One of the most common questions I receive from estate planning clients is, “Shouldn’t I put everything I own in a revocable living trust?” The answer depends on your situation, but most likely you do not need a Revocable Living Trust if you live in Texas.
A Revocable Living Trust is a trust created during someone’s lifetime which passes ownership of assets at the time of their death. Most importantly, the trust can be amended or revoked at any time by the creator. The creator of the trust is referred to as the Settlor. The person with control over the trust is referred to as the Trustee. Often the Settlor and the Trustee are the same person.
There are many misconceptions regarding the benefits offered by a Revocable Living Trust. A Revocable Living Trust can provide additional privacy and is extremely beneficial if you own real property outside of Texas. However, it does NOT provide any protection from creditors or any relief from estate taxes, and it does require the expenditure of upfront costs, as well as yearly administration and fees to maintain the trust.
In a Revocable Living Trust, the Settlor states who will receive various assets at the time of the Settlor’s death. This allows the transfer of property at death without the involvement of a probate court. In Texas, probate is relatively simple, fast, and often does not result in significant attorney’s fees. In states where probate is extremely costly and complicated, such as New York or California, a Revocable Living Trust makes a lot of sense, but in Texas, it is generally not necessary. A will can serve the same purpose as a Revocable Living Trust and does not require continuous administration.
Another reason people choose a Revocable Living Trust is for privacy. Traditionally, a public inventory of the deceased’s assets was submitted to the court during a probate proceeding. If you did not want your assets to be public knowledge a Revocable Living Trust was the way to go. In Texas, an inventory of assets still must be prepared, but it does not have to be filed with the court and can be made available only to the beneficiaries.
One of the few times I do recommend a Revocable Living Trust is when a client owns real property outside of Texas. Real property must be probated in the state where it is physically located. If a client lives in Texas but owns property in Indiana and Florida, a probate case must be opened in each of those states. This requirement dramatically increases the cost of and the time for probate. If real property outside of Texas is placed in a revocable living trust, the real property will transfer at the time of the death of the Settlor to the named beneficiary without the need for probate.
If you would like more information about Revocable Living Trusts or other estate planning tools, please contact Rosenblatt Law Firm.