example, transfer real estate, heirlooms and disposable property, such as automobiles and furniture. Stocks, bonds and other financial vehicles are also transferable assets. You will have full control of these assets during your lifetime.

2. Hire an appraiser. You cannot sell or transfer an asset into your family trust without issuing documentation of its fair market value, which an appraiser can provide.

3. Appoint a successor trustee -- most likely, you will be the trustee while you are alive. A successor trustee takes over control of the trust after your death and distributes the trust's assets to your beneficiaries. A beneficiary is an organization or person who will receive the benefit of the trust's assets.

4. Assign the trust's assets to specific beneficiaries. A trust deed outlines how your family's assets will be distributed and to which beneficiary.

5. Fill out an Agreement for Sale and Purchase. This document transfers your assets into your family's trust. Consider this document as a kind of bill of sale; although, a sale, in the traditional sense, will not take place.

6. Fill out a Deed of Acknowledgment of Debt. This document functions as a kind of "I Owe You." It acknowledges that you are giving the family trust a right to purchase and retain ownership of your assets without payment. In other words, you are loaning your assets to your family trust and agreeing to accept payment later. An attorney can help you forgive this debt over time so your family trust does not remain indebted to you.

Tips & Warnings

• Hire a local title company or attorney to fill out and submit your trust deed and other paperwork for public record.

References

• The Smarter Wallet: Trust Fund Basics: Setting Up A Family Trust
• ABA Net: Estate Planning FAQs
• Estate Planning Links: What Is a Living Trust
• Dummies: Benefits of Setting Up a Trust

Resources

• Doc Stoc: Deed of Acknowledgement of Debt Template
• Consumer Build: Sale & purchase agreement