Your estate plan should consist of a variety of documents to prepare for all eventualities. Not only do you need clear powers of attorney and instructions for when you may be incapacitated, but you should also express your wishes for how your property will be divided and transferred to the people you want to receive it. A will is one part of that process, but many families may benefit from setting up trusts that provide additional protections and make the asset transfer process easier for beneficiaries during a difficult time. Additionally, a trust allows you to maintain more control – even after your eventual death or incapacitation.

The first step in setting up a trust is determining which type of trust you need. You can set up either a living trust or a testamentary trust. A living trust (also referred to as an inter vivos trust) is created and funded while the grantor – or the person who sets up and funds the trust – is still alive. Conversely, a testamentary trust is one that is included in your will and only becomes effective and funded upon your death.

Living Trusts (Inter Vivos Trusts)

Families may want to establish a living trust for any of the following reasons:

  • Trusts allows you to maintain greater control over assets after your death
  • Trusts also allow you to set terms for how and when assets are used by your beneficiaries
  • Trusts can ensure estate plans are concrete, which is especially helpful in situations with blended families or multiple spouses
  • Trusts are a vehicle for multi-state real property transfer after death or during incapacity
  • Trusts potentially reduce the risk of being sued because they provide more privacy
  • Trusts can facilitate probate avoidance if they are properly funded and maintained until the grantor’s death

Living trusts can either be revocable or irrevocable. In a revocable trust, you maintain control over your assets and can make changes at any time. You can be both the grantor and the trustee of the trust, and can continue to make decisions about your assets as long as you are able. The trust can even be amended multiple times within the grantor’s lifetime. While a trust does not have to go through the probate process, unless the assets are substantial a trust may be costly to set up, and must be funded – which means assets must be moved into the trust.

With an irrevocable trust, you hand over complete control of the assets to a trustee (who must be a different person), and you cannot make any changes during your lifetime to the trust once it is established.

Obviously, a revocable trust offers much more flexibility to the grantor, and allows them to adapt to changing family dynamics or financial circumstances. An irrevocable trust, however, can help minimize estate taxes for wealthy families, protect assets against malpractice lawsuits for professionals (e.g. doctors and lawyers), or assist in martial estate planning purposes for blended families. The best way to determine the correct type of trust is to speak with an experienced estate planning attorney.

Testamentary Trust

A testamentary trust, on the other hand, is best utilized for those looking to manage how their loved ones (usually children) inherit assets. For instance, if you have minor children and want to ensure they do not inherit everything immediately upon their eighteenth birthday, you can establish a testamentary trust that specifies the exact requirements and timeline for them to access any assets. These types of trust only activate upon your death, and can provide you with peace of mind knowing that you will have some control over what happens to your assets after you are gone.

Towson Law works with families to understand the pros and cons of trusts. While a living trust may seem like a better option since it avoids the probate process, it may actually be more expensive in the long run. Our attorneys can assess your estate, and help you decide on the best options that fit your family’s specific needs.

Special Types of Trusts

Additionally, trusts can be created to address very specific needs. Below are a few examples of the types of trusts you can set up to care for yourself and your loved ones:

  • Education trust – a trust set up to pay for your children’s or grandchildren’s education
  • Special needs trust – a trust established for someone under the age of 65 with disabilities that allows them to access assets while still maintaining their eligibility for government assistance
  • Medicaid asset protection trust – an irrevocable trust created to take assets out of your name when you apply for Medicaid to pay for long-term care
  • Charitable trust – a trust that allows you to designate certain non-profits as your beneficiaries and to dictate how property is distributed or used

These are just a few of the options available to you as part of a comprehensive estate plan. We can explain each one in more detail and educate you about the benefits and potential ramifications of each type of trust.

The Advantages of Trusts

One of the main advantages of a trust is control. You have more predictability and control over what happens to your assets in a trust than you do without one. Additionally, trusts can offer you the following:

  • You can establish a trust to take care of minors or someone with disabilities when you are no longer here.
  • A trust can take assets out of your name when you are trying to qualify for Medicaid coverage to pay for long-term care.
  • There is a successor trustee in place who can make important decisions when you are no longer able.
  • There are certain tax benefits of trusts that can lessen the burden on your beneficiaries and allow them to keep more of your assets.
  • Probate is a public process, and avoiding it will mean there are no public records of proceedings involving your assets.

How We Can Help Your Estate Planning

There are numerous reasons why you need the help of an experienced lawyer to establish the trust, including:

  • You need to know various trust options available to you
  • Setting the terms of the trust is crucial
  • The trust may have other legal implications that you need to know
  • Trusts work in conjunction with the rest of your estate plan
  • The documents and execution of the trust must be free of errors

Act Now to Establish a Trust

When you choose to establish a trust, it must be done correctly. Success depends on the framework that you establish at the very beginning. The documents need to be legally correct, otherwise the trust may not be effective when you need it. In addition, the trustee must manage the assets in accordance with the terms of the trust, so you should think ahead when you establish the terms.

In terms of timing, you must act to establish a trust while you are in relatively good health. One of the major benefits of a trust is having the peace of mind there is a structure in place to manage your assets and take care of your loved ones. Once you begin to lose capacity, it may be too late to establish a trust. In addition, if you are using a trust to preserve assets, Medicaid will use a five-year lookback period to search for asset transfers, so you need to fund the trust well in advance of when you may need it.

Call a Texas Estate Planning Lawyer

Towson Law works with families just like yours to devise and execute an estate plan that will protect them in difficult times. To learn what we can do for you, call us at (817) 856-0270 or message us online.