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Examples of Trusts Handled by Looney & Conrad, P. C.
- Constructive Trust
- This trust instrument can only be created by a court to remedy a wrong. The trust restores rightful ownership to the intended owner after another person has title or takes possession of property without a formal trust document or agreement. This may occur as a result of fraud, breach of faith, ignorance, or inadvertence.
- Credit Shelter Trust
- This type of trust allows a married investor to avoid estate taxes when passing assets on to heirs named in the trust. This type of trust instrument provides the surviving spouse with the unimpaired rights to the trust assets and income they generate during the remainder of his or her life.
- Discretionary Trust
- An arrangement whereby property is set aside with directions that it be used for the benefit of another, the beneficiary, and which provides that the trustee (one appointed or required by law to administer the property) has the right to accumulate, rather than pay out to the beneficiary, the annual income generated by the property or a portion of the property itself.
- Grantor Trust
- A trust in which the person who establishes the trust, the grantor, retains an interest and control, and because of this, is required to pay taxes on trust income.
- Irrevocable Trust
- A trust in which the grantor gives up any right to amendments or termination. Income from the irrevocable trust is taxable to the beneficiary if disbursed, or to the trust if not disbursed.
- Revocable Trust
- A trust that may be terminated by the grantor or that is set up to terminate automatically at a specific date. A revocable trust may serve to reduce federal estate taxes, but generally has no effect on income taxes.
- Special Needs Trust
- A trust created to serve a beneficiary, but managed by a person (trustee).
- Testamentary Trust
- An irrevocable trust created at the death of the grantor through a will. The assets of the trust are released to the beneficiary upon a specific date, specified time, or specific action occurs.
A living trust is a trust created while the creator is alive (compared to a testamentary trust, which is created at or after the creator's death under the terms of his or her Will). A living trust may be a revocable living trust (changeable by the creator prior to his or her death) or an irrevocable living trust (unchangeable by the creator).
When most people discuss a living trust, they mean a revocable trust created during the creator's lifetime for the management and disposition of all, or substantially all, of the creator's property.
Different marketers of these types of trusts give them different names including:
- Loving Trusts
- Family Trusts
- Revocable Management Trusts
- Living Trusts
The creator of a Living Trust is the settlor or trustor. That person names himself or herself as the initial trustee and the initial beneficiary. Thus, the settlor holds legal title to trust property as trustee for his or her own use and benefit as beneficiary. When the settlor dies, becomes incapacitated or resigns as trustee, another person becomes trustee and manages the property for the benefit of the settlor, if living, or for the beneficiaries named by the settlor, if the settlor is dead. For example, the trust may provide that, upon the settlor's death, the settlor's daughter becomes trustee and is instructed to distribute the trust property in equal shares to the settlor's three children.
Living Trust versus a Will
A Will is a legal document that becomes effective upon death and specifies how property is to be disposed of. To be effective, a Will must be acknowledged as valid through a court procedure known as probate. A living trust also specifies how property will be disposed of upon death, but since it exists before death, its validity does not need to be acknowledged by a probate proceeding. Avoiding probate is why living trusts are popular today.
Avoiding Probate with Trusts
Revocable living trusts are marketed in many states as a great way to avoid probate, especially in states with complicated administration procedures. In many states, estates are put through court-supervised administration where the executor must have the court's approval to do most anything. Over time this can be very expensive, diminishing the assets available for the heirs and beneficiaries.
In Texas, most well-drafted Wills provide for independent administration, allowing an executor to handle estate business without on-going court supervision and approval. Delays or prohibitive costs of probate are not as much of a concern in Texas as they are in many states.
Living trusts are more complicated than Wills and typically cost more to establish. They also require the consumer to do more things, such as change ownership of property into the name of the trust, which adds inconvenience and may add expense. Usually some of the settlor's property is left out of the living trust (either by design or neglect), so a pour-over will (a will which "backs up" the living trust and indicates, "if I forgot to put anything into the living trust before I died, I hereby put it there upon death") has to be probated to get those assets into the trust.
In most cases, where the plan of disposition is straightforward (for example, in trust for the spouse and then to the children in equal shares when the surviving spouse dies), the cost of the probate proceeding is likely to be equal to the additional cost of the living trust-based estate plan, causing little or no savings. In other cases, the savings and other advantages can be substantial.
Utilizing a Living Trust
Call a trust attorney at Looney & Conrad, P.C. for a complimentary consultation concerning a living trust. Here are some factors often making a living trust a good idea:
- Real Estate in another state:For Texas residents who own real estate in another state, the use of a living trust could save the cost of probate proceedings in the other state.
- Impending disability is likely: If age or medical condition is such that there is reasonable fear the person will soon be unable to manage his or her property prior to death, a living trust can make it easier for those designated to manage the property.
- Heightened privacy concerns: Most people want to keep personal financial information private, but when a person has a "greater than average" desire for privacy, a living trust may be a good idea. When used properly, there can be less public disclosure when the person becomes disabled or dies.
- Post-retirement, stable assets: If a person is retired and not in "acquisition mode" (buying new cars every couple of years, opening and closing accounts frequently, changing jobs, starting new businesses, etc.) then a living trust may be beneficial.
- Will contest likely: If loved ones are likely to fight over the Will, in some cases a living trust may make it less likely that someone will successfully contest the plan based on undue influence, lack of capacity, etc.
If most or all of these factors are not present in the situation, then a traditional Will is probably the simplest and least expensive way to plan. These are general guidelines. Call a Trust Lawyer at Looney & Conrad, P.C. for a complimentary consultation.
Other Estate Planning Tools
The traditional and most common method of estate planning involves a Will and various disability documents. One advantage of a living trust is its usefulness in the event of incapacity. However, a statutory durable power of attorney may accomplish the same thing in case of incapacity. While some banks and others are reluctant to accept and act on a power of attorney, the Texas Statutory Durable Power of Attorney is generally accepted at most banks and financial institutions.
Wills are complex documents that should be prepared by an experienced family trust attorney with asset protection trust skills. Living trusts are even more complicated than wills. Lawyers with experience in estate planning, trust and probate work are the professionals to call for assistance.
For assistance, contact at Looney & Conrad, P.C. at 281-597-8818.
Our lawyers are available 24 hours a day, 7 days a week for a free, no-obligation case evaluation.
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11767 Katy Freeway, Suite 740 Houston, Texas 77079
918 Austin Street Hempstead, Texas 77445