In many states across the U.S., including Texas, a growing trend has developed which encourages the use of Trusts as a part, or in place of, traditional estate planning. While attorney drafted trusts can be utilized effectively in a variety of situations, many questions exist for most clients about the nature of trusts, how they are used effectively, when they may not be appropriate, etc.
This Trust section of our website is designed to answer some of these questions for you if you are seeking counsel from a trust lawyer. We provide information about Education Trusts, Testamentary Trusts, Revocable Living Trusts, Spendthrift Trust provisions, Crummey Trusts and Irrevocable Life Insurance Trusts.
Each of these trusts has different uses and benefits, but an understanding of each is important before you consider creating a trust.
General Information Related to Trusts:
In this section, we provide you with a general overview of the concepts related to trusts. We recognize that many of our clients and potential clients often have misconceptions related to what a trust actually is, its proper use, etc. This section should help to provide a background on these issues so that you can then understand the specific types of trusts explained elsewhere in this site.
1. Testamentary Trusts: The concepts of Wills and trusts combine when you consider the creation of a Testamentary Trust. Theses trusts are created under your Will and will control the management of your assets after your death. These trusts have a wide array of uses, but they are very often used to provide for the management of assets for minors and young children in the event they might become entitled to receive property under a Will.
2. Revocable Living Trusts: In recent years, the use of Revocable Living Trusts as a substitute to traditional estate planning has exploded in many states. In Texas, however, the uses of these trusts as effective estate planning alternatives have limited usefulness. The effective use of these trusts is discussed, but also we discuss many of the myths and misconceptions related to the uses of these Trusts.
3. Educational Trusts: One of the primary concerns that many parents and grandparents have is setting aside money to provide for education for their children and grandchildren. In spite of this desire, those same parents and grandparents recognize that the best interests of their children is not served by giving large sums of money to minors or young adults who might rather buy a car than pay for an education. As a result, the use of an Educational Trust becomes a very appropriate option for providing money for education while ensuring a mechanism to make sure the money is used appropriately.
4. Spendthrift Trusts: Another concern of people creating trusts is that they want the assets of the trust to be protected from the attacks of potential creditors of either the Grantors or the Beneficiaries of the Trust. Spendthrift provisions can be incorporated into a Trust, which will then protect the trust assets from attack.
5. Crummey Trusts: People making gifts into Trusts generally make those gifts for a variety of reasons. However, regardless of the reason, they do not want to give up their money and pay gift taxes on top of giving away their money. The Crummeytrust provisions make it possible to make gifts to a trust while excluding some portion or all of the gift from potential gift tax complications.
6. Irrevocable Life Insurance Trusts: Life insurance policies can very often present estate tax problems for the person who owns the policy. To combat the estate tax complications, the Irrevocable Life Insurance Trust provides an alternative to own a life insurance policy while completely excluding the proceeds from the estate for tax purposes.