Texas Trusts: What Are They & Why Are They Important?
trusts are an important part of an overall estate plan in Texas. But, what are they and why are they important? To find out, we went straight to Texas estate planning legal expert R. David Weaver who explained it to us in detail.
Texas Attorney R. David Weaver
R. David Weaver, a Texas attorney with over 25 years experience whose practice offers a wide range of legal services including estate planning and probate, told us that there are two different types of trust in Texas a living trust and a Testamentary trust. He explained how each works and why they are important:
- Texas Testamentary trust. A Testamentary trust is usually included in the Will and it provides for the management of the property of the estate, usually for the benefit of minors or incapacitated heirs who are not capable of managing their own financial affairs. It is a very valuable instrument and we use it all the time.
Sometimes parents will say, 'Well, I don't want my children to receive my estate until they're at least 30 or 35 years old so that they would have learned what it's like to earn a dollar, make a living and become responsible; then they could have all the money.' Others want to set it up so that college expenses are taken care of and things of that nature, and that's usually done through a Testamentary trust.
- Texas living trust. The creation of a living trust is nothing more then creating a separate entity into which you transfer title to property. Then you can create provisions for continuation of the ownership or property after you, the trustor, pass away and name beneficiaries. It's a real nice-sounding concept; except that it doesn't keep you out of probate because there's no way that you can continue to have everything that you own go into a living trust.
Further, to the extent that there are debts or obligations, no creditor is going to look only to a living trust as a guarantor or debtor. If I die with debt and all my assets are in this living trust, my assets can still be attached even though they're in the trust. So, a creditor may go in and still require that there be an administration of the estate. It doesn't serve that purpose. A lot of people think it does, but that's a misconception a very common misconception.
Texas living trusts do have a benefit, though. If, for example, I own real estate or other types of property that are situated across jurisdictional lines, it would be a good idea to transfer ownership of all that property into a living trust because it avoids the jurisdictional problems that you would encounter in a probate situation.
Weaver says that there is a place for a Texas living trust, but while it can avoid probate to a certain extent, it will not entirely avoid the need for probate. When you consider the cost of probate versus the cost of establishing and maintaining a living trust and creating a separate taxable entity which a living trust would be then you find that sometimes the cost of doing that is more than the cost of the probate would be. You're looking at a living trust generally being advisable where there is a substantial amount of property and the property is distributed across state lines.