Houston Estate Planning Law Firm
Wills, Trusts, Durable Powers of Attorney, & Health Care Documents
We have worked with many families and can offer advice and guidance when a gift or inheritance is contemplated, including:
- Making gifts of special items, such as heirlooms, art or collections
- Dealing with debts owed to you by a beneficiary
- Treating children in different circumstances fairly
- Providing clarity and guidance to an Executor or Trustee carrying out your plan
- Transferring interests in a business
- Protecting a beneficiary’s inheritance from divorce and other creditors
- Balancing the interests of a second spouse and children from a previous marriage
- Avoiding family conflict after you’re gone
- Maintaining a disabled beneficiary’s eligibility for benefits
- Providing for the care of pets left behind
- Making charitable gifts in a tax efficient way
- Avoiding the cost and delay of probate
- Minimizing estate and income taxes
There is nothing we like more than to hear a client say, “I didn’t know I could do that. This has given me such peace of mind.”
More About Estate Planning Services:
Your estate plan may be based on a traditional Will or a Revocable Living Trust. If you are wondering which estate planning vehicle is right for you, the following information may be helpful to you in making that decision.
What is the difference between a Will and a Revocable Living Trust?
The basic difference between a Will and a revocable living trust is that a Will needs to be probated before it can be effective, while assets in a revocable living trust (and accounts passing to the revocable living trust by beneficiary designation) can be controlled by the successor Trustee and distributed to the deceased person’s beneficiaries without having to go through the probate process.
There is also no need to file a public inventory of the deceased person’s assets with the court if the assets are in the name of the revocable living trust, nor is there a requirement to publish a notice to creditors in a local newspaper.
Because a probate procedure needs to be completed in every state in which a deceased person owned real estate, a revocable trust also helps prevent the time and expense it takes to go through the probate procedure in multiple states.
If there is a concern that a Will may be contested, a revocable living trust is the better vehicle for an estate plan. If a Will is contested, even if the contest is of no merit, no actions may be taken regarding the deceased person’s estate until the contest is resolved. If assets are in a revocable trust, the successor Trustee may continue to have access to the deceased person’s assets and manage the trust, unless the contestant is successful in obtaining a restraining order (which is more difficult than merely filing a Will contest).
Can I keep my property tax exemptions, if my home is transferred to my revocable living trust?
You may keep all the property tax exemptions for which you are eligible; however, you may have to file a new exemption application with the appraisal district. You may also need to provide the appraisal district with a copy of the page of your trust which states that you may live in your residence “rent free.”
Can a revocable living trust be the beneficiary of my retirement accounts?
To obtain the most favorable income tax treatment for a tax deferred retirement account, it is preferable to name an individual or the separate trust created under your revocable trust for the benefit of the individual who is to receive a share of your retirement account. If you name your revocable living trust as beneficiary, then the life expectancy of the oldest beneficiary will be used to determine the required minimum distributions for all your beneficiaries.
Can a revocable living trust be the beneficiary of my life insurance?
There are no tax consequences associated with naming your revocable trust the beneficiary on your life insurance policies.
Do I need a Will, if I have a revocable living trust?
If you opt to go with a revocable living trust as the foundation of your estate plan, it is advisable for you to have a short Will referred to as a “pourover will.” The pourover will simply states that, if an asset was not transferred to your revocable living trust during your lifetime, or by beneficiary designation at your death, the asset passes to your trust by probating your pourover will. While you may make every effort to make sure that all your assets are transferred to your trust, either during your lifetime, or at death through a beneficiary designation, sometimes assets are forgotten, or a death occurs before newly acquired assets have been transferred to your revocable living trust. The goal is to avoid having to probate the pourover will, but it is a safety net if the unexpected occurs. Because the details are your estate plan are included in your revocable living trust, and not in your pourover will, no privacy is sacrificed by probating the pourover will.
A power of attorney is a legal document giving another person (the attorney-in-fact) the legal right (powers) to do certain things for you. What those powers are depends on the terms of the document. A power of attorney may be very broad or very limited and specific. All powers of attorney terminate upon the death of the maker, and may terminate when the maker (principal) becomes incapacitated (unable to make or communicate decisions). When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.
When does a successor Trustee take over managing my revocable living trust?
In most cases, you will be the initial Trustee of your revocable living trust. The successor Trustees you name in your revocable living trust will take over managing your assets only if you resign, or if you are certified to be incapacitated (you control the definition of incapacity in your revocable living trust), or at your death.
Why is it important to transfer my household furnishings and personal effects to my revocable living trust?
If you wish to have the flexibility of preparing a list of individuals to receive specific items of your household furnishings and personal effects at your death; and being able to revise that list whenever you wish to do so, you should assign your household furnishings and personal effects to your revocable living trust when you create the trust. The trust will state that you may prepare a “personal property memorandum” listing the specific assets you wish to gift to certain beneficiaries. The trust will include default beneficiaries to receive any items not included in your personal property memorandum.
Do I have to give a copy of my revocable living trust to the financial institutions where my accounts are located?
Texas law states that you are not required to share your revocable living trust document with anyone. Instead, Texas law allows you to execute a “certification of trust” which includes the pertinent provisions of your trust such as when it was executed, that it is revocable by you, that you are the Trustee, and that you have all the powers granted to a Trustee under the Texas Trust Code. That said, there are certain situations when it may be necessary to share pages from your trust document, such as when you apply for a new homestead exemption if you transfer your residence to your trust.
How do I transfer my assets to my revocable living trust?
Assets are transferred to your revocable living trust the same way they are transferred to any other individual or entity. For example, if you wish to transfer real estate to your revocable living trust, you would do so with a deed. If you wish to transfer a financial account to your living trust, you would ask the financial institution to put the name of your trust on the account instead of your name.
What happens if I sell assets that have been transferred to my revocable living trust?
The fact that property is in the name of your revocable living trust does not restrict your right to sell or otherwise dispose of the property. If the trust sells property, the proceeds from the sale are paid to the trust and deposited into an account that you manage in the name of the trust.
Do I need to get a separate tax identification number for my revocable living trust?
As long as the trust is revocable by you, you do not need to apply for a separate tax identification number for your revocable living trust. Accounts in the name of the trust will use your social security number.
Do I need to file a separate tax return for my revocable living trust?
As long as the trust is revocable by you, no separate tax return is required for the trust and all income from your assets would be reported on your own individual income tax return as if the trust did not exist.
Can I do the same kind of tax planning in a revocable living trust that I can do in a Will?
You can do the same kind of estate tax planning in a revocable living trust as you can do in a Will.
Does my revocable living trust protect my assets from my creditors?
No. Because the trust is revocable by you, the trust does not provide any protection from your creditors.
What if I want to terminate or amend my revocable living trust?
You may terminate or amend your revocable living trust at any time while you are living. If you are married and have a joint revocable living trust, the trust may state that it may be amended and revoked as to community property only with the consent of both spouses. As part of terminating the trust, you should deed any real property that is in the name of the trust back to yourself and you should close any accounts in the trust’s name and transfer the funds to an account in your name.
How important is funding my revocable living trust, if I wish to avoid probate?
If probate avoidance is the goal, it is very important to make sure that all your assets are either transferred to the name of your revocable living trust or that your revocable living trust is the beneficiary to receive certain assets on your death.
Creating the revocable living trust, itself, is just the first step. Having an unfunded revocable living trust is the same as having a Will, except that your plan is still private with an unfunded revocable living trust. Probate will be necessary before your estate can be settled and your beneficiaries receive their inheritance.
Some people who are comfortable with the idea of probate will create a revocable living trust, but then just transfer their out of state real property to their trust so as to avoid having to go through the probate process in multiple states.
Other people who are not ready to transfer their assets to their trust now, create a revocable living trust to keep their options open so that they do not have to totally revise their estate plan if they decide at a future date that a revocable living trust is the best option for them. They know that, if they pass away before transferring assets to their trust, their pourover will takes care of making sure that their plan is put into effect after their pourover will is probated. If probate avoidance is the goal, it is important to periodically review how your assets are titled so that newly acquired assets are either in the name of the revocable living trust or the revocable living trust is the beneficiary of the assets at death.
How do I know what’s right for me, a traditional Will or a revocable living trust?
During the estate plan design meeting, your Galligan & Manning attorney will review your assets and your goals and will make recommendations as to which estate planning vehicle would best suit your needs. In the meantime you can take this Quiz to see whether a traditional Will or a revocable living trust would be better fit for you.