What Types Of Trusts Are Available In Texas?
There are several different kinds of trusts in Texas, a few of which we have summarized below. We can help with the establishment of trusts. Before listing what they are, and a little bit about them, it’s important to first understand a few basic terms. They are: grantor, trust document, trustee, and trust assets.
- A grantor is the person who creates the trust, also known as settlor, donor, or trustor.
- The trust document is the written document executed by the grantor defining the terms of the trust. It likewise names the beneficiary or beneficiaries of the trust. Some trust documents give very detailed instructions about these responsibilities while others provide only extremely general directions.
- The trustee is the person or entity responsible for the management and distribution of the assets in the trust. There can be one trustee or multiple trustees and can be a private or a business trustee (such as a bank trust department). Those responsibilities include the need to make important legal, investment, and other choices; therefore, the grantor should take great care in choosing a trustee and take into account the size, function, and duration of the trust, also the tax implications and the recipients’ needs.
- Trust assets are all of the assets to be transferred through the trust. This includes cash, stocks, real estate, art, or insurance policies.
A testamentary trust is a trust that is created under the terms of the grantor’s will. This trust does not exist until the grantor’s death, and all properties moved to the trust pass through probate. By changing the will, the terms of the trust can be changed at any time prior to death. Testamentary trusts can be contingent, which indicates the trust will be developed only if particular conditions are present (for example, the recipients are under a particular age).
A living trust (also called an inter vivos trust), is created and funded while the grantor lives. It can end upon the grantor’s death or continue according to the trust’s terms. Living trust assets bypass the probate procedure. A living trust may be “revocable” (able to be terminated by the grantor during his or her life) or “irrevocable.” Possessions held in a revocable trust are often considered to be part of the grantor’s estate for tax purposes. Nevertheless, the properties are not included in the probate procedure, which is the reason such trusts are often utilized. As its name indicates, a grantor can withdraw or modify the terms of a revocable trust, consisting of the beneficiaries, trustee, possessions subject to the trust, trust provisions, or the grantor can dissolve the trust. Generally, when the grantor dies, the trustee distributes the possessions in accordance with trust terms, not according to the grantor’s will or through the probate procedure.
An irrevocable trust is different in a few key ways. As soon as an irrevocable trust is created, it cannot be revoked or amended. The grantor cannot change the recipients, remove assets, or alter the terms. This is due to the fact that the trust possessions, consisting of future appreciation, are not included in the gross estate for estate tax functions. (Note: the transfer of assets to an irreversible trust does have possible tax implications). With mindful planning, you may have the ability to save substantial estate taxes. Shielding possessions from possible lenders is another typical factor for using irreversible trusts.
A Rotten trust is a kind of trust usually used to make presents of assets to kids gradually. The grantor structures the trust so that the recipient has the right to take possession of the present for thirty days. This means the present is considered a “present gift,” which suggests it is not counted as part of the grantor’s estate. The recipient has a considerable reward not to exercise their right to the immediate gift since if they do, the grantor will not make future gifts. When the gift enters into the trust, it is distributed according to the trust terms.
There is a great deal of misunderstanding about trusts in Texas and their terms. Trusts have a range of usages; however, they are often utilized to offer the management of possessions for minors and young kids in case they may become entitled to get a residential or commercial property under a will. If you have questions or would like to explore how you can set up a trust to protect or transfer your assets, call our offices today.
Hogan Law firm can help you or your family set up a variety of trusts, depending on your individual situation. We also specialize in personal injury cases in Lubbock and across the state of Texas.