A trust is one of the most common additions to a comprehensive estate plan. A primary reason is that trusts can help accomplish a diverse range of estate planning objectives. In addition, trusts are extremely flexible. The creator of the terms of the trust has considerable leeway, barring illegal or unconscionable terms. With this in mind, is creating a trust difficult? The short answer is, it doesn’t have to be.
If you have considered including a trust in your estate plan, you have likely questioned the difficulty. You may even have seen “Do-It-Yourself” trust agreements advertised online or at the local stationary store. Do not be lured by these “easy” DIY estate planning documents. While the basic concept behind a trust agreement is simple enough, creating a trust that actually functions properly, accomplishes the intended purpose, and complies with relevant state and federal laws requires the assistance of an experienced estate planning attorney.
Trust Basics
There are seemingly countless specialized trusts to choose from. However, all trusts are first divided into two basic categories – testamentary and living trusts. A testamentary trust is a trust that does not become active until the death of the trustor, or creator, of the trust. A living trust, as the name infers, is a trust that becomes active while the trustor is still alive. It comes into effect once the formalities of creation are in place.
Living trusts are then further sub-divided into revocable and irrevocable trusts. A revocable trust can be changed, amended, or revoked by the trustor at almost any time and for any reason. An irrevocable living trust, on the other hand, cannot be changed or revoked by the trustor, but can sometimes be changed with court approval or the appointment of a special trustee.
Creating a Trust –Deciding on the Trust Purpose
The first, and most important, step involved in creating a trust is deciding what type of trust you need. To do that, you must first consider what you want the trust to accomplish. What is the trust purpose? In the past, trusts served a limited purpose. Nowadays, there is a trust for just about any estate planning goal, including trusts that can help with:
- Probate avoidance
- Special needs planning
- Medicaid planning
- Asset protection
- Incapacity planning
- Tax avoidance
- Parents with young children
- Blended families
- Even Pet planning
Deciding what you want to accomplish with your trust is crucial because different types of trusts can accomplish different things. For example, if asset protection, Medicaid planning, or special needs planning is your goal, you will probably need an irrevocable trust. On the other hand, if incapacity planning or probate avoidance is the purpose of your trust, a revocable living trust is probably a better choice.
Choosing a Trustee
The next crucial step is to choose your Trustee. People often make the mistake of appointing a spouse or family member simply because they are family. Being a relative, however, is not the primary concern. The most important quality in a trustee is their ability to do what is required.
The duties and responsibilities of a Trustee can be varied and complex. Thus, an, at least, rudimentary knowledge of both the law and finance is required to properly administer a trust. Choosing the wrong individual for the job can cause a trust to fall apart. In short, the Trustee is responsible for managing and investing your trust assets as well as administering the trust terms; so, pick a good one.
The Trust Terms
Finally, the trustor must create the trust terms used to administer the trust. A trustor may include almost any terms he/she wishes. However, it is important that those terms collectively guide the Trustee in the administration of the trust and allow for the success of the trust. Unless you have experience creating trust terms, it is likely that the terms you choose will conflict with one another, may violate a state or federal law, or tie the Trustee’s hands so that he/she cannot properly fulfill the role of Trustee.
Contact Us
In conclusion, “Is creating a trust difficult?” The answer is, it doesn’t have to be. An experienced Texas estate planning attorney can help you create a trust that should accomplish your goals with a lot less headache. If you have additional questions, concerns, or wish to get started creating a trust contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.
Stephen A. Mendel, Estate Planning Attorney
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