When you think of trust funds, you probably think of super wealthy people providing their kids with access to huge amounts of money. However, trust funds aren’t meant only for the rich. You can transfer just about any asset to a trust fund — cash or savings, a house, investments, business shares, life insurance proceeds — and define who you want as beneficiaries and how the assets should be distributed. Some trust funds even allow you to receive income from your own trust.
If you’re looking to elevate and protect your finances through a trust, here’s what you need to know about how they work and how to set one up.
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Online willmaker Trust & Will offers an easy-to-follow question-and-answer format and access to attorneys who can provide a line-by-line review or advise on estate and tax planning topics. You can print your documents or have them shipped to you.
$199 for an individual will, $299 for a joint will; $499 for an individual trust, $599 for a joint trust
What’s a trust and how does it work?
A trust is an arrangement that holds one party’s assets and allows them to transfer those assets to a beneficiary. Trusts also outline how your estate should be managed after your death — just like a will. The difference is that wills must go through probate court before assets can be divvied up, and once they go through probate court, they become public record. This is not the case with trusts. Trusts remain private and generally do not go through probate court.
There are three main components that make up a trust: The grantor, the grantee and the trustee.
The grantor is the person who opens the trusts and assigns assets to the trust. The grantee is the person who is instructed to receive the assets from the trust (aka, the beneficiary). And the trustee is the institution where your trust lives. The institution is responsible for handling the distribution of the grantor’s assets as described.
How to set up a trust
To set up a trust, you’ll typically want to speak to an estate planning attorney to figure out which trust is right for you. You’ll also work with the attorney to draft what’s called a trust document, which includes a list of all the assets you’re assigning to the trust and terms for how they’ll be managed and distributed and to whom.
You’ll have to actually fund your trust with whatever assets you want to protect like bank accounts and investments. Then follow your state’s instructions for legally protecting your trust, which usually includes signing and notarizing the trust document.
You can also use a will and trust creation platform to get the ball rolling and create your trust document, but you may still need to get the physical documents signed and notarized. Trust & Will helps users create digital trusts by walking them through a drafting process. When they’re done, they can just print it out at home or get a physical copy mailed to them and have it signed and notarized. The platform also charges a one-time $299 fee for attorney support during your process. Pricing for individual trusts start at $499.
Trust & Will
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Cost
$199 for an individual will, $299 for a joint will; $499 for an individual trust, $599 for a joint trust
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Estate planning options available
Wills, living wills, trusts, power of attorney
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Access to legal assistance
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Availability
Trust & Will can prepare wills in all 50 U.S. states and Washington, D.C., and trusts in all states except Louisiana.
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Standout Features
Online willmaker Trust & Will offers an easy-to-follow question-and-answer format and access to attorneys who can provide a line-by-line review or advise on estate and tax-planning topics. You can print your documents or have them shipped to you.
Pros
- User-friendly design with clear instructions
- Access to attorney support and probate case managers
- Robust customer service is available seven days a week
Cons
- Free updates are only available for the first 30 days
- After 30 days, trust updates cost $39 annually and will updates cost $19 annually
- Doesn’t offer attorney support in every state
For a more affordable online trust maker, consider Quicken WillMaker & Trust, which starts at $149 for trusts. Note that Quicken’s interface is less intuitive, which can be a drawback if you’re prioritizing a simpler, seamless process.
Quicken WillMaker & Trust
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Cost
$109 to $219 ($39 annually to update after the first year)
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Estate planning options
Wills, living trusts, power of attorney, health care directives
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Access to legal assistance
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Availability
Quicken WillMaker & Trust is available nationwide except in Louisiana
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Standout Features
Quicken WillMaker & Trust allows users to create wills, health care directives and living trusts, both online and through downloadable software. Its all-access plan includes a digital storage vault through Everplans.
Pros
- Produces variety of documents available, including travel documents and other helpful forms
- Downloadable software for lifetime access
- 30-day money-back guarantee
Cons
- Not available in Louisiana, U.S. territories or Canada
- Online will maker only allows free changes for the first year
- No access to attorneys
What are the different types of trusts?
There are over 14 different types of trusts:
- Revocable living trusts: This is a type of trust that allows the grantor (the creator) to make changes to the terms (or even revoke) the trust at any point — like in the event of a divorce or marriage. The trust can become irrevocable (meaning, no changes permitted) after your death, but you’ll have to set those terms to make the conversion happen.
- Irrevocable trusts: As the name suggests, irrevocable trusts don’t allow you to make changes to the trust’s terms without the permission of the beneficiaries.
- Marital trusts: Marital trusts allow the grantor to transfer assets to a surviving spouse. Within marital trusts, you have two sub-sets of trusts including AB trusts and qualified terminable interest property trusts.
- AB trusts: AB trusts are a two-fold type of trust. Trust “A” distributes assets to the surviving spouse and trust “B” protects assets from estate taxes. The surviving spouse can use the trust “B” assets until their own death — in which case remaining assets would be distributed to surviving beneficiaries.
- Qualified terminable interest property (QTIP) trust: The QTIP trust is where a surviving spouse receives income and distributions from the trust until they pass away. When they pass away, the principal assets get passed onto surviving beneficiaries. The surviving spouse cannot access the principal investment in the trust — only income from the principal in the form of dividends, interest, etc.
- Charitable trusts: There are two sub-sets of charitable trusts, including Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs).
- Charitable Remainder Trust (CRT): With this trust, you or your beneficiaries receive the income generated by the trust (like through dividends or interest) and after you die, the remaining assets get passed onto a charity of your choice.
- Charitable Lead Trust (CLT): The CLT is the opposite of the CRT. With the CLT, income generated from the assets are sent to the charity of your choosing up to a certain period of time and then all remaining assets will go to your beneficiaries.
- Special needs trusts: A special needs trust allows you to leave assets to beneficiaries who may be receiving supplemental government support without impacting their ability to continue receiving that support.
- Spendthrift trusts: This type of trust allows you to leave assets to your beneficiaries, however, the trust retains ownership of the assets and only distributes them to your beneficiary according to special terms you set. So if you’re worried that your beneficiary will abuse the assets you leave them or won’t make smart financial decisions with your assets, this type of trust is built for that.
- Generation-skipping trusts: As the name suggests, generation-skipping trusts allow your assets to pass to your grandchildren, not your children so the distributions skip a generation.
- Grantor-retained annuity trust: This type of trust lets you (the grantor) put assets into a trust and also receive payments for your trust while you’re still alive. The payments you receive are fixed amounts, kind of like an annuity (hence the name). You have to set a specified period of time during which you’ll receive your payments from the trust and when that time is up, the assets will transfer to your beneficiaries.
- Grantor-retained income trust: These are similar to the grantor-retained annuity trust but instead of receiving fixed, annuity-like payments, you’re receiving whatever income is generated by your assets in the trust.
- Pet trusts: Yes, you can set up a trust fund for your pet! These are set up like a traditional trust except the terms outline how your pet should be cared for after your death.
However, it doesn’t stop there. There are plenty more different types of trusts for a variety of needs and occasions.
FAQs
How much does it cost to set up a trust?
The cost of a trust depends on how complicated your affairs may be. It can range in cost from a few hundred dollars to a few thousand dollars, especially if you hire a real attorney to help you.
What are the downsides of a trust?
There are a few downsides to consider, including the potentially high setup cost and losing control over distributions for some assets under certain trust conditions.
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