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I’m interested in setting up a trust fund for my three children. Where do I begin, and what steps are necessary?


Setting up a trust is easy in theory. You could go to a low-cost legal website and buy one that’s pre-made except for the blanks that need to be filled in: What assets are included? Who gets them? Under what conditions? But trusts are generally intended as solutions for legal, tax and family issues that are complicated and idiosyncratic. That means they are likely to require something custom-tailored, not off the rack. The more valuable the assets in the trust are, the more that holds true.
A good potential first step in establishing a trust is to decide what you want it to accomplish – those blanks that need filling in – then find a lawyer who specializes in the field. You can get a referral from a friend who has used a trust lawyer or else ask a professional – another lawyer, a banker, an accountant – in whom you have confidence. Perhaps a better first step is to understand what a trust is and what it can and can’t do.
A trust generally involves surrendering ownership of assets to a third party, either another person or a corporation, known as the trustee, although the person establishing the trust, known as the settlor, sometimes can be the trustee. The trustee is given instructions on how the assets in the trust are to be administered and then passed on to others, your children in this case.
There can be many advantages to a trust, including tax efficiency and protection of assets from lawsuits. Trusts also provide a way to give up control of assets while keeping beneficiaries form getting their hands on them too quickly, such as when they’re young and possibly foolish. Anyone contemplating a trust should remember, though, that it can be quite expensive to establish and maintain a trust. Also, the more control the settlor has, the less bulletproof the trust is likely to be from challenges in court or by the IRS. Another consideration is that property that is part of the trust but located in jurisdictions whose legal systems don’t recognize such a vehicle may not be protected.
-Conrad de Aenlle