Trusts

What Are The Benefits Of A Living Revocable Trust? 

Avoids Probate

One of the main uses of a living revocable trust is to avoid probate. If you die with a Will, your loved ones must go through the probate courts in order to claim title to the property you leave for them. The probate process is burdensome, time-consuming, costly, and entails court involvement in your family’s affairs. Many people do not want their loved ones to have to deal with probate after they are gone and instead want a trust-based estate plan that avoids probate entirely. 

Enhanced Privacy

A living revocable trust keeps the estate administration process private. Unlike a Will, which becomes a public record once filed for probate, a living revocable trust is never filed with any court. You do not have to record your trust document in any public records. If you die with a WIll, then when that Will is filed for probate, it becomes part of the public record–anyone can look in the court records and see the documents filed in the probate case and read what your Will says. In addition, once a Will is filed for probate, the executor is likely to be solicited by realtors and investors who want to buy estate property. With a living revocable trust, your entire estate can be handled internally and privately among your loved ones. 

Speed And Ease Of Use

Upon your death, your successor trustee can immediately step in and distribute your assets to your beneficiaries according to your wishes. Your beneficiaries do not have to wait for the conclusion of probate to access the inheritance you leave them upon your death, your successor trustee can visit an estate planning attorney, spend an hour or two with the attorney, who would draw up one or two documents relating to the administration of the trust, and then walk out of the attorney’s office and be done with the legal matters, without having to set foot in a courtroom. 

Incapacity Protections

Your trust not only provides for your assets when you die, but it also takes care of you during your lifetime. If you become incapacitated or disabled, your successor trustee (the person you name in your trust document to take over when you are unable), can step in and manage your property for your benefit during your lifetime. 

Who Should Serve As My Trustee? 

During your lifetime, you are the trustee of your living revocable trust. But you need to nominate a successor trustee who will take over if you die or become incapacitated. A trustee should be someone who is trustworthy, responsible, impartial, and capable of making good decisions. This could be a family member or friend. Many people choose to name an adult child to this role. You can also name a corporate trustee, such as a bank, to serve as the trustee of your living revocable trust. 

If I Have A Living Trust, Do I Still Need A Will? 

Yes. When you have a living revocable trust you also need a Will. However, your Will becomes a backup. This Will is a special type of Will called a “pourover Will.” A pourover Will is a very simple Will that leaves everything to your revocable trust. 

Ideally, this Will never sees a courtroom when you die. But it is important to have as a backup in case some property you own is not inside your trust at the time of your death. For example, say you set up a trust, and years later you buy a piece of land or a new house but never titled it in the name of your trust. In this circumstance, after you die, your executor is able to probate the Will to get this property back into your trust so that it can be distributed in accordance with the terms of your trust. 

What Are The Tax Implications Of A Living Trust? 

A living revocable trust is ‘tax neutral.’ During your lifetime, the IRS disregards the fact that your property is held in a living trust, and you receive the same tax treatment you do now. 

Can I Change A Living Revocable Trust After Creating It? 

Yes, you can change your living revocable trust after you have created it. A living revocable trust is completely revocable, just like a Will. During your lifetime you can amend or modify your trust any way you see fit. The living trust only becomes irrevocable after you have died.

Special Needs Trusts In Austin, TX

Many loved ones with special needs and disabilities receive public benefits such as SSI and Medicaid. Unfortunately, an inheritance can disrupt or disqualify them from these public benefits. A Special Needs Trust (or Supplemental Needs Trust) allows you to provide for a disabled beneficiary without jeopardizing their eligibility for benefits. 

Many parents make the mistake of leaving property directly to a child with special needs in their will or trust. This often leads to disastrous consequences. The asset thresholds for many public benefit programs are very low. Medicaid, for example, has an asset limit of $2,000. If a special needs child receives even a modest inheritance this can disqualify them from benefits. 

The solution to this problem is a special needs trust. The special needs trust is there to ‘supplement’ the public benefits that the beneficiary receives. You can leave property to a disabled beneficiary through a special needs trust, and after you are gone, the beneficiary’s inheritance will be held in trust and be available for the aid and care of the beneficiary during their lifetime, all while preserving SSI, Medicare, and Medicaid. 

Irrevocable Trusts In Austin, TX

It sometimes is necessary to create an irrevocable trust. However, an irrevocable trust is just that: irrevocable. Once created, it cannot be dissolved, altered, or modified, except in narrow circumstances through court intervention. Irrevocable trusts are most often utilized for estate tax purposes. An individual who has an estate valued in excess of the federal estate tax exemption may opt to use irrevocable trusts to avoid or reduce estate tax liability. This is not without a cost, as it results in a loss of control over the assets placed in the irrevocable trust. 

One of the most common irrevocable trusts is the “Irrevocable Life Insurance Trust” (“ILIT”). Once created, the trustee of the ILIT purchases a life insurance policy, and the trust is the beneficiary of the policy. Because the ILIT owns the policy, the death benefit of the policy does not count as part of the estate for purposes of the federal estate tax. 

Contact An Austin Trusts Attorney Today

If you would like to learn more about trusts, please contact our office to schedule a consultation with one of our estate planning attorneys. We assist clients with living revocable trusts throughout Austin and the surrounding area, including Round Rock, Pfluegerville, Williamson County, Hays County, Buda, Drippings Springs, Kyle, Driftwood, and more.