Trusts

There are a few tools that exist to avoid probate, which can be burdensome and costly.

A trust is an arrangement where one or more persons, referred to as the Trustees, hold and manage property for others, known as the Beneficiaries. A revocable living trust is a legal document that allows you to establish a separate entity (the trust) to “hold” legal title to you assets while you are still living, and to name trustees to manage those assets according to the trust terms. Typically, while you are still living, you serve as the trustee of your revocable living trust and manage your assets for your own benefit. Upon your death or in the event of a disability, the trust terms appoint a successor trustee who then manages and distributes the assets held in your trust. A properly drafted revocable living trust can be a very useful tool in organizing and managing your assets while living and transferring those assets at death and can accomplish several goals, including guardianship and probate avoidance for your estate and heirs, and even marital and creditor protection for your children.

A properly drafted and funded trust will generally avoid probate. While the trust need not be filed with the probate court, there are, however, several steps necessary to administer the trust, including: contacting beneficiaries; gathering, valuing, and managing assets; notifying potential creditors; paying debts, taxes and final expenses; and, distributing any remaining income and assets in compliance with the trust terms. Successor trustees often lack the time, knowledge or resources to personally administer the trust. As a result, they may want call upon legal, accounting and investment professionals for assistance. Oftentimes, a corporate fiduciary (e.g., a trust company) is a great alternative to relying solely on busy family members or friends to serve as trustee. The Walker Law Firm can help your successor trustee(s) deal with the complexities of administering your trust. Please call our office and we will be happy to schedule a consultation, whether or not our office has drafted the original trust.

A joint tenancy adds another person to your assets as a “joint tenant with rights of survivorship.” This allows your property to pass to them when you die without going through the probate process. However, there are disadvantages to this strategy, including: subjecting subjecting your assets to any claims (like a lawsuit, for example) against your co-owner as well as making the assets available to any creditors of your co-owner, all while you are still living and planning on using your assets for yourself.

Texas also permits Transfer of Death (TOD) or Pay on Death (POD) beneficiary designations to be added to bank accounts. Beneficiary designations may have an advantage over a joint tenancy in that they allow you to transfer property only upon your death without giving away any current ownership. A disadvantage, however, is that it can be difficult to obtain an equitable distribution of property among your heirs when utilizing beneficiary designations. Importantly, if you choose to have these beneficiaries listed on your assets, those assets will be distributed upon your death to those listed beneficiaries, even if you last will and testament indicates otherwise.