One of the few guarantees in life is that it is going to end one day for all of us. Chances are, you want the things you’ve accumulated in your lifetime to stay in your family or pass down to specific individuals. This is exactly why estate planning is so important for nearly all Texas families.
Creating a proper estate plan will ensure that your property and assets pass on to your intended beneficiaries. Many families these days secure their estates through trusts. Trusts have many benefits, such as the ability to avoid probate, and typically are either revocable or irrevocable. Understanding what trusts are and the key differences between revocable and irrevocable trusts may help you decide what is the right fit for your family.
What exactly is a trust?
In its most basic form, a trust is a legal entity created by a person, known as the grantor, and used to hold assets for the benefit of another person, or the beneficiary. If you are the grantor, you would transfer your property and assets to the trust, and a trustee that you appoint would manage and administer the contents. One reason many people use trusts is because they can bypass the probate process, since the contents technically belong to the trust and not the trust creator or grantor.
You cannot amend irrevocable trusts, and they are basically set in stone once you sign the agreement. Rules vary by state, but the only ways you can make changes to irrevocable trusts are by court order or if the beneficiaries are in 100% full agreement. The main reasons people choose irrevocable trusts are for tax purposes. Most of the time, assets within an irrevocable trust are not subject to estate taxes, and the benefactor will not owe taxes on income generated by the assets.
Revocable trusts are also known as living trusts and the trust owners can change them at any time. Trust owners can modify the management of the assets in the trust and may also remove beneficiaries or designate new ones. Although the flexibility of revocable trusts is a major benefit, revocable trusts don’t carry the same shield as irrevocable trusts. If you own a revocable trust, the assets held in your trust will be subject to state and federal estate taxes upon your death.
Questions about estate planning
Trusts are just one of the many tools that you can use to ensure that your property and assets pass down to your loved ones when you die. However, while trusts offer a multitude of benefits, both irrevocable and revocable trusts can be expensive to compose and complicated to undo. If you have questions or want to know more about trusts or any aspect of estate planning, legal guidance is readily available.