Trusts

When a Will May Not Be Enough for Your Estate Plan

Published on: July 17, 2024 | By Thomas W. McCulloch

Many times, prospective clients come to us for an initial consultation asking for help writing a will. While the will can be a valuable tool in estate planning, there are times when writing a will may not be enough. Today, we cover some reasons that your estate plan might need more than a will. As always, to talk more about the specifics of your estate and the planning process ahead, contacted a trusted Houston estate planning attorney that can walk you through your next steps.

Reason 1: Avoiding Probate

The first and most obvious reason to explore an estate planning tool outside of the will is that you want your loved ones to avoid probate after you are gone. A will is generally subject to probate, meaning a probate court reviews the will and decides if it is valid. Only after deciding the will is valid does the court approve the will so that beneficiaries can receive their assets. Probate takes time and resources that many people don’t have or don’t want to expend.

By using a trust instead of a will, you can oftentimes avoid probate altogether. The trust allows property and assets to go straight to beneficiaries instead of through the intermediary of the probate court. This allows for more efficiency, both in terms of cost and time.

When It’s Time to Consider Adding a Trust to Your Texas Estate Plan

Published on: July 5, 2024 | By Thomas W. McCulloch

As many of our clients know, the trust can be a valuable estate planning tool for those who choose to use it. If you are wondering whether adding a trust to your estate plan might be the right next step for you, consider the following reasons that many individuals choose to utilize the trust in their estate planning processes.

You Want to Avoid Probate

The most common reason to add a trust to an estate plan is to avoid having to go through the probate process. When a person dies with a will, the will’s executor must present the will to the probate court. The court reviews the will, decides it is valid, then approves the distribution of the decedent’s assets. This process takes time and resources, and it can be frustrating for families to have to wait for the court proceedings to play out over a series of months.

A trust, on the other hand, is exempt from probate. By putting your assets in a trust, these assets can go directly to your intended beneficiaries instead of passing through probate court. Avoiding probate has the added benefit of ensuring privacy for the decedent and their family, since no documents become part of the public record when they are part of a trust.

What is the Difference Between a Will and a Trust?

Published on: July 3, 2024 | By David W. Miller

As our client community knows, there are many tools available for individuals undergoing the estate planning process. Two of these tools are the will and the trust, and there are important differences between the two. To find out whether a will or a trust is better for your individualized estate plan, we always recommend that you contact an experienced Houston estate planning attorney that can apply the law to your goals and circumstances.

What is a Will?

In short, a will is a legal document that dictates how your property will be distributed upon your death. The will typically lists assets the beneficiaries, and it provides instructions for how exactly to dole out these assets. The probate court is typically involved in making sure the will is valid and in giving a stamp of approval to distribute the will’s assets.

What is a Trust?

A trust, on the other hand, is not a legal document but a legal contract. The trust puts assets into an account, and that account is managed by another person. A trust also has beneficiaries, just like a will. The trust, though, directs the manager (the “trustee”) to distribute the assets in a way that aligns with the trust’s goals.

The Basics on Texas Trusts

Published on: March 13, 2024 | By Thomas W. McCulloch

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.

What is a Texas Charitable Remainder Trust?

Published on: February 24, 2024 | By David W. Miller

Many clients, especially after they have had an especially profitable year, ask our team about how to best structure their charitable giving. Giving money away is a noble goal, and part of our job as estate planning attorneys is to help you figure out how to have the greatest impact while still making sure your financial foundation is solid. One tool we often suggest for our clients’ charitable giving is called the charitable remainder trust. Today’s blog goes into some details about this kind of trust, so that you might be able to discern whether it could be right for you.

A charitable remainder trust is a tool that allows you to both contribute to a worthy cause and be eligible for important tax benefits. Once you deposit money into the charitable remainder trust, you automatically offset or minimize your current tax liabilities. As time goes on, you stay in some control of the money deposited in the trust, and you become eligible to receive a potential income stream from the trust itself. Then, when you pass, the remainder of the trust is given to the charity or charities of your choosing.

Because you get the trust’s tax deduction today, but you still have access to the income from the trust over your lifetime, the charitable remainder trust can truly be the best of both worlds. Importantly, a contribution to a charitable remainder trust constitutes an irrevocable transfer of cash, so it is essential to choose your contribution wisely.

What is a Special Needs Trust?

Published on: January 31, 2024 | By McCulloch & Miller, PLLC

The diversity of estate planning tools available for Texans is vast, and without guidance, it can be difficult to figure out which tool works best for your individualized needs and goals. One specific tool that might be useful for you or a loved one is called the special needs trust. In today’s blog, we review the special needs trust – its advantages, its implications, and important tips to keep in mind if you are thinking about pursuing this trust for someone in your life.

The special needs trust is an irrevocable trust that benefits a physically or mentally disabled individual. The money put in this kind of trust is untouchable to creditors and lenders, and it is managed by a trustee who controls the trust’s assets. Under the law in Texas, the trustee cannot give the trust’s beneficiary money directly from the trust, but he or she can instead use the money to cover the beneficiary’s education, medical needs, and services that might be needed to help the beneficiary navigate his or her disability.

One important advantage of the special needs trust is that the money in the trust does not contribute to the beneficiary’s income for purposes of Social Security Income (SSI). If a disabled person wants to receive these benefits, he or she cannot have more than $2,000 to his or her name. With the special needs trust, however, the amount of money held in the trust has no bearing on this $2,000 maximum. The trust therefore allows these beneficiaries to both receive SSI and, at the same time, keep money in the special needs trust.

Trust Terms Everyone Should Know

Published on: January 19, 2024 | By McCulloch & Miller, PLLC

woman retirement risks and estate planning

Are you delving into the world of trusts and finding yourself unsure of where to start? A common stumbling block for those looking to learn about trusts (or estate planning more generally) is the legal language that comes up in the process. Today, we review some key trust terms that everyone should know, so that you can move forward in your estate planning process with a solid foundation under your belt.

People Involved in a Trust

The trustee: a trustee is in charge of overseeing the assets in the trust. Many people appoint a family member or friend as their trustee, but you can also hire an outside party to oversee your trust.

The beneficiary: a trust’s beneficiary is the person (or group of persons) receiving assets from the trust. Parents, for example, may create a trust for their children – the children then qualify as the beneficiaries.

The settlor: the settlor transfers his or her asset into the trust, which in turn creates the trust.

Are Family Members Less Expensive than Professional Trustees and Executors?

Published on: September 30, 2023 | By Thomas W. McCulloch

Deciding who to appoint as a trustee or executor as part of your estate plan can be a tricky business. One obvious option for a trustee is a valued family member, someone that you can count on to act in accordance with your best interest. At McCulloch & Miller, we have years of experience advising clients on how to choose the right trustee or executor for them, helping them make a decision that works well for their individualized circumstances.

What is a Trustee or Executor?

A trustee is a person that you designate to oversee your trust; this person is in charge of making sure the trust’s assets are used according to your wishes. An executor, on the other hand, is a person appointed to carry out the terms of your will or estate plan. This person will sort out your finances and assets after you are gone.

What is the Cost of Appointing a Trustee or Executor?

When deciding who to appoint as a trustee or executor, you may have many options in front of you: in particular, you might need to choose whether to appoint a family member or a professional as the person to oversee your assets.

Protecting Estate Assets from a Child with Poor Money Management Skills

Published on: August 31, 2023 | By David W. Miller

As you go about your estate planning process, you will necessarily think about who you want to be the beneficiary or beneficiaries of your assets. If you are leaving behind money for your children, you have worked hard to earn that money and keep it safe for future generations in your family. If you have a child with poor money management skills, then you might be worried that the money will be spent frivolously. In this blog post, we go over a few ways you can protect estate assets from heirs who might be at risk for depleting assets you leave behind.

Option One: Spendthrift Provisions

One solution to the problem of untrustworthy beneficiaries is creating a trust with a “spendthrift provision.” This kind of provision essentially puts limits on how a beneficiary can use the money he or she inherits in a trust. For example, you can explicitly state that you only want a beneficiary to benefit from a trust if he or she is gainfully employed. You can write that the money is only to be used for specific purposes, such as rent, utilities, or car payments. You can also give restricted deposits so that the beneficiary does not receive too much money from a given payment.

Setting up spendthrift provisions requires specificity in order to eliminate the risk that the provision can be interpreted in ways that are different from how you intended. Contacting a qualified attorney to help create your spendthrift provision is always a good idea.

Common Misconceptions About Texas Trusts

Published on: June 30, 2023 | By Thomas W. McCulloch

For many of our clients and potential clients, trusts are a somewhat foreign concept and are thought of as inaccessible tools only for the uber-wealthy. Fortunately, this is a misconception, and individuals with all different kinds of estates, assets, and debts are able to benefit from establishing a trust. In today’s blog, we take the time to walk you through several key misconceptions we see about Texas trusts. Here are several myths and realities that we think every Texan should know:

Myth: Only wealthy individuals should consider setting up a trust.

Reality: Trusts can benefit those with large estates, small estates, and everything in between. One possible trust purpose, for example, is protecting assets from creditors if you think you might have debts to pay. By putting money into a trust, you can insulate it from the outside world and make sure it is only used for your desired purposes.

Myth: Trusts cost too much money to maintain – they just aren’t worth the hassle and money.

Reality: While some individuals do invest considerable time and money into creating and maintaining their trusts, there are ways to go about the process that actually saves you money in the long term. For example, assets in a trust can avoid the probate process, which saves your estate considerable time and money after your death. Additionally, you can appoint a trustee that is a family member – if your family member does not want payment for being the designated trustee, you’ve avoided a major expense commonly associated with trusts.