A trust, or a trust fund, is an arrangement where one party grants another party the right to manage and distribute assets for the benefit of a third party. Those assets may include money, real estate or other property. A trustee is charged with carrying out the instructions, rules and guidelines set forth in a trust document by the grantor (also known as the “trustmaker”). The trustee is generally an individual or firm. The trustee is bound by fiduciary duty to act in the best interests of the beneficiaries.
A revocable trust, which allows you to place your assets in the trust while you are alive and then transfer control of them after your death, can also reduce or eliminate estate taxes. It can also protect your assets from creditor claims and short-circuit spousal inheritance provisions. Trusts can also be used to avoid the time and expense of probate after your death and to protect your assets from beneficiaries with poor spending habits or bad relationships with creditors.
There are many reasons to create a trust, and while the process of setting up a trust may take longer than drafting a will, it can be very important for you and your family. A TIAA adviser can help you determine the type of trust that is right for you.
Step 1: Work with an attorney to draft a trust document that incorporates your wishes for the distribution of your assets. You can also decide to name yourself as trustee and beneficiary of your trust. You can even include a disability trustee who takes over management of the trust in the event you become disabled or incapacitated.
Step 2: Find a trusted trustee. The trustee is the person who manages and administers your trust and distributes the assets in accordance with your wishes. Your trustee can be an individual or a corporate entity, and he or she should have the knowledge, astuteness, business experience and ethical standing to be responsible for managing your trust.
Once you have completed the above steps, it is time to move your assets into your trust account. If you have a large amount of assets to transfer, it might take some time to get them all into the account. However, your advisor can help you systematically move your assets into your trust as they come up for review. This step is also a good opportunity to talk with your tax and financial advisors about the benefits of a trust. The more your advisors can collaborate on your behalf, the better your overall planning results are likely to be.