What are the basic requirements to create a trust?
There must be three roles to create a trust – a settlor / grantor, a trustee, and one or more beneficiaries. You will also need to create a trust document, which will govern the trust. The trust must also have a valid purpose and property or assets to go into the trust. Some trusts will gain property later, such as trusts as a part of a pour-over will (i.e. the property in the will pours into the trust when the decedent dies). A settlor can also be a testator if the settlor creates a testamentary trust (i.e. a trust that is created through a will at the testator’s death). A.R.S. § 14-10103(16). The settlor must also intend to create a trust as expressed in the trust instrument. A.R.S. § 14-10103(20). In sum, you can create a trust by: (1) transferring property to another person as trustee during your lifetime (i.e. inter vivos trust) or by will or other disposition taking effect on the settlor’s death (i.e. testamentary trust), (2) declaring the trust if you are the owner of property and saying that you hold identifiable property as trustee, or (3) exercising a power of appointment in favor of a trustee. A.R.S. § 14-10401.
Issues come up when one person wants to play all three roles of the settlor, trustee, and beneficiary. It is common for a settlor to wear the hats of both a settlor and a beneficiary. However, if a settlor is a beneficiary of the trust created by the settlor and the settlor’s interest in the trust is subject to a restraint clause (such as a spendthrift clause), the restraint is invalid against transferees or creditors of the settlor. A.R.S. § 14-7705(A). This means that the consequences of making a trust and naming yourself as beneficiary with a spendthrift clause is that it is invalid against creditors, so they may be able to reach in to satisfy debts. A trust shall not fail for want of a trustee. If you fail to mention a trustee, the court will appoint one. A settlor may be a trustee in certain circumstances, such as when he or she declares a trust validly. A.R.S. § 14-10401.
If you do not address certain situations in your trust document, you either will not have a valid trust or more likely your trust will be governed by default rules in the Uniform Trust Code (UTC). The document must then be signed in front of a notary public.1 You can also make your trust into a certain kind of trust depending on your purpose. For example, the trust could mainly be for the support of your children or a spouse. You can make your trust have any purpose as long as it is lawful, not contrary to public policy, and possible to achieve. A.R.S. § 14-10404.
How much does it cost to create a trust?
It can cost about $30 for a book on how to create a living trust or $60 to complete a living trust online.2 Creating a testamentary trust will only cost as much as creating your will properly and having the right provisions. If you hire an attorney to help you create a more complicated trust, costs can go up, but you will save money by making sure the trust is set up properly.
For more information about creating a trust contact an experienced estate planning attorney in phoenix at Ariano & Reppucci.
1 Making a Living Trust in Arizona, NOLO.COM, http://www.nolo.com/legal-encyclopedia/arizona-make-a-living-trust-31719.html (last visited Jan. 28, 2015).
2 Denis Clifford, Making A Living Trust: Can You Do It Yourself?, NOLO.COM, http://www.nolo.com/legal-encyclopedia/making-living-trust-yourself-29736.html (last visited Jan. 28, 2015).