A trust is a fancy term for a three-party legal relationship. A trust involves the trustor (the person creating the trust), a trustee (the person managing the trust) and one or more beneficiaries (the person or people to whom the trust will pay money or give property). Irrevocable rusts can provide significant tax benefits, and they are helpful tools for avoiding property and managing property. Whatever your reason for creating an irrevocable trust, you can do it yourself if you have the right paperwork and understand a few basic concepts.
Irrevocable Trust Basics
When you create a trust you actually transfer ownership of property from yourself to your trustee. The trustee then holds legal title to the property, the beneficiaries hold equitable title, and you the trustor no longer have any title to the property. This is a significant step, especially where the trust is irrevocable. Irrevocable means that once you create the trust, you can't undo the trust and get the property back without the consent of the trustee and the beneficiaries.
Choose Your Parties
The first step to creating a trust is to decide who will be the trustee and the beneficiaries. The trustee should be somebody you trust completely, and should be somebody with some experience or capacity for managing the trust property. As long as you are not the sole beneficiary, you can act as your own trustee. As for beneficiaries, you simply need to decide who you want to benefit from the trust. You can choose one or more beneficiaries, including contingent beneficiaries in case the primary beneficiaries die. Choosing the beneficiaries is a personal decision that only you can make.
Identify the Trust Property and Benefits
Most trusts are designed to hold real property, such as homes, land, investment property or rental properties. You probably don't want to transfer title to your automobiles (in fact, some states, such as California, prohibit transferring cars to a trust) or your personal bank accounts and retirement accounts, but you probably want to transfer certain bonds and other investment accounts. Only you can decide what you want to transfer to the trust. Keep in mind that whatever goes into an irrevocable trust can come back to you only if the trustee and all the beneficiaries consent. In other words, you lose control over whatever property goes into an irrevocable trust. For tax reasons, that may be exactly what you want, but be sure to think through each piece of property and make sure you have a good reason for essentially giving it away to your trust.
Draft the Trust Document
You should always use a written trust document to define the terms and conditions of the trust. The trust document will be called "Irrevocable Living Trust of [Your Name]." You should use a model trust form and adapt it to your particular needs. You can find a good model by asking somebody you know who has set up a trust, asking a local attorney for a form (you will have to pay for it) or purchasing a good form from a reputable online seller such as USlegalforms.com or legalzoom.com. Once you get a good form, it is merely a matter of reading through and filling in the blanks to make the trust say what you want it to say. There are very few legal limits or requirements on what you can say in your trust.
Transfer the Trust Property
Your trust is worthless until you transfer property to the trust. Property comes in two forms: (1) property that is represented by written title and (2) property that is not represented by written title. Ownership of real estate, for example, is represented by a written deed, while a family jewel is probably not represented by any written document of title. To transfer property with documents of title, you need to perform a paper exchange in which you execute aconveyance deed from yourself to your trustee. For example, if Joe Bob is your trustee, you will convey your home from "[Your Name]" to "Joe Bob, as Trustee of the Irrevocable Living Trust of [Your Name]." Remember that if you are dealing with real estate, you need to record the deed of conveyance with your county recorder. As for property not represented by written document, you need to transfer physical possession of the property to the trustee. So, for the family jewel, you need to actually give the jewel to the trustee to hold and protect. As soon as you transfer the property, your trust will be up and running.
- Nolo's Make Your Own Living Trust, Attorney Denis Clifford (9th Ed. 2009).
How to Use an Irrevocable Common Law Trust
How to Use an Irrevocable Common Law Trust. ... Irrevocable Trusts; Resources. LawGuru Forms; Legal Zoom; More Like This. How to Sue...
What Is the Irrevocable Living Trust?
Probate avoidance is the most common reason for creating a trust. This can be achieved ... need during their own ... of...
When Does a Revocable Trust Become Irrevocable?
A revocable living trust allows you to distribute your assets after death while managing them in life. By creating a trust and...
How Much Does a Irrevocable Trust Cost in New Jersey?
Work for Yourself; Your Business. Starting a Business; Managing Employees; Running a Business; Insurance. ... When Does an Irrevocable Trust Expire? Comments....
How to Dissolve an Irrevocable Trust
Irrevocable trusts are excellent tools for protecting assets and minimizing income taxes. They don't come without a price, however. By definition, an...