Why Do You Need a Lawyer to Set Up a Trust?
by Unbundled Legal Help
Whether you are interested in setting up a trust for financial purposes or you simply want to ensure that your family is well-provided for after you are gone, it is reasonable to ask “Why do you need a lawyer to set up a trust?”
If you have a relatively small amount of assets with few instructions for disbursement, then hiring an estate planning lawyer to set up a trust for you may not be necessary. However, if you intend on setting up a trust that includes large assets, detailed instructions, and/or multiple people, hiring an attorney may be in your best interest.
Regardless if you ultimately choose to hire an estate planning lawyer in your area or not, it can be helpful to at least schedule a free consultation with an attorney. We can put you in touch today with a local estate planning lawyer. Learn more below about why you need a lawyer to set up a trust and why you may not.
What is a Trust?
A living trust is essentially a document created by the grantor (also called trustor, settlor, or trust maker) that gives a way to manage as well as disperse assets to specified beneficiaries upon their death.
A trust is typically one piece of a comprehensive estate plan. Once the grantor transfers their assets to the trust, the assets no longer belong to them. They will be owned by the trust and under the control of the named trustee.
It is important to note that the trustor may also be the trustee (depending on the type of trust) until they are incapacitated or pass away. Trusts can be used as financial tools as well as vehicles to pass money, assets, or property to another person or organization. The most common types of trust funds include revocable, irrevocable, and testamentary.
Learn more about each below.
Revocable Living Trust
A revocable living trust is set up while the grantor is alive. This represents the vast majority of trusts. Most living trusts are made revocable until the passing or incapacitation of the grantor. Once this occurs, the trust will become irrevocable. Living trusts can offer many benefits to include:
- End-of-life/ healthcare instructions desired by the trustor
- Reduced or eliminated probate fees (in many cases)
- Easy access to assets for beneficiaries
- Privacy (unlike wills)
Since most living trusts are revocable, the assets therein are still considered the property of the grantor. This means that creditors can still potentially lay claim to the assets held in a trust and the grantor will still have to pay taxes on the assets in the trust.
These types of trusts are also called “trusts under will.” Unlike a living trust, these are created by a will after the grantor's death. A testamentary trust can help to:
- Preserve assets for children from past marriages
- Financially provide for your spouse after your death
- Leaving money behind for beneficiaries with special needs
- Gifting money to charitable organizations
An irrevocable trust is a type of trust that cannot be changed or revoked without the explicit permission of the beneficiaries of the trust. Unlike revocable trusts, once the grantor funds an irrevocable trust, they absolve themself of all ownership rights to the assets. People create revocable trusts for many reasons such as:
- Tax advantages and benefits
- Preventing beneficiaries from misusing the assets by setting distribution rules
- Gifting a principal residence with more lenient tax rules
- Deplete property to remain eligible for government benefits (i.e. social security, medicare, etc.)
Do I Need an Attorney To Set Up a Trust?
Technically, no. You are not required to hire an estate planning lawyer to set up your trust. When setting up a trust on your own, you should be sure to include the following information:
- The name of the trustor
- Name of the trustee (typically yourself)
- The name of the successor trustee
- The beneficiaries that you intend to leave your property to
- Instructions for disbursement
In addition, be sure to check your state’s laws. Many require the grantor’s signature to be notarized and include witnesses. If your trust includes complex instructions, multiple beneficiaries, is created exclusively for financial purposes, etc., then it may be in your best interest to at least consult with an estate planning lawyer before setting it up on your own.
Pros and Cons of Hiring an Estate Planning Lawyer
The more complex and complicated your estate planning needs are, the more likely you are to need an attorney to create an effective trust agreement. It may be beneficial to hire an estate planning lawyer if your estate plan includes any of the following provisions:
- High-value life insurance policies
- Set conditions and/or instructions for beneficiaries
- Generation-skipping (i.e. leaving money to your grandchildren)
- Help with funding of the trust
An estate planning attorney can help to ensure that your trust financially protects you and your beneficiaries. If you intend on distributing assets such as stocks, large sums of money, real estate, etc. then it is typically in your best interest to work with an experienced attorney.
Unfortunately, many are turned off by the thought of hiring an estate planning lawyer due to the costs associated with retaining one. In fact, estate planning lawyers can cost as much as $2k - $7k upfront, with an additional hourly fee on top of that. In some cases, it can be lower and in other cases, it may be higher. It will depend on your specific circumstances.
When setting up a trust, it is best to conduct independent research and learn some basic information before you begin the process. This is especially true if you plan on setting up a trust without the help of an estate planning lawyer.
What Are The Benefits of a Trust
Trusts can be complex, varied, and adaptable. Though once considered financial tools meant exclusively for the rich and super-wealthy, they can be beneficial for many across the economic spectrum. Among the chief benefits of trusts, they allow you to:
- Create instructions and conditions for asset distribution upon death
- Reduce overall estate taxes and/or gift taxes
- Distribute your assets among your beneficiaries without probate costs and publicity
- Add a layer of protection for your assets against certain creditors and lawsuits
- Identify a successor trustee
It is important to note that the probate process can cost your estate upwards of 10 percent of it’s value. Trusts can help you to avoid probate fees, legal fees, executor fees, and other court costs. Regardless of the size of your estate, a trust can help you and your beneficiaries to save a significant amount of money.
Depending on your reasons for setting up a trust, the amount/type of assets you wish to fund the trust with, and the disbursement instructions, it may be in your best interest to have an in-depth conversation with your estate planning attorney before choosing the type of trust you will use.
Tips To Reduce The Costs of Setting Up a Trust
The high cost associated with hiring a trust lawyer dissuades many from doing so. While the benefits of working with an estate planning lawyer are clear, it is not always possible to pay thousands of dollars upfront. If you would like to save money on setting up a trust while still retaining the help of an attorney, check out a few cost-saving tips below.
- Conduct Your Own Research: You are not expected to become a trust fund expert overnight. However, having a basic understanding of your state’s laws and what is required of you before starting a trust fund can save you a lot of time and money.
- Know What You Want: Knowing the laws are not enough, before meeting with your trust lawyer, it is best if you at least have an idea of what you would like to do with your assets, your reasons for setting up a trust, and who you want your assets distributed to.
- Take Care of a Few Things on Your Own: You can save money on legal fees by taking care of a few things on your own, and hiring an unbundled attorney to handle the rest. Learn more below about how unbundled legal services can help you to save money on setting up a trust.
Save Money with an Unbundled Lawyer Today
You can save thousands of dollars in upfront fees by hiring a trust lawyer to handle the more complex parts of setting up a trust, while you take care of the rest (i.e. conducting research, drafting a trust agreement, creating distribution rules, etc.).
Fees for an unbundled estate planning attorney start as low as $500-$1500 upfront. If your estate planning needs are more complex our network of unbundled attorneys also offers full representation at affordable rates.
Before you spend thousands of dollars in upfront fees to set up your trust fund, get connected with an unbundled trust attorney in your area, and learn if you can save money on your estate planning needs today.