TEXAS REVOCABLE LIVING TRUSTS ADVANTAGES AND MISCONCEPTIONS

Originally published by Michael Cohen.

Many are under the mistaken impression that only the wealthy need trusts and that it is never needed in Texas since the probate process (the court process confirming the Will is valid) is simple in Texas compared to many other states. Although what is best for the individual may vary, here are some of the advantages of a revocable living trust:

• Avoidance of Texas probate – saves time, court costs and legal fees making it easier for the beneficiaries;
• Avoidance of probate when the deceased owns real estate out of state – if you own real estate outside of Texas and you have a Will, then the Will has to be proven valid in each state where the deceased owned real estate adding to court costs and legal fees;
• Privacy – when you probate a Will, the original Will becomes a part of public record. Furthermore, if an inventory is submitted, it is also a matter of public record. Also, as of September 1, 2017, in Texas, the last several digits of both the Social Security Number and Driver’s License Number of both the person who died and the person who applies to probate the Will are now needed;
• Financial institutions are more likely to recognize trusts than Powers of Attorney – financial institutions so frequently failed to recognize Powers of Attorney that Texas recently passed new laws (effective 9/1/17) making it more difficult for institutions to continue to fail to recognize Powers of Attorney (without risking liability for attorney’s fees and court costs);
• Management continuity at death or disability – when you probate a Will, there is a waiting period before the court can have a hearing to determine if a Will is valid. A trust is effective immediately so even if one becomes disabled an alternate trustee can generally act quickly without court supervision.

Misconceptions About Revocable Living Trusts:

• Revocable Living Trusts are good if you apply for public benefits – to the contrary, assets are considered available as a resource if held in a revocable living trust (RLT). For the protection of resources counting, one should use an irrevocable trust. In married couple situations, RLTs are in fact counterproductive to obtaining or retaining public benefits;
• An RLT is costly to set up and there are maintenance fees – you simply re-title the assets into the name of the trust (some assets, such as retirement accounts, are generally not put into the trust). You don’t need a new tax id number. Although initially more expensive to set up, it saves the court costs and legal fees involved with probate. There are no maintenance fees;
• You have creditor protection – RLTs do not give a creditor protection during the life of the grantor. However, most irrevocable trusts give creditor protection and, if properly done, can protect assets from counting as a resource for Medicaid benefits for governmental benefits to help pay long-term care costs;
• Anyone can prepare a living trust – There are numerous options and (like any estate planning) you should consider what is most important to you.

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