As a part of your comprehensive estate planning in Texas, should you consider using a revocable living trust?
Texas probate law is complex and potentially detrimental to the value of your estate should you die without adequate protections in place.
Living trusts offer a number of clear revocable living trust benefits, but they also come with a few caveats. Whether this estate planning tool is right for you depends on your goals and the details of your assets and holdings.
Talking to a Texas estate planning lawyer is a great way to learn more about these and other types of trusts. Attorney Adam Curley of the Curley Law Firm can help you develop comprehensive estate and asset protection strategies that meets your goals and objectives. Contact us today.
Before considering a revocable trust, consider the following seven things you need to know about these versatile asset protection vehicles.
No. 1: What Is a Living Trust?
Living Trusts, also called revocable living trusts or revocable trusts, are legal entities established for the purpose of holding assets during your lifetime.
Once the entity is established, you must transfer title of your chosen assets to the trust. Unless you make changes, those assets will remain in the trust until you die or become incapacitated, depending on your instructions.
You can place real property, cars, investment accounts, and other types of assets in a living trust. During your lifetime, any assets held in a living trust will be for your benefit, unless you specify otherwise.
As with any type of trust, you must designate a trustee to manage the assets and name anyone who will be a beneficiary.
The designated trustee (you can designate yourself as trustee) administers the trust based on the formal instructions outlined in the legal documents required to establish the trust entity. Unlike some other entity types, you can make changes to or revoke a living trust any time prior to your death.
No. 2: How Is a Living Trust Different Than a Will?
One of the primary reasons people choose to transfer assets through trusts is to avoid the time, cost, and hassle of the probate process.
Using a trust also ensures that your wishes are carried out. Going through probate carries the risk that the court could override your instructions for which beneficiaries receive which assets.
Another consideration is whether you want your estate’s disposition to be a matter of public record. Wills and probate proceedings are public, which means anyone can view the details of your assets and beneficiaries. Trusts are not on the public record, which means no one will have access to those personal details.
In most cases, you will likely need to have both a will and at least one trust as part of your overall estate planning strategy. Consulting an experienced asset protection lawyer is the best way to determine what’s right for you.
No. 3: What Are the Benefits of Living Trusts?
One of the primary benefits of a revocable living trust is that you have control of how your assets will be distributed.
You also have the freedom and flexibility to make changes to the trust during your lifetime, an option that you don’t have with an irrevocable trust. You can also benefit from the assets while you’re alive.
For example, you can continue to live in your home, pay your mortgage, and take the allowable interest deductions on your taxes.
A living trust protects you and your assets should you become incapacitated and unable to make decisions, as you have already formalized your wishes and transferred your assets.
No. 4: What Are the Drawbacks of Living Trusts?
As compared to a will, for example, establishing a trust will cost you a bit more up front. However, your estate will avoid the cost of going through probate, which can get expensive.
An attorney can help you compare the cost of setting up a revocable living trust in Texas versus other estate planning options that might be appropriate for you.
Another issue you should consider is how federal estate taxes and creditors might affect your assets upon your death. A living trust does not protect your assets from the federal estate tax burden, nor does it protect you from creditors.
However, an attorney can recommend companion strategies (such as a marital trust) that can address these potential weaknesses.
No. 5: Who Should Have a Living Trust in Texas?
This question doesn’t truly have a clear-cut answer, because everyone has unique goals for their estate and diverse types of assets to consider.
Some investment articles and blogs discourage establishing a living trust if your total asset value falls below an arbitrary threshold. However, you shouldn’t necessarily use that advice as a guideline.
The best way to determine whether you need a revocable trust or any other type of estate planning strategy is to consult an experienced lawyer.
Your attorney can help you evaluate the benefits and drawbacks of each approach and find what works best for you.
The bottom line is that if you want to keep the details of your estate out of the public record, you should consider a trust.
Likewise, it’s worthwhile to explore this approach if you want to ensure your financial future and that your wishes for distribution are carried out faithfully upon your death.
No. 6: How Do You Set Up a Revocable Living Trust in Texas?
If you want to set up a revocable trust, Texas has specific guidelines you must follow.
You must identify the assets you wish to transfer and designate the trustee and beneficiaries. You must determine the most appropriate way to structure the legal entity and create a trust formation document in accordance with that choice.
After you have executed the document and complied with the requirements for establishing the legal trust entity, you must legally transfer all assets that you have designated.
Texas estate planning lawyers strongly recommend that you frequently revisit the structure of your trust and its portfolio of assets. Any changes in your life (marriage, divorce, having a child) may require making changes to your asset plan.
Likewise, buying or selling property may also require adjustments.
No. 7: Should You Contact a Lawyer for Help with Texas Living Trusts?
Although you can draw up your own trust documents and transfer your selected properties to the new entity, consider letting an experienced estate planning attorney assist you.
Should you encounter a problem in the future, anyone who wants to get their hands on your hard-earned assets may mount a legal challenge.
If you prepared any of the documents incorrectly or did not follow the legal requirements of establishing the trust or transferring the assets, you may face potential legal or financial liability.
Contact the Curley Law Firm today to learn more about how you can protect yourself, your family, and your future through comprehensive estate planning. Contact us online or call today to schedule a consultation to discuss establishing a revocable living trust in Texas.