A Last Will and Testament is the first estate planning document executed by the average person. If you already have a Will in place, that Will may continue to provide the foundation for your estate plan for the rest of your life; however, you will also likely incorporate additional strategies and documents into your comprehensive estate plan as you move through the stages of your life. Along the way, you may decide to add a trust to your overall estate plan. While you should always work closely with your estate planning attorney when establishing a trust, the Los Angeles attorneys at Schomer Estate & Wealth Advisors explain 10 common steps involved in creating a trust to include in your estate plan.
What Is a Trust?
A legal trust is a fiduciary arrangement where a Trustee holds assets on behalf of one or more beneficiaries. The person who creates the trust, known as the Settlor (also known as the Grantor or Trustor), appoints someone to be the Trustee of the trust and funds the trust by transferring assets into the trust. The Trustee then administers the trust according to the terms and provisions outlined in the trust agreement.
Steps to Creating a Trust
Step 1: Determine Your Trust Purpose and Objectives
Begin by clearly defining the purpose of your trust and your objectives. For example, is protecting assets the purpose of your trust? Maybe your objective is to minimize estate taxes or ensure a smooth asset transfer to beneficiaries. Understanding your goals will shape the type of trust that best suits your needs.
Step 2: Choose the Type of Trust
Trusts fit into one of two broad classifications: testamentary and living trusts, with the former not activating u until after the death of the Settlor and the latter taking effect during the Settlor’s lifetime. Within those two broad categories there are numerous specialty trusts, each designed to serve specific purposes. A trust can also be revocable or irrevocable. Your estate planning attorney can help you decide which type of trust works best with your objectives and financial situation.
Step 3: Select a Trustee
Selecting the right Trustee is paramount to the success of your trust. The Trustee has a fiduciary responsibility to manage the trust assets and carry out your instructions as written. You can choose an individual, more than one individual, a professional, or a trust management entity as your Trustee. Consider factors such as legal knowledge, trustworthiness, financial acumen, and willingness to serve when appointing a Trustee.
Step 4: Identify Beneficiaries
Define the beneficiaries who will benefit from the trust assets. Be specific in outlining their roles and entitlements to avoid ambiguity or conflicts in the future. Consider future generations and contingent beneficiaries to ensure your wishes endure over time.
Step 5: Draft the Trust Document
To ensure that your trust operates as intended, work closely with an experienced estate planning attorney when drafting the trust agreement. The trust agreement delineates the terms, conditions, and instructions governing the trust and will likely include provisions for asset management, distribution criteria, Trustee powers, and termination instructions.
Step 6: Fund the Trust
Funding the trust is required if the trust is a living trust. If the trust is a testamentary trust, the trust will be funded after you pass away. Almost anything of value can be used to fund a trust so transferring assets may involve re-titling assets such as real estate, bank accounts, and investments.
Step 7: Consider Tax Implications
A trust is a separate legal entity, meaning you need to understand the tax implications associated with your trust. Your trust may be required to pay income, gift, or estate tax. Consult with tax advisors to optimize tax efficiencies and minimize potential liabilities. Ultimately, the Trustee will be responsible for filing tax returns and paying any taxes due.
Step 8: Establish Trust Administration Procedures
Establish clear administrative procedures for the Trustee to follow in managing the trust. This includes record-keeping, asset management, communication with beneficiaries, and compliance with legal obligations.
Step 9: Educate Beneficiaries
Explain the trust’s purpose, important provisions, and beneficiary rights and responsibilities to the beneficiaries of the trust. Encourage the beneficiaries to communicate with you and/or the Trustee if they have questions or concerns.
Step 10: Review and Revise Routine
Periodic reviews and updates of your trust agreement should be conducted to reflect changes in your life circumstances, financial status, or legislative regulations.
Do You Need Help Creating a Trust?
For more information, please join us for an upcoming FREE seminar. If you are interested in creating a trust, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
- Reasons to Incorporate a Living Trust into My California Estate Plan - August 16, 2026
- What You Need to Know about Funding a Trust in California - August 15, 2026
- Estate Planning for Real Estate Owners in California - August 14, 2026
