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Introduction

If you have been on this planet long enough, you have received a solicitation from at least one attorney or seen an advertisement for a seminar in the Sunday paper praising the benefits of a Living Trust to avoid putting your loved ones through the probate process. Before you answer these solicitations or go to one of these seminars, I recommend that you discuss your situation with an experienced estate planning attorney. A living trust may not be an appropriate estate planning document for your needs. Visiting with an experienced estate planning attorney can help you avoid unnecessary estate taxes, inheritance taxes, receipt of assets by unintended heirs and save you money by not buying unnecessary estate planning documents.

What is a Living Trust?

A trust is created by transferring assets to a Trustee for the benefit of someone which may be the person creating the trust referred to as the Settlor or the Grantor. Simply speaking a living trust is a trust created during the Settlor's lifetime. It is usually created with a legal document that sets forth the beneficiaries, how the assets are to be managed, by whom they will be managed, and how and when the assets will be distributed. A Settlor may manage the assets as Trustee and may name a successor Trustee in case he becomes incapacitated or unable to manage the Trust assets.

A trust may be revocable or irrevocable. A revocable trust is one in which the Settlor may create and dissolve or revoke it at any time. The Settlor may move the assets in an out of the trust, and whatever is left in the trust on the date of his death is what is distributed to the beneficiaries. An irrevocable trust is one that the Settlor may not revoke; therefore, losing control of his assets. Whether an individual's needs will be best met with a revocable or irrevocable trust requires a consultation with an experienced estate planning attorney.

What is the purpose of a Living Trust?

The revocable living trust is typically used as a Will substitute. There is a myth that the living trust avoids or minimizes costs incident to probate and estate administration. You hear horror stories of the costs of probate in other States; however that is not the case in Texas. Our Probate process is a simple, efficient, and inexpensive, if the decedent has a well written, valid, self-proved Will which is why it is important to discuss your situation with an experienced estate planning attorney.

Typically, a revocable living trust will cost in legal fees alone anywhere from $1,500.00 to $2,000.00; however, this fee does not include the cost of transferring all the assets into the trust. Transferring assets to the trust during your lifetime to assure that all of your assets are in the trust when you die is an ongoing process. It is necessary to have a Pourover Will which bequeaths all the assets you have acquired and have not transferred in your lifetime to the Trust. This Will must be probated to transfer those assets at your death; therefore, one has not avoided probate.

An individual who has assets in more than one State can avoid or minimize some of the probate costs by creating a living trust. An out-of-State asset that the Settlor has transferred to a trust during the Settlor's lifetime avoids probate in more than one State.

What happens when I die?

While I am not a proponent of the revocable living trust as the ultimate estate planning vehicle, as stated above, it has its advantages when there are assets in multiple States. When you die all the assets in the trust will be distributed to the beneficiaries; thus, the out-of-state property is distributed to the beneficiaries without the necessity of probating the estate in that state.

If the trust is an revocable living trust, all the assets will be counted in the decedent's estate for estate tax purposes. However, your attorney can add provisions in your living trust to help reduce taxes and possibly even eliminate taxes depending on the size of your estate. If your primary concern is to avoid federal estate taxes, you may want to discuss alternative options with an experienced estate planning attorney. There are other estate planning trusts that may serve your needs better.

Conclusion

The revocable living trust is an option for a Will substitute; however, as explained above it is not necessarily a cost saving device in Texas, and it is not appropriate in all circumstances. Each individual should discuss their circumstances with an experienced estate planning attorney.

THE LAW OFFICE OF LINDA K. BURKE

I, Linda K. Burke, have been assisting clients with estate planning for approximately 8 years. I regularly attend continuing education seminars and seminars offered by financial planners and tax advisors so that I can stay abreast of the estate planning techniques; however, if after meeting the client there are circumstances that require an expertise that I do not have, I refer the client to an expert in that area.

We can be contacted as follows:

3000 Wilcrest, Suite 120
Houston, Texas 77042
Telephone No. 713-266-7227
Facsimile No. 713-782-9949
e-mail address: lkb@hal-pc.org