When most people think of estate planning, they think of writing a valid will, which is one important purpose of planning. In addition to a will, several types of trusts also offer options to protect assets and ensure that beneficiaries are cared for. With the wide variety of options available, discerning whether a will or a trust best meets a family’s needs is best determined with the help of a probate attorney.
Texas Trust Code
Subtitle B, entitled the “Texas Trust Code,” of Title 9 of the Texas Property Code identifies how trusts in Texas should be created, registered, and administered. It requires that the creator of the trust, known as the grantor, must identify a trustee to manage the trust. In some cases, the grantor is also the trustee of the trust. The trustee administers the trust, distributing assets as the trust dictates. A trust is not a matter of public record. Therefore, the trustee may be the only person aside from the grantor who knows the workings of the trust.
Two Main Types
Two main types of trusts exist, a revocable trust and an irrevocable trust. A revocable trust allows the grantor to revoke or change the trust as the grantor chooses. She or he retains control over the trust, including income and legal title of any property in the trust. By contrast, an irrevocable trust places power over income and property into the hands of the trustee; the grantor no longer has control of the trust property.
A living trust may be revocable or irrevocable. It gets its name from the fact that its provisions are in effect during the grantor’s lifetime. This type of trust allows the grantor to choose a guardian in the event that the grantor is incapacitated in some way. It allows the trustee to distribute assets according to the grantor’s wishes, especially helpful for minor children or those with poor money management skills. Depending on how it is written, a living trust may also replace a medical power of attorney.
The testamentary trust is established through a provision in a will. For that reason, it goes into effect after the death of the estate planner. Helpful for estates with beneficiaries who are young, it often names a guardian to watch over minors and a trustee to distribute assets as needed while safeguarding the estate. Another type of trust designed to provide continuing support for beneficiaries is the special needs trust. As its name indicates, it supports individuals with intellectual and developmental disabilities.
Like wills, trusts reflect the values and priorities of those who create them. For those Texans who are pet owners and wish to protect their four-legged loved ones, a Pet Trust may be a good option. Those who wish to support a particular charity have the option to donate a portion of the estate to a non-profit organization via a charitable trust, which will also designate how and when that money is distributed.
Trusts are also useful to shield the estate itself. An asset protection trust, for example, protects beneficiaries who may have debt or poor money-management skills since creditors cannot access those assets. It is also helpful for medical professionals or anyone else who may have a high chance of being sued. An Estate Tax Trust helps to reduce tax burdens on an estate, sometimes by a significant amount.
Given the wide variety of options available, a wise first step is to find an experienced estate planning attorney to help with estate planning. Taking control of assets and protecting family members during and after the grantor’s lifetime is a loving way to safeguard an estate and its cherished family members.
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