Safeguarding Your Estate
Austin, Texas Attorney R. Brian Daniel
What is a Trust?
A Trust is a legal vessel (a legal entity) used to hold property for the benefit of someone. While trusts come in many forms, each one serves a specific purpose. Trusts can be used for a variety of reasons including estate planning, managing assets for a minor, and avoiding inclusion in a probate estate. Due to the complex nature of trusts and the numerous different types available, you should consult a knowledgeable Dripping Springs, Texas Trust and Estate Planning Attorney to find out whether you might benefit from a trust and, if so, which type best suits your unique needs.
How does a Trust Work?
To set up a trust, a legal document called a Trust Agreement is drafted by a knowledgeable Dripping Springs, Texas Trust and Estate Planning Attorney. There are three basic parties involved with a trust. The first party is the maker or creator of the trust. This person is known as the “Grantor” of the trust. This is the person who initially creates or forms the trust and places assets into the trust (also called “funding” the trust). The second party, the “Trustee”, is the person or entity that manages the assets while they are in the trust. Depending upon the type of trust that is created, the Grantor may also be the Trustee. The third party involved with a trust is the person or entity benefiting from the assets in the trust. This person is known as the “Beneficiary” of the trust. In any given situation, there may be multiple Grantors, Trustees, and Beneficiaries to a trust.
In addition to the separate creation of a trust through a Trust Agreement, a specific provision may also be included in a person’s Last Will and Testament directing that all undisposed assets of a person’s estate become part of an existing trust upon the death of that individual. This is usually seen in the Will of the Grantor of a separate Trust and this is called a “pour over” provision in a Will.
What are common forms a Trust might take?
One distinguishing feature of a trust is whether it is created during, or after, someone’s lifetime. A trust created during the lifetime of a Grantor is called a “Living Trust”. A trust that is created after the death of a Grantor is referred to as a “Testamentary Trust” and the latter are usually created via a specific provision in a Grantor’s Last Will and Testament.
There are two basic types of Living Trusts – Revocable and Irrevocable. A Revocable Trust is one in which the Grantor retains control of the trust assets by maintaining the right to revoke, make changes, or terminate the trust at any time. If the Grantor gives up these rights at the time of the creation of the trust (or at some point during the existence of a Revocable Trust), the trust is considered to be an Irrevocable Trust. Irrevocable Trusts are sometimes used to remove money from a Grantor’s estate in an effort to minimize estate taxes upon death.
What is the Purpose of a Trust?
A trust’s benefits depend upon its purpose. Trusts can be used to provide for the needs of a Grantor in the event of incapacitation. They can also be used to pass assets onto the heirs of the Grantor. Individuals with a high net worth may use a trust as part of their estate plan in an effort to minimize the tax liability to their heirs. A trust can also provide the Grantor with more control than a Last Will and Testament over the distribution of assets after his or her death by, for example, allowing the Grantor to make stipulations that the beneficiary may not have access to the funds until they reach a certain age. Some individuals also establish trusts in an effort to avoid probate (a very common practice). A trust provides more privacy to an individual and his or her family than does a Will because probate records, if the Will must be admitted to probate, are public records.
Trusts can also be used to provide for special needs children upon the death of their parents. Special Needs Trusts are vital when dealing with an individual who is benefiting from social programs or other government assistance with regard to medical care or otherwise. Without a Special Needs Trust, if an individual benefiting from a social program or other government assistance earns or comes into too much money (and the threshold is very low), then that person may lose the much needed benefits. This places parents or other family in an awkward situation because they know they can’t leave anything of value to the person out of fear of the loss of benefits. With a Special Needs Trust, however, inheritance or gifts or otherwise can be placed in trust for the individual such that the trust exists for the individual’s health, care, welfare or education (with some specific caveats and restrictions) and then the individual can benefit from the assets in the trust without ever owning them, thus the social programs or other governmental benefits are not voided.
Do you need a Trust attorney?
The best way to determine whether you need a trust is to talk to an experienced Austin, Texas Trust Attorney. A trust can be a very complex estate planning vehicle and, if not set up properly, it may not serve its intended purpose or may actually further confuse a situation the trust was initially intended to simplify.
If you are anywhere in the Greater Austin area or its surrounding cities, and need assistance with a Trust or with any issues related to a Trust, please reach out to The Daniel Law Firm. We take great pride in serving clients all over Central Texas. Let us discuss the best strategy for creating the appropriate Trust for your situation in a timely manner. Contact an Austin, Texas Trust Attorney at The Daniel Law Firm today at (512) 615-3569.