Guide: How to Set Up a Family Trust Fund

family trust fund

You’ve spent decades building a nest egg to take care of yourself. But do you have a will? Half the country does not.

If you’ve been investing properly throughout your career, there’s a good chance this little egg has grown to close to seven figures or maybe more.

“You can’t take it with you.”

We’ve all heard this adage a million times. When you die and your accounts are still plump, how do you make sure this leftover money is allocated to the right people?

You’re in luck. Keep reading to find how to get your family trust fund set up so your money gets into the hands of the right people.

Steps to Setting up a Family Trust Fund

Dying without a will means the courts will decide how to divvy up your estate. If you want to leave your money to a non-relative, they’ll never receive a dime. You can fix this today by setting up a family trust fund.?

The terminology you’ll need to know for this post:

  • The grantor – The person with the money
  • The trustee – Manager of the assets
  • The beneficiary – The person who receives the assets

Step 1

You are the grantor. You decide who receives your assets and when. Let’s get started!

Break out the pencil and the paper for this one. Write down all of your assets. Your home, investment accounts, vehicles, etc…

Keep in mind that creditors can dip into some types of accounts if you die in debt. Make sure all of your debts are handled or paid off in advance.

Step 2

Choose a trustee. In many cases, this will be you and your spouse, as the trustee’s job is to manage funds. If you or your spouse were to pass or be critically injured, there is still one person who can do the job.

Others will choose an adult child, a trusted friend, or professional trustee services, such as one offered by a bank or independent trust company.

A beneficiary can be a trustee, however, we advise against this.

Step 3

Choose your beneficiaries. Write down everyone you want to get a piece of the pie and what kind of percentage they will receive.

Next, come up with the rules. What will this money be used for? Do the beneficiaries need to be a certain age or will all monies be distributed to individual accounts upon your demise?

Are there any restrictions on what the money can be used for? Some people will set up a “college fund” for their grandchildren in this way.

Step 4

Seek out a reputable estate attorney. They will draft the trust to your specifications.

They will also be able to inform you of any discrepancies or loopholes you have yet to think of. The official legal document is called a “declaration of trust”.

Check the document for errors and then sign off on it. It’s now a done deal.

Wrapping It Up

Setting up a family trust fund is not just a great way to take care of your loved ones after you die.

It’s also a great way to incentivize your heirs and reward certain behaviors, which you can dictate through the rules and regulations of the trust.

Did you find today’s post informative? Is there anything you would like to add? Leave us a comment below, we’d love to hear from you.

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