Revocable Living Trust

A Trust is the Solution for Dallas Grandparents

A Dallas family asked me a few questions during a free meeting the other day.  They are contemplating setting up an arrangement for their estate. Their goals are to make everything as simple as possible for the surviving spouse, whomever it is; have both of their children involved with their estate, avoid Dallas County probate court after they pass away; and make sure that the money they leave to their grandchildren will be used for good.

We are going to create a revocable living trust for them so that after the first of them passes away, the surviving spouse is the sole trustee and is in complete control of everything, no assets or titles will be frozen, the survivor will have immediate access to do what needs to be done and there is no need to deal with lawyers, judges or courtrooms; their two children will be the Successor Co-Trustees after both parents die, and since there will be no probate, the children can immediately sell their home after the parents pass away; and third, instead of handing $150,000 to each of their grandchild, when they pass away (encouraging possible bad habits from the grandchildren), the grandchildren's parents (their children) will serve as the trustees of the trust for the grandchildren. The parents will have total discretion regarding what the money is used for, and the grandchildren's parents will transfer the inherited funds to the grandchildren when the grandchildren show adequate maturity and financial responsibility.

Have a similar need?  Contact us at 214.220.2130.

 

You, Me, and Trusts And Red Wagons: The Truth

I helped a man from Plano, Texas today.  He was in our office and wanted to know how Trusts work.  I gave him a quick demonstration using a little red wagon that I keep in our conference room.  The wagon represents the Trust entity itself.   I have several matchbooks that represent a family’s assets (house, car, bank accounts, savings accounts, etc.).  I placed the matchbooks inside the wagon (to represent the re-titling and trust ownership of the assets) and rolled it around the conference room floor to emphasize the mobility and portability of the Trust.  I explained that as long as the assets are inside the trust, they are protected from predators like lawsuits, Probate and the claims of Nursing Homes.  Then I took some of the matchbooks out of the wagon and placed them on the table to demonstrate how the owner maintains control over the assets.  I also indicated, though, that once the matchbooks (assets) were outside of the wagon, they were no longer protected from lawsuits, probate and Nursing Homes.  In the bed of the wagon is a set of instructions that lets everyone know how the trust is to be operated.  I closed my demonstration by explaining to my newest client that trusts aren’t just for the rich anymore.  They are for anyone that wants to protect assets for their families.

That’s a very simple explanation of Trusts.  They can be very complicated but the basics remain the same:  protection and control of family assets.

What Many Texans Don't Know About Trusts and Avoiding Probate

We often have clients that want to avoid Texas Probate. They can often do so by utilizing a Revocable Living Trust and re-titling their assets in the name of the Revocable Trust.  But what a lot of people don’t know is that some assets, like IRA's, annuities and life insurance, by their nature, don’t need to go into a trust to avoid probate.   These types of assets and a few others are established as payable to pre-determined beneficiaries. In other words, the beneficiary is designated at the time the account is established. Provided that the beneficiaries have been properly designated, it isn’t necessary that a Trust hold their titles.

There are other types of assets that do not have to be transferred to a Revocable Living Trust so that probate can be avoided.

1. Personal Items and Effects.  Since your personal belongings are not titled (i.e. there is no deed like you would have with real estate assets, or certificate of title like a motor vehicle would have), family members usually divide personal effects amongst themselves after the death of a loved one without the involvement lawyers, judges or the court.

2. Checking and Savings Accounts.  By giving an adult child signing authority upon your checking account, after the last spouse passes away, that child can have immediate access to the account so that he or she can pay for funeral expenses, close the account, and divide the funds between your heirs.  All of this can be done without the involvement of lawyers, judges or the court.

3. Vehicles.  If the person you want to ultimately receive ownership of your car provides the Will or a photocopy of the Will to the Texas Office of Motor Vehicles, they will transfer the title after death without court intervention.

If your goal is to make things easy on your spouse and your children, and/or to set things up so your family doesn't have to deal with lawyers or judges or participate in the lengthy and costly court probate process, then the assets that would typically require court involvement must be in a trust.  These types of assets include real estate, mineral interests, stocks, Certificates of Deposit, ownership in limited liability companies or corporations, other business interests, and non-IRA investments.

Since many people have a large portion of their estate in retirement accounts, it's fairly easy to avoid probate by retitling the family home and other probate assets to your trust.