Trusts are a popular estate planning tool in Texas, allowing you to protect and distribute your assets in a variety of ways.
A trust is a legal arrangement in which a person’s assets are held by a trustee for the benefit of one or more beneficiaries.
Trusts can be used to avoid probate, protect assets from creditors, and provide for loved ones who may need special care or attention.
There are several types of trusts available in Texas, each with its own advantages and disadvantages. The best type of trust for you will depend on factors such as the size of your estate, the types of assets you own, and the needs of your beneficiaries.
Revocable Living Trusts
One of the most common types of trusts in Texas is a revocable living trust. This type of trust allows the settlor (the person creating the trust) to maintain control over the assets in the trust during their lifetime. The settlor can also make changes to the trust at any time or revoke it altogether.
Upon the settlor’s death, the assets in the trust are distributed to the beneficiaries named in the trust. One of the advantages of a revocable living trust is that it can help avoid probate, which can be a lengthy and expensive process in Texas.
Unlike a revocable living trust, an irrevocable trust cannot be changed or revoked once it has been established.
This type of trust is often used for tax planning purposes, as assets placed in the trust are removed from the settlor’s estate and may be subject to fewer taxes.
A testamentary trust is a trust that is created through the settlor’s Will and takes effect only after the settlor’s death.
One advantage of a testamentary trust is that it can be used to protect assets from creditors or to distribute assets to beneficiaries over time.
Another advantage is that a testamentary trust can help avoid the need for a guardianship, which can be time-consuming and expensive.
However, one disadvantage of a testamentary trust is that it is subject to probate, which can be a lengthy and costly process.
Additionally, the terms of a testamentary trust are public record, which may not be desirable for some individuals.
Charitable trusts are designed to support a charitable cause or organization. In Texas, there are two types of charitable trusts: charitable remainder trusts and charitable lead trusts.
A charitable remainder trust allows the settlor to receive income from the trust during their lifetime, with the remaining assets going to a designated charity upon the settlor’s death.
A charitable lead trust, on the other hand, provides income to a designated charity for a set period of time, with the remaining assets going to the settlor’s beneficiaries.
Supplemental Needs Trusts
Supplemental needs trusts (also known as special needs trusts) are designed to provide for the care of a beneficiary with special needs, without jeopardizing their eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI).
There are two types of supplemental needs trusts, first-party supplemental needs trusts and third-party supplemental needs trusts.
A first-party supplemental needs trust is created using the assets of the individual with special needs. This type of trust is useful in situations where the individual with special needs receives a settlement or inheritance but is required to contain a payback provision.
This means that any remaining assets in the trust after the individual with special needs passes away must be used to reimburse the state for Medicaid benefits received by the individual.
A third-party supplemental needs trust is created using the assets of someone other than the individual with special needs.
This type of trust is commonly used by parents or other family members to provide financial support for individuals with special needs.
Unlike a first-party supplemental needs trust, a third-party supplemental needs trust is not required to contain a payback provision.
A gun trust is a trust created to legally own and manage firearms, including Title II weapons under the National Firearms Act (NFA), such as machine guns, submachine guns, sawed-off shotguns, short-barreled rifles, and silencers.
By creating a gun trust, you can provide for the proper transfer of firearms upon your death, avoiding the possibility of accidentally violating federal laws related to gun ownership and transfer.
Additionally, a gun trust may provide some protection against liability for accidents or injuries involving the firearms held by the trust.
Get in Contact with a Waco, Texas Estate Planning Attorney Today
Trusts are a valuable estate planning tool in Texas, providing a wide range of benefits to settlors and beneficiaries alike.
Whether you are looking to avoid probate, reduce taxes, protect assets from creditors, support a charitable cause, or provide for a beneficiary with special needs, there is likely a trust that can help you achieve your goals.
However, setting up a trust can be complex, and it is essential to work with an experienced estate planning attorney to ensure that the trust is established correctly.
It has been our honor to help the people of Waco, Temple, Killeen and the surrounding area for over 50 years.
A trust is a legal arrangement in which a person (the “settlor”) transfers assets to a trustee to manage for the benefit of one or more beneficiaries.
When choosing a trustee for your trust in Texas, you should look for someone who is trustworthy, financially responsible, and able to manage the assets according to the terms of the trust agreement. You may choose a family member, friend, or professional trustee.
There are many types of trusts available in Texas. Depending on the situation, advantages of creating a trust may include avoiding probate, protecting assets from creditors, providing for minor or incapacitated beneficiaries, and reducing estate taxes.
If the trustee mismanages the trust, the beneficiaries may take legal action to remove the trustee and recover damages for any losses suffered as a result of the mismanagement.
You may be able to modify or terminate a trust in Texas by amending the trust agreement, obtaining a court order, or following the termination provisions set forth in the trust agreement. The specific method will depend on the terms of the trust and the circumstances surrounding the modification or termination.