It’s not exclusively for the wealthy. If you’re 18 years old or older in Texas, it’s time to consider estate planning, whether your financial condition is modest or affluent. If you own a home or a business or have a family, now is the time to consult with an Austin trust attorney.
A comprehensive estate plan includes more than a will. With guidance and insights from an Austin estate planning attorney, your estate plan should eliminate any confusion or fear regarding the future. Proper estate planning provides lasting peace of mind.
There’s no one-size-fits-all planning strategy. A will by itself may be enough if you own no real estate and you’re single, but for most people in Texas, the first estate planning choice will be deciding to set up either an irrevocable trust or a revocable trust.
What Are Trusts?
A trust is comparable to a will, but it achieves much more. For anyone who owns significant assets or properties, a well-written and adequately-funded trust will ensure that your assets and properties will be managed – and after your death, distributed – according to your instructions.
An Austin estate planning lawyer can set up a trust for you. You may review and then sign the trust so that it takes effect. During your lifetime, in most cases, you are the trustee of your trust, and you will designate a successor trustee to manage your trust after your death.
By setting up a trust, you may give legal protection to your assets and properties, and you’ll be makings sure those assets and properties are transferred to your beneficiaries. A trust lets your estate and beneficiaries avoid probate, and an irrevocable trust lets your estate avoid estate taxes.
After you create a trust, you move assets and properties into the trust. Those assets and properties are then distributed after your death by the successor trustee to the beneficiaries. Your successor trustee’s responsibilities are similar to the responsibilities of the executor of a will.
Irrevocable and Revocable Trusts: How Are They Different?
Should you set up an irrevocable trust or a revocable trust? What are the differences? For starters, a revocable trust may be modified at any time after it goes into effect, but an irrevocable trust cannot be changed, generally speaking, but with some exceptions for certain types of irrevocable trusts.
Revocable trusts (also sometimes called “living” trusts), give you the right and ability to revise, add to, change, or even dissolve the trust completely when and if you choose. However, irrevocable trusts can’t be changed after they are signed and go into effect.
Everyone’s circumstances are different, but if asset protection is the main reason you are establishing a trust, you should probably consider setting up an irrevocable trust. Creditors may “go after” assets in revocable trusts because you can move those assets, so they’re still under your control.
However, creditors may not have access to assets owned by irrevocable trusts. Any assets in your irrevocable trust are not legally in your possession or your estate.
Should You Be Concerned About Estate Taxes?
Texas imposes no state-level estate tax, but the federal estate tax – if your estate is subject to it – can considerably reduce your estate’s value. In 2022, the federal estate tax exemption is $12,060,000. For married couples, the exemption is $24,120,000.
Very few people in Texas pay a federal estate tax, but if an estate is subject to it, the federal estate tax may be avoided by establishing an irrevocable trust. Because revocable trusts may be changed or revoked, they cannot help your beneficiaries avoid the federal estate tax.
Here’s how irrevocable trusts help you avoid the tax. If a couple owns a $30 million estate, they can move $6 million in property, cash, or other assets into their irrevocable trust, making the trust the owner. Their estate is then valued below $24,120,000 and is no longer subject to the estate tax.
What Are the Pros and Cons of Revocable and Irrevocable Trusts?
The main difference between irrevocable trusts and revocable trusts is that revocable trusts may be changed or revoked if you need or choose, while irrevocable trusts may not be changed.
As mentioned previously, revocable trusts provide no protection to your assets from creditors and taxes. Revocable trusts:
- let you retain control over your assets and properties
- give your family instructions for managing your affairs should you become incapacitated
- let your estate and beneficiaries avoid probate
In contrast, irrevocable trusts may reduce your tax burden, protect assets from creditors, and maintain your personal and financial privacy, as well as allowing the estate to avoid probate. You typically relinquish control of assets and properties you transfer into irrevocable trusts.
Should You Consider Comprehensive Estate Planning?
Trusts are probably the most useful, versatile, and adaptable estate planning tools, but the details of trusts can be difficult to understand. To establish a trust or to learn more about comprehensive estate planning, seek the help and advice of an Austin trust attorney.
Comprehensive estate planning includes the preparation of a will or trust, a power of attorney for health care, and a durable power of attorney for financial matters. Without these documents, a court can name someone (who may not have been your choice) to manage your affairs.
However, a durable power of attorney for financial matters empowers someone you have named to act on your behalf legally if you cannot because you are disabled or incapacitated. It lets that person, and not the court, manage your financial affairs and make your financial choices for you.
A power of attorney for health care empowers someone you have designated to make your health care choices if you can’t. The document addresses concerns and questions about end-of-life treatment and care.
What Else Should You Know About Trusts?
As mentioned previously, everyone’s financial situation is different, and the details of trusts can be difficult to understand. To plan your estate properly, you’ll need to spend some time with an Austin estate planning lawyer.
Creating an effective trust takes thoughtful consideration, but the right attorney can help you create a customized trust that meets your needs and offers long-term financial security to your loved ones.
Your attorney will work with you, making suggestions and recommendations, until the two of you have prepared the personalized plan that’s right for you and your family. And because tomorrow cannot be predicted, the time to begin the estate planning process is now.