One common misconception in estate planning is that everyone’s estate documents revolve around a will. While many of our clients do decide to use a will, many others use the trust instead of or in addition to their will. The trust has purposes that go beyond estate planning, though, and today, we go over some of the basics on Texas trusts to give you a framework for understanding just how useful this tool can be.
What is a Trust?
A trust is a financial arrangement. When the grantor, the creator of the trust, forms the trust, he or she appoints a trustee. This trustee has control of whatever money that the grantor puts into the trust. The trustee doesn’t necessarily use the money for his or her benefit, though. The trust money benefits one or more beneficiaries, named specifically by the grantor. The trustee’s job is to administer the trust and manage the assets so that the beneficiaries can profit from the trust property.
Types of Trusts
There are several kinds of trusts, and each one helps achieve a different goal. In estate planning, we often talk about the testamentary trust. This kind of trust goes into effect when you die, and you maintain the right to change it any point during your lifetime. Once you pass, the trust becomes irrevocable, or unchangeable.
The revocable trust, on the other hand, is one that stays (you guessed it) revocable. You can change the terms of the trust at any time. The irrevocable trust is one that cannot be changed once you create it. While this may seem restricting, the irrevocable trust has important potential benefits, like allowing you to avoid estate taxes or keep your total wealth a minimum for the purpose of Medicaid or other government benefits.
The charitable trust allows you to name non-profits as your beneficiaries, and the Crummey trust allows you to give money to your children over longer periods of time. The asset protection trust keeps your money out of the hands of creditors, which can be beneficial if you owe a debt to one or multiple parties.
Why Consider Forming a Trust?
In estate planning, trusts are popular options because they allow a decedent to avoid probate altogether (as opposed to wills, which necessarily go through probate). Trusts are also private, meaning your estate planning documents won’t be part of any court or public record.
Trusts can also help you manage your estate in the event that you become incapacitated. They also place a kind of barrier around your assets, protecting them from creditors or from being used for any other purpose outside of your specified scope for the trust.
Ultimately, the decision of whether to form a trust is a personal one, and speaking with a Houston estate planning attorney can help you figure out if this tool might be right for you.
Do You Have a Houston Estate Planning Attorney?
At McCulloch & Miller, we have been providing the Houston community with estate planning services for over 30 years. We offer a holistic approach to planning that takes all of our clients’ needs into account, allowing our clients and their families to enjoy the highest possible quality of life. For a consultation with one of our Houston estate planning attorneys, give us a call today at 713-597-7176. You can also fill out our online form to have a member of our team reach back out to you as soon as possible.