Learn how a trust works.
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.
Experienced Estate Planning Lawyers Assisting Sugar Land Families with Trust Matters
A trust can be explained in parts as follows:
- A trust is a legal entity and must be created according to Texas laws to be valid. A valid trust must have the following:
- A “trustor”, the person or persons who create the trust;
- A valid “trust purpose”;
- A “beneficiary” or “beneficiaries”;
- A “trustee” who manages the trust for the benefit of the beneficiaries; and
- “Trust property,” the actual assets transferred to the trust. If there is no trust property, there is no trust.
Trusts may be revocable (able to be changed or revoked by the trustor after creation) or irrevocable (permanent upon creation and unchangeable).
Sometimes you should use a lifetime trust.
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 purportedly 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 Fort Bend County estate planning attorney gives the following explanation.
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 time value of money.
Ask any Fort Bend County estate planning 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 up front 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).
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 a Fort Bend County 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 up front 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 Fort Bend County 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 experienced Fort Bend County estate planning attorney, simply Call us at 281 242-0995 or contact our Houston law offices.
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