How to Set Up a Trust for a Parent

Learn the step-by-step process of establishing a trust to protect your aging parent's assets and ensure their wishes are honored.

1. Understand the different types of trusts. There are two main types of trusts to consider. A revocable trust (also called a living trust) can be changed or canceled while your parent is alive and mentally capable. This type helps avoid probate court but doesn't reduce taxes. An irrevocable trust cannot be easily changed once created, but it can reduce estate taxes and protect assets from creditors. Your parent would give up direct control of assets placed in an irrevocable trust. Most families start by considering a revocable trust because it offers more flexibility.
2. Have honest conversations with your parent. Before taking any legal steps, sit down with your parent to discuss their goals and concerns. Ask about their wishes for their assets, whether they're worried about long-term care costs, and how they want to provide for family members. Discuss who they'd want to manage their affairs if they become unable to do so. These conversations can be emotional, so approach them with patience and respect. Your parent needs to be on board with the process since they'll be the one creating and funding the trust.
3. Gather important financial information. You'll need a clear picture of your parent's assets before meeting with an attorney. Make a list of bank accounts, investment accounts, real estate, life insurance policies, and valuable personal property. Note how each asset is currently titled (individual name, joint ownership, etc.). Also gather information about debts, including mortgages, credit cards, and loans. Having this information organized will help the attorney recommend the best trust structure and make the process more efficient.
4. Choose the right estate planning attorney. Look for an attorney who specializes in estate planning and elder law, not just general practice. Ask friends, your parent's financial advisor, or your state bar association for referrals. During initial consultations, ask about their experience with trusts, their fee structure, and how they'll guide you through the process. A good attorney will explain complex concepts in plain language and help you understand all options. Don't choose based solely on price – this is an important legal document that needs to be done correctly.
5. Work with the attorney to draft the trust documents. Your attorney will draft the trust document based on your parent's specific situation and goals. This will include naming trustees (the people who will manage the trust), beneficiaries (who will receive assets), and detailed instructions about how assets should be distributed. The document will also specify what happens if your parent becomes incapacitated. Review all drafts carefully and ask questions about anything you don't understand. Make sure the language reflects your parent's actual wishes.
6. Fund the trust properly. Creating the trust document is only the first step – assets must be transferred into the trust for it to work properly. This process is called 'funding' the trust. Your parent will need to retitle bank accounts, investment accounts, and real estate in the name of the trust. For example, instead of 'John Smith,' the title might read 'John Smith, Trustee of the John Smith Revocable Trust.' Your attorney should provide specific instructions for each type of asset. Some assets, like retirement accounts, may not be transferred but will name the trust as a beneficiary.
7. Set up ongoing trust management. Decide who will serve as successor trustee if your parent becomes unable to manage the trust or passes away. This person will need access to important documents and should understand their responsibilities. Keep all trust documents in a safe but accessible place, and make sure key family members know where to find them. Your parent should also update their will to work alongside the trust and review beneficiary designations on accounts that weren't transferred to the trust.