When you are making an estate plan in Texas, you may want to consider creating a trust. There are many different kinds of trusts, the design of which allows each to accomplish a slightly different objective. Therefore, there is likely to be a trust available that is appropriate for your particular situation.
The Street explains that at its most basic, a trust is a financial arrangement among at least three parties. The trustor, or grantor, creates the agreement, while the beneficiary receives the benefit from it. There can be more than one beneficiary. In creating the trust, you grant control over the estate, property or assets in the trust to a trustee, who manages the property on behalf of the beneficiaries. Depending on the type of trust you choose, it may be possible for you to serve as the trustee as well as the grantor until your death.
While all trusts function in basically the same way, there are different types that perform specific functions.
- Insurance Trust
A life insurance policy may be subject to estate tax. Placing the policy in a trust protects it from taxation, meaning that the benefits will be available to your family to help pay for post-death expenses.
- Credit Shelter Trust
If your assets exceed the estate tax exemption, a credit shelter trust allows you to pass along the remaining portion to family members free of taxation.
- Living Trust
Living trusts are very popular with people who want to avoid probate. Also called an inter-vivos trust, it allows you to transfer property and assets to one or more beneficiaries upon your death while allowing you to still make use of them while you are alive.
A living trust can be either revocable, meaning that you can make changes to it during your lifetime, or irrevocable, meaning that you cannot change or cancel it if you change your mind later.
The information in this article is not intended as legal advice but provided for educational purposes only.