When you execute an estate plan in Texas, you might decide to use only the most basic documents. However, you might determine that a more complex plan is needed. If you’re like many estate owners throughout the state, you might want to learn more about how to fund a trust. If so, it is important to note that there are several options, such as revocable trusts and irrevocable trusts.
You may have also heard someone refer to a revocable trust as a living trust. Both terms refer to the same thing. Some people call it a living trust because you can change it for any reason during your lifetime, as long as you are of sound mind. On the other hand, an irrevocable trust is unchangeable, unless you have the consent of the designated beneficiaries.
Using revocable trusts instead of a will
You might choose to use a revocable trust, rather than a will, to give a loved one an inheritance. With a trust, you can include instructions regarding exactly when and how the money you have funded it with can be used by the beneficiary. Your trust will also have an appointed trustee to oversee the funds, according to your documented instructions.
Another reason that many people choose to fund a trust instead of leaving instructions for asset distribution in a will, is that a trust often helps minimize the burden of estate taxes.
A downfall regarding a living trust
You might wonder why anyone would choose to fund an irrevocable trust, which cannot be modified, if they also have an opportunity to fund a living trust that can be changed as needed. One possible answer might be that the funds in an irrevocable trust are more secure than those in a living trust.
If a creditor sues you to collect a debt, the assets you have in a living trust may be garnered to help satisfy the judgment.
A benefit of revocable and irrevocable trusts
Maybe you have a son or daughter or grandchild who is terrible at managing money. You have reason to believe that, if you were to leave a large sum of money to this person in your will, he or she would not use it wisely.
In such a case, it might be better for everyone involved to fund a trust. You can incorporate instructions in the trust that state how specific amounts of money should be distributed at specific times.
Customizing your estate plan
You can choose to add or omit any estate planning documents you want or when you need. It is helpful to research Texas estate planning laws ahead of time so that you can be proactive in the process of planning your estate.