As a Houston estate planning and probate lawyer, I often get questions about different estate planning techniques. Often, clients ask me about whether a Texas revocable living trust is a good fit for their estate. As most lawyers will tell you, the answer is usually “it depends”. While revocable living trusts are often used as the default planning mechanism in some states, such as California, where the cost to probate an estate can be substantial, they are not used as often in Texas. This is partly because the probate process in Texas is fairly streamlined and relatively inexpensive. Some estate planning lawyers will tell you that you can save the cost and expense of probate by using a Texas revocable living trust, which can be true in some cases. However, most lawyers will charge a higher fee for setting up a revocable living trust than for drafting a last will and testament, so there may not be as much cost savings as one might think. Additionally, when the grantor (the person who formed the trust and contributed assets to the trust) dies, the trust estate must be administered much in the same way as an estate governed by a will must be administered, although usually with less court involvement.
In my experience, using a Texas revocable living trust often does not save much, if any, cost or expense in the end. This is because even if you have a living trust, you still need a will to make sure that anything that accidentally gets left out of the trust can go through the probate process and end up in the trust. This type of will is called a “pourover will”. More often than not, some assets get left out of the trust when it is initially formed, or new assets are not titled in the name of the trust when they are acquired. When this happens, the pourover will must go through probate and much of the cost savings that was so attractive as part of the trust is lost because of the attorneys’ fees and court costs involved in probating the will.
That is not to say, however, that revocable living trusts are never a good idea in Texas. If privacy is a critical part of your estate plan, then a trust can be a good option because trusts are not filed in the public records the way that wills are filed during the Texas probate process. For instance, if you live in Houston and die with a will that is admitted in a Harris County Probate Court, then the will becomes a public record, and the general public could conceivably become aware of how you distributed your assets. However, if a trust is your primary estate planning vehicle, it is not filed in the county records and will not generally be made available to any other parties.
A Texas revocable living trust might also make sense if you own real estate in another state. In that case, the out-of-state property could be owned by the trust and you could avoid probate in the state where the property is located. After you die, the property is still owned by the trust, so there is no need to open a probate estate in the state where the real property is located. Additionally, the trustee of a trust will trump agents named on financial powers of attorney or even guardians named by a court when dealing with the trust assets. For this reason, it sometimes makes sense to form trusts for people who may become incapacitated and want to be assured that they have control over naming the people who will be responsible for handling their assets if they become incapacitated.
When it comes to estate planning with Texas revocable living trusts, there is no universal answer as to whether they are a good fit. The decision must be made on a case-by-case basis because everyone’s assets and family situations are different. You should speak to estate planning lawyer to determine if this type of trust is a good fit for your estate.