Revocable trusts, which are sometimes referred to as revocable living trusts, offer many benefits with the primary one being the ability to control assets during a person's lifetime. The other main benefit is the ability to dissolve the trust if and when necessary. There are, of course, other advantages as well as some disadvantages that you should consider.
Understanding Revocable Trusts in Texas
A revocable trust allows a person to manage and control his or her assets while living and have those assets pass to loved ones according to his or her wishes upon death. A revocable trust allows the trust creator to change its terms, or even revoke it in full, while he or she is alive. Once the trust creator passes away, the trust is distributed by a trustee (typically someone appointed by the trust creator) according to its terms.
Types of assets that can be transferred to a trust include but are not limited to:
- Real property (e.g., homes, farms, vacation homes)
- Deposit accounts
- Investments (e.g., stocks, bonds, money market accounts)
- Business interests
- Personal property (e.g., family heirlooms, collectibles, art, antiques)
- Life insurance policies
Pros of Texas Revocable Trusts
There are distinct advantages to using a revocable trust as an estate planning tool, including:
Probate Avoidance
The ability to avoid probate is the main reason people consider placing assets in a revocable trust. Probate is the process where a person's estate is administered through the court system upon his or her death. Probate can be a tedious and time-consuming procedure. Assets placed in a revocable trust typically do not have to go through this court-supervised process.
Flexibility
While there are other types of trusts, the revocable trust remains a popular choice due to its flexibility. The creator of the trust is able to make changes to the trust up until the time of his or her death.
Incapacity Protection
A trust provides protection in case of incapacity of the trust creator (for example, developing dementia). In other words, if the person that creates the trust later becomes incapacitated, a new or successor trustee can take over the management of the trust. The successor trustee will be required to administer the trust according to its terms.
Privacy
If maintaining privacy over your assets is important to you, a revocable trust is an option worth considering. Assets placed in the trust are administered to beneficiaries privately, unlike assets administered through the probate process, which is public.
Cons of Texas Revocable Trusts
There are some disadvantages to revocable trusts, including:
Time and Money
Going through the process of setting up a revocable trust can take significantly more time and money than simply executing a Will. It requires that the trust be funded by changing deeds, titles, and other documents to transfer into the fund.
Lack of Asset Protection
Some trust types shield assets from the reach of creditors and judgments. A revocable trust, however, does not provide this protection, and assets are still within the reach of creditors.
Terminating a Revocable Trust in Texas
The good news, and the reason most people choose to use a revocable trust, is that the trustor retains the right to terminate it when he or she chooses to do so. The steps you need to take to terminate the trust vary by jurisdiction and the terms of the trust.
Typically, you will need to execute a trust revocation document and “defund” the trust, which means removing the assets placed into it. This may involve re-issuing titles, deeds, and other documents out of the name of the trust.
Contact a Revocable Trust Lawyer in Texas
A revocable trust can offer many benefits. They can be used as a way to protect your assets and help family members or other individuals or organizations. To find out if a revocable trust is right for you, contact an estate planning attorney.
