03 Jul When Is a Revocable Living Trust the Best Estate Planning Option in Texas
Texas estate planning attorneys often disagree about what is the best option in estate planning. Sometimes it is best to have a will to transfer your assets and pay your debts after death. Sometimes it is best to have an irrevocable trust for numerous reasons. Sometimes Texans do nothing (usually the worst option) leaving it up to state laws regarding payment of debts and transfer of assets. Each factual situation is different, but this article will address who are best candidates for a revocable living trust.
What is a Revocable Living Trust?
Consider a revocable living trust to be an open box which you can control. You get to purchase, sell, use, or give away your assets. You can change the terms or revoke the trust as long as you have mental capacity. You are not only the one who sets up the trust, but generally the one who establishes the trust is also the trustee and beneficiary of the trust. As a result of the retained control, it is generally tax-neutral (however do not transfer your retirement account into the trust during lifetime).
Best Candidates for a Revocable Living Trust:
- Probate Avoidance (avoid court) –
Some prefer to not have to go through the probate process that is needed if assets are to be transferred according to the will of the decedent. Sometimes it is easy to probate, and sometimes it is not. There are numerous examples when probate becomes more difficult and costly (i.e., the original will cannot be located, a witness fails to sign or a notary fails to properly complete that the testator and witnesses swore that the will was signed in the presence of the testator and witnesses before the notary, capacity of the testator or undue influence over the testator could be asserted, inadequate powers given to the testators, etc.). If one has a living trust that is properly funded, then the requirements of the probate are avoided.
- Quicker Representative Authority –
If someone wants a representative to be able to act without delay, then a trust is advantageous. If the decedent had a will, then the executor or administrator would only have authority after a court hearing and the order is signed and after letters testamentary or letters of administration are issued – which often takes months. A trust gives the trustee the ability to pay debts or bills quickly, manage assets without delay and often settle the estate quicker.
- Privacy –
When a will is probated, it is a matter of public record. If an inventory of the assets that pass by the will of the decedent is filed, then it is also a matter of public record. A trust is private. For those who don’t want others to know their beneficiaries or assets of the estate, then a trust is preferable.
- Real Estate Owned in More Than One State –
If one owns real estate in more than one state, then it is usually best to consider a trust. If one has a will, then it would be probated in Texas and an ancillary probate would be required in the other state where the real estate is located adding to costs (attorney’s fees, court costs, filing fees, etc. in more than one state).
- Management Continuity at Death or Disability During Life –
A will becomes effective after it is probated. Thus, if one has a will and nothing else (i.e., financial and medical powers of attorney) and that individual becomes disabled, then a court ordered guardianship may be needed. A revocable living trust is effective immediately. So, if the one who establishes a trust becomes disabled, the trust provides what happens if a trustee becomes disabled without a court order. Even if one has a power of attorney (which terminates at death of the principal), sometimes such a document is not recognized by others. Furthermore, if you own real estate, the original of the power of attorney should be recorded in the county where the property is located (otherwise the agent could not sell or mortgage the property). Also guardianship supersedes the power of attorney. If one has a business, management continuity without delay (due to disability or death) is often needed and thus a trust is often a better choice than a will and a power of attorney.
- Total Costs Savings –
Although a will is less expensive to prepare, when you add the cost of probate to the cost of preparing a will the total cost is generally less than the cost for trust preparation. However, if one has many real estate properties or notes secured by real estate, this would add to the cost of the trust since those assets should be transferred to the trust to avoid probate.
- Concern Over Will Contest –
Although trusts can be contested, it is generally easier to contest a will due to the probate laws.
Everyone’s situation is different. Sometimes it is best to have a will. Sometimes it is best to have an irrevocable trust. Those concerned with the preceding issues could consider a revocable living trust. However, it is best to discuss with a professional before any decision is made.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.