A trust is not a contract. It’s not an entity. It’s an arrangement with three different roles. You have the grantor, or settlor, who creates the trust. Then, you have the trustee, who manages the trust. Next, there’s the beneficiary of the trust, who benefits from the trust itself. The same person or persons can serve in multiple roles, sometimes being in all three of those roles. A spouse could be the grantor, the trustee during their lifetime so long as they have mental capacity, and the beneficiary as well.
Benefits And Drawbacks Associated With Using Trusts
One benefit of a trust is that it can help you avoid probate if all assets are held in the trust. Trusts do have more flexibility than a will. If someone wants to put conditions on the disposition of assets, the trust would allow more flexibility for that sort of thing. Trusts are a little more expensive to set up initially than just a will and they do require a bit more work. It’s an abstract concept for most people to own their property in a trust and manage it for their own benefit, rather than just owning it.
Components That Constitute A Strong And Effective Trust
A trust must assign all three roles: a grantor, or “settlor”, who creates the trust, a trustee who manages the trust, and beneficiaries who benefit from the trust. The trust has to be funded. We caution clients about the ads in the newspaper or mailers, offering a free steak dinner if you’ll come to learn about how to avoid probate. They will often sell you fill in the blank trust document that is not set up for your circumstances and will never help you actually fund the trust. Often you get a worthless pile of paper. If it never has defined roles or is never funded, the document never becomes effective.
Different Types Of Trusts
There are many different types of trusts. Most people would not need more than one trust but you could need more than one, depending on what you’re trying to accomplish. You could benefit from having more than one type of trust, or you could include provisions for multiple things in a single trust. There’s no cookie-cutter-one-size-fits-all trust. Each trust is prepared for a specific purpose.
What Does Irrevocable Mean When Referring To A Trust?
If a trust is irrevocable, it usually means that it cannot be changed or revoked. A typical trust is revocable, which means that if someone wants to make changes to it or if they want to do away with the trust, they can do so. If they fund an irrevocable trust, they’re giving up control. They generally cannot make changes or revoke that trust. Typically, an irrevocable trust is used for a specific purpose such as qualifying for government benefits, shielding assets from creditors, or minimizing estate tax. This type of trust is not recommended for just avoiding probate.
Can A Trust Avoid Probate?
A trust can avoid probate, but most the time there’s not a necessity to avoid probate in Texas, with a valid will that appoints an executor to serve independently. To set up a trust merely to avoid probate would be an additional expense and would have to be managed. Most people struggle with the concept of trust, in that all their assets are owned by the trust and they are serving a role as a trustee and benefiting from their trust. We often see people go out and purchase real property in their own names after they’ve formed their trust. At that point, if something happens, they would need a pour-over will and we’d still have to do probate on the will to pour those assets into the trust upon their passing.
What Is Involved In Trust Administration? How Does That Compare With Probate?
Probate usually takes about three to six months, assuming there’s a valid will. Upon someone’s passing, the trust will say what happens next. After the grantor dies, the trust would define exactly what happens and would authorize the trustee to do as instructed in the trust, whereas probate is asking the court to acknowledge the will and to appoint the executor. Then, the executor would do what the will says, after being acknowledged and appointed by the court.
How Long Does The Initial Trust Administration Generally Take?
If trust says that assets are to be distributed, they can be distributed immediately. If assets are to be held, it could be for many years. Trust administration depends on what’s in the trust, how the trust is written, and what instructions are in the trust.
For more information on Trusts In The State Of Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (830) 625-9300 today.