Trusts are important tools in estate planning. Depending on the type of trust established, it can serve many purposes: to decrease tax liabilities, to protect accumulated funds from creditors, and to protect privacy, since trusts, unlike wills, are not public documents. A trust is legally defined as a relationship in which property is held by one party for the benefit of another. A trust is created by the owner, also called a “settlor” or “trustor” who transfers property to the trustee, an individual chosen to manage the designated funds for the trust’s beneficiaries.
Why You Need Hegwood Law Group
Hegwood Law Group, with several offices in the Houston Area, has a staff of highly professional trust and estates attorneys who are capable of setting up trusts for you that will be most beneficial under your particular circumstances. Our comprehensive knowledge concerning Texas trusts, and our genuine interest in your needs and goals, make our firm stand out among other law practices. You will find us to be well-informed, respectful, and responsive.
How Various Trusts Protect You, Your Family, and Your Accumulated Assets
Because of the variety of types of trusts, and the complexities of each, it is essential to have a skilled trust attorney working with you as you plan your estate. Hegwood Law Group has experience handling all of the following:
Revocable Trusts are also known as living trusts; as such they can be altered or revoked throughout your lifetime. The price of this flexibility is that the revocable trusts remains part of your estate and can therefore be taxed. Even so, when you die, the revocable trust will become irrevocable and the property held in trust will be passed on to your beneficiaries. Two major advantages of revocable trusts are that  they avoid probate and  they preserve your financial privacy since, unlike wills, they are not public documents. At the time of your death, a revocable trust becomes irrevocable.
Irrevocable Trusts cannot be changed or revoked once they have been created. Examples of irrevocable trusts are trusts for minors, insurance trusts, and charitable trusts. Though they are permanent and don’t give you the flexibility of revocable trusts, they are advantageous in terms of taxation.
Trusts for Minors are established to protect a minor child until he or she reaches adulthood. While some minors trusts provide specific benefits to the minor during childhood, others designate that the funds are only to be distributed when the minor reaches adulthood. Some have restrictions that only permit the minor to inherit funds when he or she reaches a particular age or achieves a particular goal, like finishing college.
Special Needs Trusts are created to protect individuals who are disabled in a way that prevents them from consistently managing their own finances. The beneficiary may be cognitively or psychiatrically disabled to the point that he or she is incapable of using money in a reasonable way. The trustee of a special needs trust is tasked with doling out money gradually so that the vulnerable individual will have enough money for the rest of his or her life. The trustee also manages the funds so that the special needs person does not “own” them, and is therefore still eligible to receive government benefits like Medicaid.
Spendthrift Trusts protect irresponsible beneficiaries from their own potential bad choices. Individuals who are addicted to alcohol, drugs, gambling or wild shopping sprees need someone else (the trustee) to keep them from having access to a large sum of money. The trustee is given the power to dispense assets in reasonable amounts for rational purchases. In other words, the trustee’s sound judgment substitutes for the spendthrift’s questionable one.
Testamentary Trusts are designed to go into effect after you pass away. They can hold assets you have amassed during your lifetime as well as assets that are only dispensed when you die, such as life insurance proceeds or funds from a wrongful death settlement.
Married A-B Trusts, also known as bypass trusts, allow spouses to combine their exemptions for use by either individual. When one spouse dies, instead of his or her assets being transferred to the other spouse, those assets are transferred to an irrevocable trust. It may even be possible for the surviving spouse to receive income generated by this trust for living expenses. This is helpful when a very large estate is involved, one which, if not for the marital trust, would be vulnerable to a heavy estate tax after the death of the second spouse.
Qualified Terminable Interest Property (QTIP) Trusts qualify spouses for an unlimited marital deduction, meaning that no estate taxes will have to be paid by the surviving spouse when the first spouse dies. In addition, a QTIP trust also permits successor beneficiaries to receive untaxed assets after the surviving spouse dies.
Qualified Personal Residence Trusts (QPRTs) permit you to give your beneficiary your house as a gift, paying a low gift tax rate, while you continue to use your home during your lifetime. With a QPRT, estate tax is also avoided.
Charitable trusts, as mentioned earlier, are irrevocable. In Texas, a charitable trust receives favorable federal tax treatment. Texans have the added advantage of not having to pay state income tax. It is possible for Hegwood Law to set up your charitable trust as a remainder trust which means that you and your family retain the income generated by the amount given to charity. In some cases we can arrange for the surviving spouse to receive remainder benefits when the first spouse dies.
Crummey Trusts make it possible for you to give gifts while taking advantage of the gift tax exclusion and retaining the ability to limit the recipients access to the funds.
Pet trusts allow you to ensure that your beloved pet will be well cared for during its lifetime, even if you predecease your pet or become too incapacitated to tend to it yourself.
As you can see, trusts are highly effective components of estate planning. They are also quite complicated. These are both good reasons to have an accomplished trust attorney working closely with you to decide which trusts will be most useful to you and your family. Call one of the Houston offices of Hegwood Law Group to discuss your options or fill out a contact form on our website. Getting in touch with one of our capable trust attorneys will be a significant step towards ensuring your family’s financial security.