4 Misconceptions about Trusts
1. You still must go through probate.
This is false. In fact, one of the primary reasons to have a revocable trust is to avoid probate. If you transfer your property into the name of your trust while you are living, then for any property not included can be added with a Pour Over Will. The Pour Over Will states that any property not in your trust at the time of your death will be “poured over” into the revocable trust. The terms of the trust will determine who will receive the property in the trust at the time of your death. Trusts operate under their own terms set up by you. Probate is not necessary to operate a trust.
2. A trust is only for wealthy people.
A trust can remove the property in your name, so you do not have to pay estate taxes. In 2019, you don’t pay taxes unless you have valued more than $11.4 Million dollars. For those who are not trying to avoid paying estate taxes can also find benefit with a revocable trust. For example, you can avoid probate as discussed in number 1 above. By setting up an irrevocable trust, you can protect your property against any personal liability. If you are sued, you are not the owner of the property you put in your trust. Your trust is the owner.
3. You lose control over property in your trust.
There are two types of trusts. Revocable and irrevocable trust. With a revocable trust, you can terminate the trust anytime while you are living. You can also make yourself the beneficiary and the trustee of the revocable trust which allows you to decide how to use the property and allows you to benefit from the property. You can still sell property and add and remove property from the revocable trust while you are living. With an irrevocable trust, you cannot terminate the trust and you cannot take the property back, but you can set the trust up so you can be the beneficiary of the property. The irrevocable trust is often used to help people qualify for Medicaid because the trust owns the property.
4. Trusts are expensive.
With a trust, there are some administrative costs for setting up a bank account in the name of the trust. If you add titled property to the trust, then there are administrative costs with that, too. Otherwise, you should not see additional expenses. You can also establish terms in your trust that allows it to be terminated in the event it becomes too expensive to operate. The expenses of operating a trust does not come from your personal assets, but is paid for by the trust.
The blog is intended for general educational purposes. To discuss your specific situation contact us at the Law Office of Hugh Spires, Jr., PLLC at 210-874-5700 or hspires@TexasWillsLawyer.com.