Setting Up Trusts for Grandchildren
- 1). Identify the beneficiaries. Trusts can be designed for specific individuals ("to Tim and Susan") or for a class ("my grandchildren"). If your children are planning on having more kids, it is best to set up the trust for “grandchildren.” However, if your children do not plan on having any more children, it may be better to identify the children by name to avoid confusion.
- 2). Find a trustee. The trustee is the individual who will have the responsibility to manage the assets in the trust for the benefit of the beneficiaries, or grandchildren. It is best to choose a trusted family friend for this position, but the trustee can even be a grandchild, so long as she is not the only trustee and sole beneficiary.
- 3). Assign to the trustee specific tasks to accomplish in maintaining the property. The trustee is required to have some responsibility over the trust’s assets, and this responsibility must be defined by the donor when the trust is created. Generally this responsibility involves maintaining the trust’s property, filing relevant governmental statements and filing trust tax returns.
- 4). Determine which property you will put into the trust. Once the property is transferred into the trust you surrender all rights of ownership to the trust, so make sure that you are comfortable with losing the property.
- 5). Draft a document signifying the intent to create a trust and its purpose. The trust document satisfies the legal requirement of signifying intent to create a trust, as well as codifies what the trust is supposed to do and how it is to be managed. Contained within should be all of the tasks assigned to the trustee and the beneficiaries of the trust.
- 6). Transfer the property to the trust. If these are investments, transfer the assets to an account in the trust’s name. If it is real property, sign the deed over to the trust.
- 7). Investigate to see if you have any specific filing requirements with the state where the trust is located. All trusts are defined by state law, and states may have different forms, filing or reporting requirements for trusts. Inquire at the secretary of state’s office where the trust is located.
- 8). Apply for an employer identification number (EIN) with the IRS. An EIN is the means that the IRS uses to organize and process non-personal returns and trusts are required to have one. The best way to apply for an EIN is on the IRS website. To complete the application, you will need the trustee’s Social Security number.
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