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Frequently, my clients ask, “Do I need a trust?” and wonder how to avoid probate. My answer is that it depends but there is a good chance that a trust is not what you need.
There are times when a revocable living trust is an effective estate planning tool, but for many clients, it is a waste of money.
Trusts are promoted by many websites and literature that the public receives. Trusts are not a solution for all. To determine if a trust is a good idea for you, it should be discussed with an estate planning attorney. Please call our office to set up a free consultation.
What Is a Trust?
A trust is a legal arrangement where one party (the trustee) holds and manages assets for the benefit of another party (the beneficiary). Trusts are often used in estate planning to ensure the assets are distributed according to your wishes, both during your lifetime and after death. Trusts can also be used to manage assets in the event you become incapacitated.
There are different types of trusts, such as:
- Revocable trust: Can be changed or revoked during your lifetime.
- Irrevocable trust: Cannot be altered after it is created.
- Testamentary trust: Created through your will and takes effect after your death.
Reasons A Living Trust Might Not Be Necessary
1. Probate is Not Complicated or Expensive with Proper Planning
The price for creating a revocable living trust, funding it, making transfers into the trust, and related documents may exceed the cost of probate for a will that is properly drawn up to provide for independent administration.
2. Probate Under a Well-Drafted Will is Timely and Efficient
Texas law streamlines the probate process, and there are rarely long delays when there is a properly drafted will. An independent administration under a valid will requires only one hearing and minimal court involvement in the process. A competent and conscientious executor will move the process along quickly unless there are unusual complications.
3. Avoiding Probate Without a Trust
You can avoid probate of many assets by placing them in a transfer on death deed or account with the right of survivorship, beneficiary designation, or payable on death designations. This may be a simpler way of passing on many assets upon death rather than spending the money to place assets in a living trust. If beneficiaries are minors or have special needs, you may require a trust, but maybe a will can also accomplish these desires.
4. Estate Tax Planning is Not Needed for Most People
Under current estate tax regulations, unless you have an estate worth well more than $12 million per person, you have no need for a living trust to avoid estate taxes. This could change in the future if Congress changes the estate tax laws.
5. A Trust Is Only Effective If Properly Funded
If assets are not properly funded to the trust, the value of the trust is void, and probate is still required. When a person has a revocable living trust, all assets must be properly titled. If this is not done, there may still be a probate required to transfer the title, and the expense is multiplied.
Reasons to Set Up a Trust
While a trust may not be necessary for everyone, there are specific situations where it can be beneficial. Here are a few examples where a living trust might be the right choice for your estate planning:
1. Property Ownership in Multiple States or Counties
If you own property in different states or multiple counties in Texas, a living trust might be needed to avoid the complications of probate in each jurisdiction. Without a living trust, your heirs could be forced to go through probate in each state or county, adding to the complexity and expense.
2. Special Assistance for Managing Assets or Special Needs Beneficiaries
A trust is an essential tool for individuals who need assistance managing their assets or for those with special needs children. A trust can ensure these assets are protected and distributed according to your wishes, ensuring that your loved ones are cared for properly in the future.
3. To Set Special Conditions for Beneficiaries
If you wish to impose specific conditions on how your beneficiaries receive their inheritance, such as distributing assets over time or requiring certain milestones, a living trust can facilitate this. You can specify when and how your heirs receive their assets, providing greater control and protection over the distribution.
4. Privacy Concerns: Keeping Your Estate Plan Private
Unlike wills, which go through the probate process and become part of the public record, a living trust remains private. If privacy is important to you, a trust can be a way to keep your financial matters out of the public eye.
Do You Need a Trust? Consult with an Estate Planning Attorney
Whether or not a trust is right for you depends on your specific circumstances. If you’re asking yourself, “Do I need a trust?”, the answer depends on factors like your assets, family dynamics, and long-term goals. An experienced estate planning lawyer at Nimmons & Fronterhouse can help you understand your options and determine the best path for your estate.
If you have questions about whether a trust would be a good fit for you and your family, please contact the office at 713-467-1760 to schedule a consultation.
