There are many things to consider when planning an estate. Along with basic estate planning documents such as a will, a power of attorney and advanced directives, estate planners in Texas will often consider the ways in which they wish to provide for their loved ones and possibly minor children after they are gone.
Among their considerations are avoiding the time-consuming and expensive process of probate, minimizing the tax implications of various investment sources and finding ways to funnel assets so that beneficiaries will be able to access them. Many people decide to set up a trust, which gives them more control over how their assets are distributed. Not only can a trust be funded with stocks, bonds and cash, it can also be funded with life insurance.
Life insurance and trusts
For parents with minor children, there are many advantages to funding a trust with life insurance. Parents who have not accumulated substantial assets can purchase a policy as an inexpensive way of ensuring that the children will be cared for if they pass away unexpectedly. In a two-parent household, each parent usually purchases a policy, naming each other as the primary beneficiary with a revocable living trust as the contingent beneficiary.
Young families often do not yet have substantial assets to assure that minor children are taken care of through estate planning. Purchasing a term life insurance with a policy that will last until the children are out of college is relatively inexpensive and cost-effective. If the parents both pass away, the life insurance policy pays out to the trust, and the designated trustee will then manage the affairs on behalf of the children.
Unlike investment accounts that may have tax implications, or the equity of real estate which is difficult to access, term life insurance is tax-free and provides liquidity immediately after death. Having the children as beneficiaries of the trust also allows the parents to have more control over how the assets are allocated. If the children were beneficiaries of the policies, they would not be able to access the funds until the age of majority.
Setting up a trust in Texas
There are a variety of trusts that people can set up in Texas, but they must conform to specific creation requirements as mandated by state trust laws. These laws give many options to residents of the Lone Star State for managing property during life so that the transition will be easier when they pass away.
For residents of Fort Worth, it is never too early to begin planning ahead, and having a trusted estate planning attorney to provide guidance is an important first step.
