How to Start a Family Trust for Your Estate Planning Needs

Hey, moms! Let’s talk about something super important but often overlooked – estate planning. I know, it sounds like one of those complicated legal things that you might want to put off, but trust me, it’s crucial for ensuring our family’s future is secure. One of the best ways to handle estate planning is by setting up a family trust. Don’t worry, it’s not as intimidating as it sounds.

Let’s break it down together.


What is a Family Trust?

Think of a family trust as a special box where you can store your assets (like your home, savings, or investments) to protect and manage them for your family’s benefit. It’s a legal arrangement that helps you control how your assets are distributed, ensuring your loved ones are taken care of according to your wishes.

The Components of a Family Trust

A family trust involves three main components:

  • The Grantor: This is you – the person who creates the trust and places assets into it.
  • The Trustee: The trustee is responsible for managing the trust according to the terms you set. You can be the trustee while you’re alive, or you can appoint someone else, like a trusted family member or a professional.
  • The Beneficiaries: These are the people who will benefit from the trust. Typically, this includes your children, spouse, or other loved ones.

Common Types of Trusts: Revocable and Irrevocable

There are also different types of trusts. A revocable trust allows you to make changes or even dissolve the trust during your lifetime. This flexibility can be very appealing if you foresee changes in your circumstances.

An irrevocable trust, on the other hand, usually cannot be changed once it is set up, but it offers stronger protection against creditors and may provide significant tax benefits.

Why Should You Consider a Family Trust for Estate Planning?

Here are some of the most important benefits of considering a family trust:

Protection and Control

A trust allows you to specify exactly how and when your assets should be distributed to your beneficiaries. This is especially useful if you want to ensure your children receive their inheritance at a certain age or milestone.

For example, you might stipulate that they receive funds for education at 18, a lump sum at 25, and another at 30. This can help you manage their financial well-being responsibly.

Avoiding Probate

Probate can be a lengthy and expensive process where a court oversees the distribution of your estate. It can take months or even years, and the associated legal fees can significantly reduce the estate’s value.

Assets in a trust bypass the probate process, meaning your family gets access to the assets more quickly and without the hassle. This can be a huge relief during what is already a difficult time.


According to SmartAsset, “Probate is the legal process of distributing the assets in an estate, due to the decedent dying intestate (without a will) or having an estate larger than their respective state government’s limit. Anything that happens in probate is part of the public record and it can be a time-consuming and expensive process. So transferring assets to a family trust can make life much easier for your family in this way.”


Unlike a will, which becomes public record once it goes through probate, a trust keeps your financial affairs private. This means that the details of your assets and who inherits them are not made public.

If privacy is important to you, a trust is a good option.

Tax Benefits

Depending on your situation, a trust can offer significant tax advantages, helping you maximize what you leave behind.

For instance, certain types of trusts can reduce estate taxes or protect your estate from certain creditors. Discussing these potential benefits with a financial advisor or estate planning attorney can provide clarity on how a trust can fit into your overall financial strategy.

Steps to Set Up a Family Trust

Trust and Will emphasises this, A Family Trust can be simple and flexible – from the creation stage, all the way through the funding stage and into the management stage. Additionally, they’re very accessible, making them easy and convenient to update or modify at any time (as long as they’re not Irrevocable).”

Here is a step-by-step guide to setting up a family trust:

1. Decide What to Include

Begin by taking stock of your assets. Think about everything you own that you might want to include in the trust. This can include real estate properties, bank accounts, investment portfolios, business interests, valuable personal items (like jewelry or art), and any other assets.

Make a comprehensive list so you can be clear on what will be transferred into the trust.

2. Choose the Type of Trust

You’ll need to decide whether you want a revocable or irrevocable trust.

A revocable trust gives you more flexibility since you can change or dissolve it during your lifetime. This can be helpful if you anticipate changes in your assets or wishes.

An irrevocable trust, while more rigid, offers stronger asset protection and potential tax benefits. Discuss these options with an estate planning attorney to determine which type best suits your needs.

3. Select a Trustee

The trustee is the person or entity responsible for managing the trust. You can appoint yourself as the trustee while you’re alive, allowing you to maintain control.

However, you’ll also need to designate a successor trustee to take over upon your death or if you become incapacitated. This could be a trusted family member, friend, or a professional trustee (like a bank or trust company).

Make sure your chosen trustee understands their responsibilities and is willing to take on the role.

4. Determine the Beneficiaries

Clearly outline who will benefit from the trust. Beneficiaries typically include your immediate family members, such as your spouse and children, but you can also include other loved ones or even charitable organizations.

Specify how and when they will receive their inheritance. For example, you might set up the trust to distribute funds for your children’s education or to provide them with regular income.


5. Draft the Trust Document

This is the legal document that establishes the trust and outlines its terms. It’s crucial to work with an estate planning attorney to draft this document. They will ensure it’s legally sound and tailored to your specific needs and wishes.

The trust document will detail the trust’s purpose, the trustee’s powers, the beneficiaries, and how the assets will be managed and distributed.

6. Fund the Trust

Funding the trust means transferring ownership of your assets into the trust. This involves changing titles on properties, updating beneficiary designations on financial accounts, and moving funds into the trust.

For example, you’ll need to retitle your home in the name of the trust and update bank account information.

This step is critical – if assets are not properly transferred, they won’t be covered by the trust.

According to LegalZoom, “While having a trust fund is generally associated with the very wealthy, the reality is that there is no set amount of money required for you to set up a trust. Anyone can set up a trust regardless of income level if they have significant assets worth protecting.

You can start a trust fund for as little as $100 in initial deposit and a few hundred dollars in fees, but if you have $100,000 or more and own real estate, then a trust might be beneficial to protect your assets.”

7. Review and Update Regularly

Life is always changing – new children are born, assets are acquired, or your wishes may evolve. It’s important to review your trust periodically and update it as needed.

Make it a point to revisit your estate plan at major life events (like the birth of a child, a marriage, or a significant change in financial situation) to ensure it still reflects your current wishes and circumstances.

Pitfalls to Watch Out For

While setting up a family trust is a great step toward securing your family’s future, there are a few pitfalls to be aware of. First, be mindful of choosing the right trustee; picking someone who is not reliable or lacks the necessary financial acumen can lead to mismanagement of the trust.

Second, failing to properly fund the trust is a common mistake – remember, assets need to be correctly transferred into the trust to be protected. Additionally, not keeping the trust updated can cause issues, as life changes and new assets may not be included.

Lastly, overlooking professional advice can lead to complications; working with an experienced estate planning attorney ensures your trust is legally sound and aligns with your goals.

By being aware of these potential pitfalls, you can create a robust and effective trust for your family’s benefit.

To Wrap Up

Setting up a family trust might seem daunting, but it’s a powerful tool to ensure your family’s future is secure and your wishes are honored. By taking these steps now, you can have peace of mind knowing that your loved ones will be taken care of. Plus, it can save your family a lot of time, money, and stress in the long run.

So, grab a cup of coffee, sit down with your partner, and start the conversation about estate planning today. It’s one of the best gifts you can give your family.

Kathy Urbanski

Leave a Comment

Your email address will not be published. Required fields are marked *