A revocable living trust is a document that can serve an important role in an overall estate plan. With a revocable living trust, an individual (known as the grantor) places property in the trust and generally serves as the trustee for the remainder of his or her life, at which time a different individual or institution (known as the successor trustee) replaces the grantor as trustee and manages the trust assets according to the terms of the trust document. By creating a trust, the grantor can maintain control of the trust assets during her lifetime while resting assured that the property will be managed according to her wishes after she dies.
One of the reasons revocable living trusts are created is for the avoidance of probate in Texas or other states. Property that is owned by a trust does not become part of that person’s probate estate upon death, and as such is not generally subject to the probate process in Texas. This can prove advantageous in certain circumstances, such as where a grantor owns property in another state. For example, if a Texas resident owns property in Colorado and that property is not owned by a trust, it may be necessary to probate the person’s will in a Colorado probate court or undergo a similar statutory probate procedure in that state. However, if the property is owned by a trust created in Texas, the trust still owns the property after the grantor’s death and thus there is generally no need for any probate proceeding in Colorado (assuming the grantor owns no other property there). By owning the property in a revocable living trust, probate costs in another state are avoided altogether.
The same rules apply for property located in Texas owned by a Texas revocable living trust. Property that is located in Texas that is owned by a trust does not become part of the Texas probate estate of a grantor after he dies, unless the trust provides otherwise. This can prove beneficial, for example, if a grantor would like to avoid the fact of ownership of an asset becoming a matter of public record, which may occur if the property is part of an estate that is subject to the probate process in a Texas court.
If the grantor is unable to manage his financial affairs for any reason, a successor trustee can be appointed to manage the trust property for him until he recovers. In the absence of a revocable living trust or other arrangement, the grantor’s family may be forced to go to court in order to have a guardian appointed for the individual, which can be time consuming and expensive. A durable power of attorney can also be used to appoint a person to manage the financial affairs of an individual, but some financial institutions are more comfortable dealing with a successor trustee than with an agent named in a power of attorney.
The question often arises about whether a person is better off to just put all their assets into a revocable living trust in order to avoid the Texas probate process entirely upon death. In fact, some people do take this approach, but it often proves problematic in the end. Ensuring that every asset you own is placed into a trust in order to avoid the probate process can be a cumbersome exercise. Inevitably, some assets will be inadvertently omitted from the trust or not property titled in the name of the trust during the course of the grantor’s liftime. For this reason, a living trust is often used in conjunction with a will (known as a pour-over will) that places all remaining assets of the decedent inside the trust. A pour-over will complements a living trust by providing a mechanism for “pouring” all of the decedent’s remaining assets into the trust that were not already there.
Contact an estate planning attorney at the Houston office of the Vance Law Firm today for a trust & estate planning consultation to help you determine whether a living trust should be a part of your overall estate plan.