What is Involved in Setting up a Trust?

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  • Written By: Charity Delich
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 January 2020
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A trust is a type of legal arrangement in which one party grants legal title to property and assets to another party, who then manages the assets on behalf of a third party. Trusts can be used to hold a variety of assets, including real estate, bank accounts, investments, and personal property. Setting up a trust usually requires the assistance of an estate planning attorney who has knowledge about the different types of trust options available. In general, it involves identifying the trust parties, the trust purpose, and the type of trust.

The first step in setting up a trust is to identify the trust parties. The party transferring the legal title is known as the trustor, settler, or grantor. The party holding the title is called the trustee, and the third party who receives the benefit of the assets is referred to as the beneficiary.

Secondly, setting up a trust requires establishing the purpose of the trust. Different types of trusts are better suited for different purposes. For example, trusts may be used in tax and estate planning, or they may be designed to ensure that assets are disposed of according to a trustor’s wishes once the trustor dies. Additionally, a trust can provide a mechanism to care for dependents, fund scholarships, or to support business operations.


Establishing the trust type is the key final step in setting up a trust. A trust may be entered into as an inter vivos or living trust, meaning that the trust goes into effect while the trustor is still alive. Alternatively, a trust may become effective after the trustor dies. This is typically called a testamentary trust.

When setting up a trust, the trustor must determine whether the trust will be irrevocable or revocable. An irrevocable trust cannot be altered once the trust agreement has been signed, and it is often used in estate planning instead of a will. A revocable trust, on the other hand, can be changed whenever the trustor desires. For example, if a trustor wishes to change the beneficiary or the type of assets covered under the trust, he or she simply needs to complete a trust amendment. Once a trustor dies, a revocable trust becomes irrevocable because the trustor is no longer able to change the will.

In the United States, spouses often use an AB trust when setting up a trust. This type of trust helps ensure that each spouse maximizes his or her personal estate tax exemptions. An AB trust gives a surviving spouse the right to access the deceased spouse’s assets tax free. Once the surviving spouse dies, the named trust beneficiaries have access to the assets, although a portion of the assets may be subject to estate taxes.


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Post 4

I want to do some sort of trust for an ill person to whom everyone can donate money directly to this trust and have charity events to have also have all proceeds to go to that trust. Is it possible?

Post 3

Speaking from a purely amateur perspective (though I specialized in this subject as my college major), there are a few big things to look for.

Obviously, the trust document is king here. You need to research the laws on "prudent investor rule" before you really invest the money. Do some due diligence here. Make sure you research the company, and remember not to invest in anything with a time period (maturity per se) longer than the expected life of the trust. Also, research "fiduciary duty."

Post 2

In general, a trustee is responsible for managing the trust property. As a result, he or she usually has the power to make investments on behalf of the beneficiaries. As to your question, look at the terms of the trust document (or will). It often specifies exactly what power a trustee has.

Relevant law may also outline your specific powers (unless this conflicts with the terms of the trust). When in doubt, it's always a good idea to seek the advice of an estate planning attorney.

Post 1

I have been named Trustee for my deceased father's money that he designated be left to his three grandchildren in his will. Can their money be put in individual CD's to be distributed to each as they reach the age of 22 (set in the will)?

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