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Best Practices for Creating a Living Trust
Best Practices for Creating a Living Trust

Learn key steps and benefits of setting up a Living Trust for estate planning

Innerhive Team avatar
Written by Innerhive Team
Updated over a week ago

Key Takeaways:

  • A Living Trust offers detailed control over asset distribution and can manage assets if the grantor becomes incapacitated, making it useful for efficient estate planning across all financial backgrounds
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  • Choose between a revocable or irrevocable trust based on your needs, and select a trustworthy and capable trustee to manage your assets
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  • Regularly review and update your trust to reflect life changes, and consult with an estate planning attorney for tailored advice and to ensure legal requirements are met

Why Consider a Living Trust?

Estate planning, including the creation of a Living Trust, isn't just for the wealthy. A Living Trust is a legal arrangement where one party, known as the grantor, grants another party, the trustee, the right to manage specified assets for the benefit of a third party, the beneficiaries. This tool is essential for anyone looking to manage their assets efficiently, avoid the public and lengthy probate process, and ensure their wishes are respected. Living Trusts are beneficial for detailed control over asset distribution and can provide financial management if the grantor becomes incapacitated, making them a wise choice for securing a financial legacy across different financial backgrounds.


Best Practices for Creating a Living Trust

Creating a Living Trust involves thoughtful preparation and understanding of its implications on your overall estate planning. Here are best practices to consider:

  1. Determine the Type of Trust: Decide whether a revocable or irrevocable trust best suits your needs. A revocable trust can be changed or terminated by the trustor during their lifetime, offering flexibility as your circumstances change. An irrevocable trust, once established, cannot be modified or dissolved without the consent of the trust's beneficiaries.

  2. Select the Right Trustee: Choosing a trustworthy and reliable trustee is crucial as this person will manage your trust after your death or if you become incapacitated. Consider selecting an individual who is both financially savvy and genuinely has the best interests of your beneficiaries at heart. Alternatively, you might opt for a professional trustee, such as a bank or a trust company, especially if the trust will manage substantial assets or requires specialized management.

  3. Inventory Your Assets: Clearly list all assets you intend to include in the trust, such as real estate, bank accounts, investments, and valuable personal property. Assets that require legal titles (like houses or cars) need to be formally transferred into the trust through a process known as "funding the trust."

  4. Define Clear Distribution Rules: Specify how you want your assets distributed among your beneficiaries. Detailing the conditions of disbursement (e.g., age, milestones like graduation, or specific dates) can prevent ambiguity and potential disputes among beneficiaries.

  5. Consider the Impact on Taxes: Consult with an estate planner or tax advisor to understand how creating a trust will affect your tax situation. Revocable trusts, for example, are generally treated as pass-through entities for tax purposes, meaning the trustor is considered the owner for income tax purposes. Irrevocable trusts can be more complex, often subject to different tax rules.

  6. Keep Privacy in Mind: One of the benefits of a Living Trust is that it remains a private document, unlike a will, which becomes public record once it enters probate. Ensure all documents are securely stored and only accessible to authorized persons.

  7. Review and Update Regularly: Life changes such as marriage, divorce, the birth of children, or the death of a beneficiary should prompt a review of your trust. Ensure that it always reflects your current wishes and familial circumstances.

  8. Legal Guidance: While various online tools can help in creating a basic trust, consulting with an estate planning attorney is advisable for tailor-made advice and to ensure that all legal requirements are met. This is particularly important if your estate involves substantial assets, complex arrangements, or if you have specific wishes for your trust that might not be straightforward.


A Living Trust is a strategic tool for anyone looking to secure their financial legacy. By following these best practices, you can ensure that your assets are managed and distributed according to your wishes, providing security and clarity for your beneficiaries during challenging times.
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Disclaimer: This article is for informational purposes only and is not intended to serve as legal or financial advice. For specific advice tailored to your individual circumstances, it is recommended to consult with a qualified professional.

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