There are many purposes for creating a trust, but they may not be the reasons you have traditionally heard of. For instance, revocable “living trusts” have been marketed by many unscrupulous salesmen as vehicles for “probate avoidance”. The theory given is that by utilizing a trust rather than a will one can bypass the purported time consuming and expensive probate process that is fraught with danger at every corner. While the argument may be valid in some states, this line of reasoning does not hold true in Texas.
A trust works much like a will in that it is an estate planning tool used to control who receives your assets upon your death. Unlike a will, which must go through the probate process after you die, a trust is designed to avoid the need for probate by transitioning control of the estate from you (as trustee during your lifetime) to your successor trustee after you die. It is true that the probate process can be expensive and, in general, can take several months to complete. However, there is a price to be paid for this supposedly streamlined, economical process, and it is called the time value of money.
Ask any trust and estates attorney what they charge for a will vs. a trust and you will find a large price differential. It can sometimes cost thousands of dollars in additional attorney’s fees to set up a trust. So while it is true that you may save a few thousand dollars on the back end (after you are dead) by avoiding probate, you have effectively paid your money upfront by electing to utilize a trust instead of a will. Additionally, in most cases, the use of a trust instead of a will may speed up the process of distribution after your death by a mere three to four weeks (the period of time it takes to have an attorney file a will for probate and have a hearing to appoint an executor for the estate).
The essential concept of a trust is that the trust, as a legal entity, owns the trust property. Typically, successor trustees are named to assume trust management duties upon specific triggering events designated in the trust. At such a time, there is no change of ownership (title remains at all times with the trust); there is only a change of management.
A trust can be explained in parts as follows:
Trusts may be revocable (able to be changed or revoked by the trustor after creation) or irrevocable (permanent upon creation and unchangeable).
Texas has a relatively simple probate process and avoiding probate is typically not the best plan for many clients. However, there are certain circumstances where an estate planning lawyer will recommend the use of a revocable trust over a standard will. For example, if a client owns real estate in numerous states, a revocable trust can serve to avoid the need for multiple probate proceedings in different states which could save enough expense to justify the additional upfront cost of setting up the trust. Additionally, if privacy is an issue, a trust may suit a client’s needs by avoiding the probate process since documents filed in probate court proceedings are a matter of public record. Finally, in circumstances where a client is disabled or elderly, a trust serves as a mechanism for allowing someone else to manage the client’s affairs.
The proceeding paragraphs have focused on setting up a trust as an estate planning tool during one’s lifetime. Do not confuse lifetime trusts with the concept of “testamentary trusts” which are trusts that are created after one’s death in even the most basic of wills. The testamentary trust concept is discussed in a different section of this website.
A knowledgeable estate planning attorney can assist you in determining whether or not a lifetime trust is the right estate planning tool for you. For a free initial consultation with a Sugar Land trusts lawyer, simply call us, or contact our Houston law offices.
Romano & Sumner – Sugar Land, TX Attorneys