When people in Texas create an estate plan, they may use a will, a trust, or other documents to pass assets to beneficiaries. Wills do not take effect until after a person’s death. Trusts generally take effect immediately unless they are testamentary trusts.
A revocable trust is reversible, but it offers fewer protections than an irrevocable trust, which generally cannot be altered. A revocable trust can be changed or terminated altogether. One benefit of an irrevocable trust is that the assets in it are usually not considered available to the settlor by Medicaid. This can be significant if the person needs nursing home care but must first pay down assets. However, the creator of the irrevocable trust can also be the beneficiary and can receive an income from it despite not having control over the assets.
One potential benefit of a trust is that it does not have to go through probate, unlike a will. This allows assets to pass directly to beneficiaries and keeps the estate plan private. There are other vehicles for avoiding probate as well. Retirement accounts and life insurance policies usually pass by beneficiary designation. Other property, such as a home or vehicle, may be titled as joint tenancies with rights of survivorship. Land may have a transfer on death deed.
An attorney may be able to assist a client in determining what the best approach to an estate plan will be depending on the person’s individual situation. For example, some people may assume that they do not need a trust because they are not wealthy. However, trusts can be useful in a variety of situations, such as one in which a relative might spend irresponsibly. The trust could be designed to only allow distributions at a trustee’s discretion or on meeting certain conditions.