Many people decide to set up a revocable living trust to avoid probate, guard their family’s privacy, or empower a trustee to manage their assets if they become disabled. Since some online sources offer a free and quick trust document template, it’s tempting to forgo hiring an estate planning attorney and save money by setting up a DIY living trust.

Should you set up a living trust by yourself? The most likely answer is “no.” Let’s break down how living trusts work and why working with an estate planning attorney is the best option for most people who want to create a revocable trust.

WHAT IS A DO-IT-YOURSELF LIVING TRUST?

A living trust is a legal document that can transfer ownership of assets from an individual to a separate legal entity — the trust —which involves three parties:

1. The grantor, a.k.a trust creator
2. The trustee or trustees
3. The beneficiary or multiple beneficiaries

Once you transfer property or funds to a trust, you legally relinquish ownership of these assets, and henceforth, they belong to the trust. However, since a grantor can also appoint themselves as trustee, you may continue using the property as before. You can also change or rescind a revocable living trust anytime during your lifetime, provided you have the mental capacity to do so.

A DIY living trust is just what it sounds like: a grantor setting up their own trust without consulting an estate planning lawyer.

IS IT SAFE TO MAKE YOUR OWN LIVING TRUST?

The law doesn’t require you to hire an attorney to create a trust, so a DIY living trust is a legally valid option. However, many people who create their own living trusts, or the beneficiaries of these trusts, ultimately discover that working with an estate lawyer could have saved them a lot of time, hassle, and often also money.

In some cases, DIY trust creators have:

Accidentally used template documents designed for another state

Overlooked other legal documents they would need besides the living trust, like a new deed to transfer real estate assets

Made technical mistakes that would eventually invalidate their trust

Is the money you save by setting up a DIY trust worth the additional risk? Only you can decide that. Most professionals would say proper estate planning is too important to hazard mistakes by eschewing legal counsel.

Finally, it’s worth noting DIY living trust templates include a disclaimer stating that this type of document “does not substitute legal advice.”

WHAT CAN A LIVING TRUST DO?

Living trusts can accomplish several purposes. Namely, a living trust may help you:

1. Avoid probate. In most cases, any property you owned solely in your name will have to go through probate, a legal process that usually takes at least a few months. Living trusts can bypass this step, distribute property directly to a beneficiary, and avoid probate fees.
2. Control assets after your passing. Compared to wills, living trusts allow for more flexible control over asset distribution. You may stipulate that beneficiaries receive trust assets when they fulfill certain conditions — for example, when your adult child graduates from college.
3. Ensure smooth asset management if you become incapacitated. Your trust can allow a successor trustee to step into their duties immediately if you can no longer manage your own assets.
4. Protect young beneficiaries. If you have minor children, you can create a living trust to hold their inheritance until they become legal adults or until a certain age.
5. Keep your legacy private. Probate goes on public records, so theoretically, anyone could look into your property after your death. Trusts allow you to keep your affairs private.

WHY DO YOU NEED ONE?

Your reasons for creating a living trust may depend on what you want to accomplish by setting up the trust: avoid probate, financially safeguard your family, or make sure an adult child receives their inheritance at the right time. Your estate planning goals may also influence the trust structure.

Keep in mind that a revocable trust does not shield your assets from creditors or Medicaid, nor does it help avoid inheritance taxes or estate taxes. To shelter your assets from claims or reduce inheritance tax, you may want to look into irrevocable trusts. An asset protection attorney can help you decide what types of trusts to include in your estate planning.

WHO SHOULD GET A LIVING TRUST?

You may consider setting up a living trust if you:

• Own many assets
• Hold property in more than one state
• Have a complex family situation, such as children from two or more marriages
• Own a business
• Want to release assets to heirs not immediately after your passing but at a certain future point

HOW TO CREATE A DIY LIVING TRUST?

As you prepare to set up a trust, make a complete and detailed list of all your assets, including:

• Real estate
• Vehicles
• Stocks and bonds
• Bank accounts
• Insurance policies

You will also need to source certificates and deeds that confirm your ownership of these properties.

Some of your assets, like life insurance policies or IRA accounts, may already have a designated beneficiary. You don’t need to include these assets in the trust.

Then, draft a beneficiary list that may include your spouse, family members, friends, charities, or anyone to whom you may wish to leave property.

Finally, consider whom you choose to appoint as a successor trustee. It can be your adult child, sibling, business partner, or even a trusted close friend. You can also name a trust management company or another financial institution as your successor trustee.

Once you have all these details in place, you can proceed with trust formation, which includes the following steps.

TRUST DOCUMENTATION

Your Declaration of Trust, the legal document that forms a trust, should include your name and list anyone whom you name as a co-trustee, successor trustee, or beneficiary. You should also describe relevant assets and instruct your successor on how to distribute property after your passing.

An estate planning lawyer can review your trust documentation to make sure it’s legally valid and answers your purpose.

NOTARIZATION

In most states, you will need a notary public to endorse your trust to make it enforceable. After confirming your ID, the notary public will sign, date, and stamp the documents. Many attorneys also provide notary services.

PROPERTY TRANSFER

Once your trust becomes active, you can transfer assets into its ownership. Typically, these transfers will involve high-value assets like your house, stocks, and bonds. To transfer real estate assets, you will need a quitclaim deed and a new deed establishing the trust as the owner of the property.

If you own a company, you may also place it in a trust as part of your business succession plan.

HOW MUCH DOES IT COST TO CREATE A LIVING TRUST BY YOURSELF?

Creating a DIY living trust may cost under $100 if you use a ready template. Hiring an attorney makes trust setup more expensive.

However, although you can save money with a DIY trust, you or your family may eventually pay a lot more if incorrect trust documentation leads to a dispute or if a court invalidates a trust because of legal errors and trust property has to go through probate after all. And that’s not counting the additional time and energy your loved ones may need to invest to resolve a potential trust dispute.

LIVING TRUST TAXES

As a rule, if a trust has an income of $600 a year or more, the trust must submit a federal tax return as a separate legal entity. However, the income of revocable trusts under the grantor’s control belongs to the grantor’s personal return, and the trust doesn’t need to file separately.

After the grantor dies and the successor trustee distributes any remaining assets, the beneficiaries will have to pay taxes on the property they receive, unless it’s returned principal, i.e., property that already underwent taxation. Any capital gains on trust assets are subject to taxation.

Working with an estate attorney can help ensure that you comply with trust-specific taxation requirements and provide all the necessary IRS forms, chief among which are Forms 1041 and K-1.

RISKS OF SETTING UP YOUR OWN LIVING TRUST

When people establish a DIY living trust, they rarely consider how many issues may arise because a legal professional hasn’t revised their living trust forms. Potential problems with making a living trust on your own include:

• Technical errors that may invalidate the trust document
• Not following the right procedures when transferring assets or money to a trust
• Unclear wording that creates an opportunity for trust disputes
• Potential probate litigation that leads to ugly family conflict
• An incomplete understanding of the trust’s purposes, like mistakenly assuming that living trusts may shield assets from debt claims

A skilled asset protection attorney can help you avoid common pitfalls and set up a living trust as part of your overall estate planning strategy, along with other documents like your last will and testament. For example, an attorney can advise you on which assets to transfer to a living trust and which property you may choose to protect by locking it in an irrevocable trust.

WHEN DO YOU NEED TO SEE A LAWYER?

In almost all cases, you will benefit from hiring a competent estate planning lawyer to create a living trust correctly. An experienced estate attorney will know how to create a trust document that helps protect your assets, safeguards your beneficiaries’ interests, and avoids various legal issues.

Working with an estate attorney is especially important if:

• You have a high net worth or complex estate
• You carry a lot of debts
• You own property overseas or live abroad
• You believe there’s a high chance of conflicts over legacy in your family
• You aren’t sure whom to appoint as your successor trustee