What is Trust Drafting?
A trust is a legal arrangement between a trustor, trustee, and beneficiary. The trustor permits the trustee to hold and manage property or assets on behalf of the beneficiary.
Trusts can be used to protect one’s wealth and help them better manage their estate.
However, trust documents need to be drafted clearly so that misunderstandings between parties are prevented and the trustor’s wishes are fulfilled.
Read the rest of this article to explore the different types of trusts, key terms that you’ll find in trust documents, and how to draft a trust so that it’s clear and legally valid.
What are the Types of Trusts?
There are various types of trusts. These include:
- Living trust. Created during the trustor’s lifetime, a living trust manages their assets while the trustor is alive and after their passing, depending on its specific terms.
- Testamentary trust. This trust is created via a person’s will and is applied only after the trustor’s death.
- Revocable and irrevocable trusts. A revocable trust can be modified by the trustor, while an irrevocable trust can’t.
- Funded and unfunded trusts. A funded trust means that a trustor puts assets into the trust, but an unfunded trust means that there’s an agreement in place without funding. Assets can be transferred into it at a later stage.
Note that different types of trusts can overlap. For example, a living trust can be revocable or irrevocable, or a revocable trust can be funded or unfunded.
What are Key Terms in a Trust?
A trust document usually contains specific terms, such as the following:
- Grantor or trustor. This is the individual who establishes the trust and transfers assets into it.
- Trustee. This is the person who will manage the trust according to the trustor’s rules.
- Beneficiary. This refers to the person, or group, who will receive money or benefits from the trust.
- Principal. This is the property and money that’s put into the trust.
- Income. This is the money that’s earned by the trust assets, such as rent or dividends.
- Funding. This term refers to transferring the assets into the trust.
What are Tips for Drafting a Trust?
When drafting a trust, there are important things to consider so that it’s clear and true to the trustor’s wishes.
Properly List the Assets
Write a comprehensive list of all assets, such as properties, investments, and bank accounts, that will be put into the trust. All assets must have detailed descriptions so that there’s no confusion over what is included.
Consider State Laws
Since a trust document will vary depending on what the state-specific laws determine, it’s important to consider all laws and regulations. A lawyer can help you with this aspect of the trust drafting process.
Ensure Correct Funding
This is an important step when drafting a trust. You need to ensure you move all the assets into the name of the trust so that the document will be able to manage it accurately.
Don’t forget about digital assets, such as online businesses, social media, digital photos/wallets, and cloud storage. These are worth considering so that your important digital assets are addressed.
Appoint the Right Trustee
The person you choose and name to manage your trust must be someone you trust and who is capable of fulfilling their required duties. It’s worth appointing a backup trustee who can take over if the first trustee fails.
It’s valuable to consider appointing a professional, objective trustee who isn’t affected by family dynamics so that they focus on the beneficiaries’ best interests.
Be Clear About Distributions
For clarity and to prevent disputes, you need to be detailed about what assets will go to which beneficiaries. Avoid any ambiguous or vague language that can create conflict or make it challenging for the trustor’s wishes to be fulfilled.
Set up specific rules you might want for your trust, such as that your children will receive a trust fund when they go to college.
Leave Room for Flexibility
If you don’t allow your trust to be amended later, this can create rigidity and problems. Bear in mind that you might need to adapt the trust if things change in future, such as if the laws change or your family situation changes.
Include clauses that allow certain changes, and be specific about who has authority to make them.
Plan Ahead for Disputes
There could be disagreements that arise between parties, so you want to address how disputes will be resolved, such as via mediation or arbitration.
It’s also important to encourage transparency, such as with beneficiaries being allowed to inspect records, to prevent misunderstandings that can cause disputes.
By having clear procedures in place, this can prevent parties from being exposed to costly litigation.
How Does a Lawyer Help with Trust Drafting?
It can be challenging to draft a trust if you don’t have a legal background or you’ve never done it before. Consulting with a qualified lawyer can assist you in various ways. A lawyer will engage in activities such as:
- Selecting the correct trust type depending on your goals, such as if you want to avoid probate or reduce taxes.
- Customizing the trust to your specific family dynamics and wishes.
- Keeping the trust legally compliant with all state requirements so that you prevent misinterpretations.
- Drafting the trust in clear, specific language to minimize ambiguity and disputes.
- Considering your overall estate plan, ensuring that the trust is aligned with other documents, such as your will, power of attorney, and more.
- Considering your tax and asset protection, such as by including provisions to protect assets from certain creditors.
- Assisting you with retitling real estate and other assets so that they can be transferred into the trust correctly.
- Reviewing your trust for you periodically, such as after significant life events or law changes.
Where to Find a Lawyer for Trust Drafting
If you need to hire a lawyer to draft your trust, you don’t have to worry about where to locate the most reliable and experienced one. On online legal platforms, you can access a network of qualified lawyers who are experienced to help you, all from the comfort of your home.
ContractsCounsel is one of the largest online legal marketplaces that connects you to a curated network of vetted lawyers. Requesting that one of them helps you with the trust drafting process is easy. Here are the steps to follow:
- Go to the ContractsCounsel marketplace.
- Post your project for free. Include a few details to help you find the most suitable lawyer, such as why you require a trust.
- Wait for bids. You’ll receive multiple bids from lawyers directly on the platform.
- Review the lawyers’ profiles. Go through the lawyer data that’s conveniently provided by the platform, such as the lawyers’ location, client ratings for previous projects, expertise, and credentials.
- Connect with a lawyer you think is best suited to your requirements and hire them to draft your trust for a flat fee.
