The Living Trust (or inter vivos trust) is a trust created during the settlor’s lifetime. Most commonly, these trusts are revocable by the settlor. Once the trust is created, the trustee manages the trust for the benefit of the named beneficiaries. This kind of trust can be revoked or amended at any time by the settlor during the settlor’s lifetime.
These trusts gained tremendous popularity in recent years, primarily for their ability to avoid probate. Since the decedent does not technically own the assets in the trust upon death, the trust assets pass to heirs outside of the probate process.
However, in Texas, the probate process is comparatively inexpensive and hassle-free. As such, in most cases, a living trust should not be created merely to avoid probate; the trust creation and administration will often be more expensive and/or more burdensome than if the assets had just passed through the probate process.
While a living trust is not ideal merely for probate avoidance, a living trust does have other advantages. First, many people do not want the whole world to know how much assets they have when they die. When assets pass through the probate process, anyone could find out the worth of the estate. A living trust, on the other hand, would grant privacy to the estate since the assets pass outside the probate process.
A living will may also be advantageous when the settlor has property outside of Texas where the probate process isn’t as efficient, when the settlor is certain that his will is going to be contested in court, and when the settlor genuinely needs assistance managing assets (as is common with Alzheimer’s sufferers).
All that being said, given the model probate system in Texas, a living trust is only recommended in about 10 percent of cases. In fact, according to Attorney General of Texas Greg Abbott, “Living trusts are not appropriate for the majority of seniors. In fact, for some people, the expense of creating, administering, maintaining and funding a living trust can outweigh the benefit of having a living trust. In deciding if a living trust is right for you, be sure not to succumb to high-pressure sales tactics.”
It is also a popular misconception that living trusts provide protection from creditors. Living trusts do not offer protection from the settlor’s creditors because creditors can reach any property that a settlor can reach. Because a settlor can revoke the living trust, the trustee can reach the trust assets, which consequently means the settlor’s creditors can also reach the assets.
Lastly, even with a living trust, it is highly unlikely that all probate processes can be avoided. In fact, in addition to the living trust, the settlor should still have a specialized “pour-over will.” This will simply indicates that any property not included in the living trust upon the settlor’s death should be automatically routed into the trust. Having this pour-over will is crucial because it’s nearly impossible to get all property into a trust before death—there’s always some property that the trustee has forgotten or didn’t know about. So, again, in Texas a living trust is generally not worth the hassle and expense.
Isaac Shutt is the Attorney/Owner at Shutt Law Firm PLLC. Visit http://www.shuttlawfirm.com or email email@example.com. You can also call Mr. Shutt at (214) 302-8197 for more information on the topic discussed in this blog or to discuss a different legal matter. Phone-calls and quick e-mails are always free at Shutt Law Firm PLLC. Please consider the Shutt Law Firm if you’re looking for a Richardson probate lawyer, Richardson wills lawyer, Richardson estate planning attorney, or Richardson guardianship lawyer.
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