Trusts can help a person manage their property and assets assuring they are distributed according to their wishes after one is deceased.
Why forming a trust is important
There are many reasons to start setting up a trust. Most importantly, providing for your family after you have passed and stating how they will receive their inheritance.
What is a Trust
- A Trust is an entity set up by a written document that is used to own property, including cash.
- The written document setting it up is referred to as a Trust Agreement.
- The control of the property owned by the trust is given to a Trustee.
- The benefits of the property are given to a Beneficiary.
- The Trustee and Beneficiary can be the same person, but this is not recommended.
- The person that sets it up is called the Trustor.
- The Trustor can be the Trustee and can also the Beneficiary, but this is not recommended.
- It can be set up when the Trustor is alive or it can be set up in the Trustor’s will.
- A Living Trust is a revocable or irrevocable trust which is set up while the trustor is alive.
- A Testamentary Trust is a revocable or irrevocable trust which is set up after the Trustor is deceased and is usually set up in the Trustor’s will.
- It is usually set up for estate planning purposes or to take care of a special needs child after the parents are deceased.
- It can also be used for asset protection if it is used properly.
Setting up a trust in Texas
A trust can be set up by an individual, group, organization or a corporation known as the grantor. It is established to hold assets or property for a specific person or group, which are called the beneficiary.
Controlling a trust is overseen by a trustee. In some cases this may be the grantor themselves or someone may be named as a grantor. This person might be a trusted member of the family, an acquaintance or a professional.
A trust consists of:
- A grantor - individual, group or organization setting up a trust.
- The beneficiary - individuals or group benefitting by the trust.
- A trustee - May be the same as the grantor. May be a close friend or a professional controlling the trust.
Interested in setting up a trust?
Reasons for Creating a trust:
There are many reasons setting up a trust in Texas, such as:
- It may help manage your affairs in case of disability
- Trusts are difficult to contest
- Avoids probate (where a judge determines a will’s validity) and are considered more private than wills.
- May determine how money or assets are used by beneficiaries. Especially those that have trouble making sound financial decisions.
- Can be distributed for a specific purpose like higher education.
- Can be used to give to charities
- Reduces or avoids estate taxes
- Help determine how difficult assets should be split