Setting Up Trusts To Manage and Protect Assets

Trusts for Lonsdale residents
Setting Up Trusts to Manage and Protect Assets: A Comprehensive Guide


Trusts are powerful estate planning tools that can help manage and protect assets, reduce estate taxes, and avoid the probate process. This white paper provides an in-depth guide on how to set up trusts, explaining the types of trusts available, their benefits, and the steps involved in establishing them.

Understanding Trusts

A trust is a legal arrangement in which one party (the trustee) holds and manages assets on behalf of another party (the beneficiary). The person who creates the trust is known as the grantor or settlor.

Types of Trusts

There are several types of trusts, each serving different purposes:

1. Revocable Living Trust:

•Can be altered or revoked by the grantor during their lifetime.

•Allows the grantor to retain control over the assets.

•Assets in the trust avoid probate upon the grantor’s death.

2.  Irrevocable Trust:

•Cannot be altered or revoked once established.

•Provides potential tax benefits as assets are removed from the grantor’s taxable estate.

•Offers protection from creditors.

3.  Testamentary Trust:

•Created through a will and takes effect upon the grantor’s death.

•Does not avoid probate since the will must be probated.

4.  Special Needs Trust:

•Designed to provide for a beneficiary with special needs without disqualifying them from government benefits.

5.  Charitable Trust:

•Established to benefit a charitable organization.

•Can provide tax deductions for the grantor.

6.  Spendthrift Trust:

•Protects beneficiaries from creditors and their own potential financial irresponsibility.

Benefits of Trusts

Avoiding Probate

Efficiency: Trusts allow assets to be distributed to beneficiaries without going through the time-consuming and public probate process.

•Privacy: Trusts maintain the privacy of the estate, as probate proceedings are public records.

Reducing Estate Taxes

Irrevocable Trusts: By transferring assets into an irrevocable trust, the grantor can reduce the size of their taxable estate, potentially lowering estate taxes.

•Charitable Trusts: Contributions to a charitable trust can provide immediate income tax deductions and reduce estate taxes.

Asset Protection

Creditor Protection: Assets in certain types of trusts (e.g., irrevocable trusts) are protected from the grantor’s and beneficiaries’ creditors.

•Special Needs Trusts: Protect assets for beneficiaries with special needs, ensuring they remain eligible for government benefits.

Steps to Set Up a Trust

1. Define Your Objectives

Determine the purpose of the trust. Common objectives include:

Managing and protecting assets.

•Providing for minor children or beneficiaries with special needs.

•Reducing estate taxes.

•Supporting charitable causes.

2. Choose the Type of Trust

Select the type of trust that best meets your objectives. Consult with an estate planning attorney to understand the advantages and limitations of each type.

3. Appoint a Trustee

Choose a trustee who will manage the trust assets. The trustee can be:
An individual (family member or friend).

•A professional trustee (such as a lawyer or accountant).

•A corporate trustee (such as a bank or trust company).

4. Draft the Trust Document

Work with an estate planning attorney to draft the trust document. The document should include:
The trust’s purpose.

•The names of the grantor, trustee, and beneficiaries.

•Instructions for managing and distributing the trust assets.

•Provisions for replacing the trustee if necessary.

5. Fund the Trust

Transfer assets into the trust. This can include:
Real estate.

•Bank accounts.


•Personal property.

•Life insurance policies (by changing the beneficiary to the trust).

6. Manage the Trust

The trustee is responsible for managing the trust according to the terms set out in the trust document. This includes:
Investing trust assets prudently.

•Keeping accurate records.

•Filing any necessary tax returns.

•Distributing assets to beneficiaries as specified.

7. Review and Amend as Necessary

Regularly review the trust to ensure it continues to meet your objectives and complies with current laws. While revocable trusts can be amended or revoked, changes to irrevocable trusts are generally not possible without court intervention.

Special Considerations

Legal and Tax Implications

Consult Professionals: Always seek advice from estate planning attorneys and tax advisors to understand the legal and tax implications of setting up a trust.

•State Laws: Trust laws vary by state, so ensure compliance with local regulations.

Family Dynamics

Communication: Clearly communicate your intentions to family members to avoid misunderstandings and potential conflicts.

•Beneficiary Needs: Consider the specific needs of each beneficiary when establishing the terms of the trust.


Setting up a trust is a strategic way to manage and protect assets, reduce estate taxes, and avoid probate. By understanding the types of trusts available and following the steps outlined in this guide, you can create a trust that aligns with your estate planning goals. Professional guidance is crucial to ensure that your trust is legally sound and effectively meets your objectives, providing peace of mind for you and your beneficiaries.

*Anyone considering creating a trust should seek independent legal advice.  This information should be considered a starting point to curiosity on the topic and in no way should be relied on for making your decisions.