Although a Last Will and Testament generally serves as the foundation of any comprehensive estate plan, most plans also include a variety of additional documents and strategies. One of the most common additions to an estate plan is a trust agreement. If you plan to include a trust agreement in your estate plan you will need to decide which type of trust is right for your plan. Understanding the difference between a testamentary trust and a living trust is essential to deciding which type of trust will work best in your plan.
Testamentary Versus Living Trusts
Trusts have evolved significantly over the past several decades. Nowadays, there is a specialized trust for almost any estate planning goal or objective. All trusts, however, fall into one of two categories – testamentary or living trusts. A testamentary trust does not take effect until your death. A living trust, formally known as an “inter vivos” trust, will take effect as soon as you have completed all the formalities of creation and transferred sufficient assets into the trust to fund the trust.
Revocable Versus Irrevocable Living Trusts
Living trusts are further sub-divided into revocable and irrevocable living trusts. As the names imply, a revocable living trust is one that can be modified or terminated by the creator of the trust at any time while an irrevocable trust cannot be modified or terminated by the creator once the trust has taken effect.
The Benefits of a Living Trust
Living trusts offer a number of benefits to the creator of the trust, and/or serve a number of purposes in an estate plan, including, but not limited to:
- Asset protection
- Incapacity planning
- Special needs planning
- Tax avoidance
- Probate avoidance
- Pet planning
- Asset control
While a living trust can serve a number of positive functions in your estate plan, the success of your trust agreement will depend on whether or not the agreement was properly drafted. Thus, it is never good practice to use a generic, “do-it-yourself” form to create even a simple living trust. Instead, it is in your best interest to have an experienced estate planning attorney draft a trust agreement for you. An attorney will help ensure that the agreement complies with the applicable law and satisfies your goals and objectives. Failing to do so could ultimately result in the failure of your trust agreement.
If you have additional questions or concerns about a living trust, and/or your Texas estate plan, contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.