How to set up a trust

Your six-step guide to setting up a trust

Elissa

By

Elissa Suh

Elissa Suh

Personal Finance Editor

Elissa Suh is a senior editor of estate planning at Policygenius in New York City. She has researched and written extensively about wills, trusts, and personal finance since 2019, with an eye towards making difficult (and at times gloomy) topics easy to understand for readers. Her articles and data stories has been cited by the likes of MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

Updated December 1, 2021|5 min read

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Setting up a trust can be relatively straightforward — you can use a digital will service to make a trust online or you can even open one on your own by writing up the proper legal document. However, more complex trusts will require the services of an estate planning attorney to set up.

A trust or trust fund isn’t only for the super wealthy. One of the main advantages of setting up a trust is having more control over how your assets are distributed, as a will distributes your estate after you die, but a trust can be set up to distribute assets only when certain conditions are met.

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After your death, trust assets can pass more seamlessly to your beneficiaries outside of the probate process, which means there is less of a possibility for an inheritance to be contested than there would be with a will.

You can also set up a trust through the terms of your will. But this type of trust, called a testamentary trust, is created upon your death and won’t help you avoid probate. This article explains how to set up a living trust — a trust created while you're alive — also known as an inter vivos trust.

Key Takeaways

  • To set up a living trust, you must write a trust agreement and then properly fund the trust with assets.

  • The trust document requires notarization in most states.

  • You can set up a revocable living trust on your own, but an irrevocable trust will likely require the services of an attorney.

  • A trust can work in conjunction with your will as part of your estate plan.

Why would I want to set up a trust?

One reason to get a living trust is to avoid probate, which can lengthen the amount of time it takes for someone to receive the deceased’s assets and property. Using a trust keeps details private, while wills become public record eventually.

→ Learn more about how to avoid probate

Creating a trust for a minor child can be especially helpful if you want to make sure trust funds and money are used a certain way according to your wishes.

Trusts that cannot be closed, called irrevocable trusts, can also help you do the following:

  • Retain eligibility for government benefits, such as Medicaid

  • Minimize taxes, including income tax, capital gains tax, or estate tax

  • Provide asset protection

  • Donate to charities while creating a stream of income

→ Learn more about different types of trusts

How to set up a trust

There are just six steps to setting up a trust:

  1. Decide how you want to set up the trust

  2. Create a trust document

  3. Sign and notarize the agreement

  4. Set up a trust bank account

  5. Transfer assets into the trust

  6. For other assets, designate the trust as beneficiary

1. Decide how you want to set up the trust

You can set up a trust by hiring an estate planning attorney, using an online service, or opening one on your own.

You likely need an estate lawyer to set up a trust if you're planning to create an irrevocable trust, which must follow certain rules in order to operate correctly. (Find out when else you should hire an estate attorney.)

You can set up a revocable trust on your own, but there may be more room for error if you don’t have legal experience.

Instead you might consider setting up a trust online through a digital estate planning service. Policygenius makes setting up a trust easy with attorney-approved tools and step-by-step guidance. And when you purchase a trust, you’ll also get a will.

2. Create a trust document

You cannot set up a trust without some legal paperwork that explains how it works. The trust document or trust agreement is the foundation of the trust. It establishes the following:

You can also create a shortened version of your trust document called a certificate of trust to use as proof of the trust's existence when handling trust matters.

3. Sign and notarize the agreement

Most states will require the grantor to have the trust document notarized, but even if it's not required it can be a good idea to do so. Notarization helps prevent fraud and confirms the validity of the document after the grantor’s death. Some states may even require witnesses to watch the grantor sign the document.

→ Find out where to notarize your documents

4. Set up a trust bank account

You'll want to fund your trust with money and the easiest way to do that is by setting up a trust bank account. This is especially important if you're setting up a trust fund, which provides money to your beneficiaries. You can create a new bank account for your trust or you may be able to register a current bank account into the trust's name.

The trust's name looks something like this: "Trustee's name, as Trustee of the John Doe Family Trust."

→ More in-depth on how to fund a trust

5. Transfer assets into the trust

Listing the assets you intend to give your beneficiaries in the trust agreement is not enough — you need to transfer those assets into the trust. How you do this depends on the asset and how you hold ownership over it.

→ Learn how to transfer real estate into a living trust

If you have a title to the asset, then you can change the ownership from your name to the name of the trust. For example, transferring a car into the trust usually requires visiting the DMV to change the title and registration from your name to the trust’s name. Putting your house in a trust means creating a new property deed with the trust’s name and filing it with the county recorder's office. If you want your trust hold stock certificates or bonds, you would similarly need to reregister them into the name of the trust.

You may also want to draw up a trust schedule, or informal inventory of your assets to help you and your trustee stay organized.

6. For certain assets, name the trust as beneficiary

The procedure for transferring a life insurance policy and retirement accounts like a 401(k) or IRA into a trust is slightly different than the assets above.

Since these assets are payable on death, a beneficiary can automatically receive them outside of probate. The grantor can have these assets transfer into the trust upon their death, by naming the trust as the beneficiary.

→ Related articles: Do I need a life insurance trust? and How life insurance works with wills and trusts

The cost of setting up a trust

An estate attorney may charge at least $1,000 to set up a trust for you. The cost of a trust can increase even more, depending on how complex your trust is and what you're trying to achieve. If you need asset protection or a credit shelter, your trust may be more complicated to set up, and thus cost more. In general, an irrevocable trust would cost more than a more straightforward revocable trust.

You can set up a trust online, which may cost only a few hundred dollars, not including the notary fee. With Policygenius, you can get a will and revocable living trust for starting at just $150.