When Should I Use a Revocable Trust?

A couple of weeks ago, I explained that probate recently got more private in Texas. In the past an estate’s representative was required to file an inventory, appraisement and list of claims with the court. Revocable trust-based plans avoided the public disclosure of information required in the inventory.

But effective September 1, 2011, Section 250 of the Texas Probate Code (which is now Section 309.056 of the Estates Code) permits independent executors to file an affidavit in lieu of an inventory, appraisement and list of claim, which keeps the information contained in it private. This should alleviate many of the privacy concerns associated with Will-based plans and make them more appealing.

But depending on your unique circumstances, revocable trusts may be the best way to accomplish your estate planning goals and objectives. Below are a few situations in which revocable trusts are beneficial.

Revocable trusts are a good idea if you own property in another state

If you are a Texas resident and you own a vacation home or investment property in another state, probate may be required in every state in which you own real estate.

However, if you transfer title of the  out-of-state property to a living trust, probate can be avoided in those states.  This helps the estate avoid legal costs associated with multiple probates.

It is possible to create a living trust only for out-of-state property.

Revocable trusts are a good idea if you are concerned about incapacity

If you are concerned you may become incapacitated because of advanced age or a particular medical condition, a living trust can make it easier for the person you choose to step in and manage your assets if and when you become incapacitated.

A Durable Power of Attorney could allow you to accomplish the same goals, but trusts are more readily accepted at some banks and other financial institutions.

Revocable trusts are a good idea if you expect a will contest

If you anticipate a contest to your will, then in some cases and with professional advice, establishing a living trust could prevent a challenge to your estate plan.

A trust becomes effective as soon as the settlor transfers his assets into it.  Since it becomes effective during his lifetime and is typically operating with his full knowledge and control, it is more difficult for challengers to claim, for example, that he lacked capacity, was fraudulently induced, or was unduly influenced to dispose of his property in the manner he has chosen.

You should always consult with an attorney to help you determine which estate planning tools can best accomplish your estate planning goals.