Should I have a Living Trust?

Maybe, but not necessarily.

A living trust or family trust is a document that serves as a substitute for a will. You transfer your property to your trust while you are alive. The trust specifies how your property will pass to your heirs. The trust accomplishes everything you want to do in a will but it allows your heirs to completely avoid the probate court process.

Some benefits of a living trust:

  • Keeps your affairs private; there is no public disclosure of the assets of your estate, and how and to whom you pass your property, which usually occurs in a probate court process.
  • There is less chance a disgruntled heir will contest your plan.
  • Allows for management of a your finances and property if incapacitated without having to produce a power of attorney.
  • Can be very easily changed without the formalities of a new will or codicil (will amendment).
  • You do not need to obtain a separate tax number for the trust. The use of a revocable living trust does not create any issues with the IRS. You continue to use your social security number and your personal tax returns are prepared and filed as if the trust did not exist.
  • There is no change in your right to buy, sell or transfer, or manage your property.
  • If you own property in more than one state, you avoid multiple probate court proceedings and attorneys in each state because the trust will cover your assets in every state.

Some drawbacks of a living trust:

  • You must be careful to transfer almost all of your existing property to the living trust or your heirs will still have to go through a probate process. (Exceptions can be IRA, 401(K) or other qualified retirement plans to maintain tax deferral advantages.)
  • Property you acquire after creating the trust must be owned by the trust for the same reason.
  • Transfer documents for real estate must be carefully written to preserve homestead and other property tax exemptions.
  • Beneficiary designations on bank and investment accounts and insurance policies must be coordinated with the purposes of your trust.
  • Not a good choice when when you want to qualify for long term care medicaid coverage.

Unlike some other states where the probate process is expensive and lengthy, in Texas, with a properly drafted will, the probate court process is relatively smooth and can be completed in a couple of months. We don't recommend a living trust for everyone, but it should be considered if

  • You are concerned about the privacy of your affairs.
  • You want your spouse and family to avoid all legal proceedings, uncontested or not.
  • You have property in multiple states.
  • You want to arrange better management for the affairs of an incapacitated spouse.

The Capelle Law Firm provides comprehensive estate planning services in Plano, Frisco, Collin County, Denton County and the Dallas area. Call 214-387-6040 now to schedule a complimentary, no obligation consultation