Archive for February, 2013

Understanding the Fundamental Differences between Living Trusts and Irrevocable Trusts

Friday, February 15th, 2013

Many people recognize the value of a trust because of its ability to prevent the delay and expense associated with the probate process, but some do not know the difference between an irrevocable trust and a living trust. The distinction between these types of trusts has critical importance in terms of ownership of assets, legal consequences and tax implications. Texas estate planning attorney Tom Reino assists clients in developing comprehensive estate plans that include appropriate types of trusts specifically tailored to the unique situation of his client. Mr. Reino has provided an overview of differences between an inter vivos trust (living trust) and an irrevocable trust.

Living Trust (i.e. Revocable Trust, Inter Vivos Trust)

A living trust is a trust that you have the power to terminate at any time. Individual terms, such as the indicated trustee of the trust, may be modified through a trust amendment. If you decide that you no longer wish the trust arrangement to exist at all, you may cancel the trust in its entirety by using a trust amendment and restatement. While living trusts offer an enormous amount of flexibility in terms of reclaiming and exercising control over property in the trust or changing the beneficiary or trustee who manages the trust, there are disadvantages to living trusts so they are not right for everyone.

Because you retain the ability to terminate the trust and exercise control and ownership over the assets in the estate, the assets remain your property for both debt enforcement by creditors and tax purposes. Because you maintain ownership and control over the assets, the assets may be subject to debt collection procedures by creditors. The property in a living trust will also all be calculated among your assets for Medicaid planning purposes if you move into a nursing home or similar eldercare residential facility. A final disadvantage of a revocable trust is that the assets will be subject to state inheritance tax as well as both federal and state estate taxes.

Irrevocable Trust

An irrevocable trust is one that cannot be changed, amended or terminated once executed or may become irrevocable once the person who makes the trust passes away. While an irrevocable trust does not allow the same exposure of the trust assets to seizure by creditors and will not be considered among your assets for Medicaid planning purposes, there are other disadvantages to an irrevocable trust. The trustmaker loses all control and ownership over the assets. If one’s wishes change with regard to who should manage the trust or who should be included among the beneficiaries, the grantor has no ability to change these terms once the trust becomes irrevocable.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Distribution of an Estate in Texas without a Will: Texas Intestate Succession

Wednesday, February 6th, 2013

While an estate plan that includes a trust or will provides the most common options for ensuring your intentions are carried out regarding your estate, many people never get around to having estate planning documents prepared. In other cases, people use computer programs, typing services or paralegals who prepare estate planning documents improperly, and their estate planning documents are determined to be invalid. In either case, the Texas law of intestate succession will determine how one’s estate will be distributed. We have provided an overview of how intestate succession works in Texas if the decedent does not have a will.

If a decedent is unmarried and dies without a will, the decedent’s children or their descendants (i.e. grandchildren, great-grandchildren, etc.) will be distributed to your children. The distribution between one’s children will be an equal share to each living child or (descendent of a child). When there are no children and a decedent was unmarried, Texas intestate law will direct that assets pass to the next closest biological relative as follows:

Two Surviving Parents: If you have two surviving biological or adoptive parents, each surviving parent inherits half of the estate. Step-parents do not inherit under Texas intestacy law.

Single Parent and Siblings: When a decedent who passes away is survived by a parent and siblings or descendants of siblings, the parent inherits half the state and the other half of the estate is split equally among the siblings.

Single Surviving Parent No Siblings: If a person dies with only a single surviving parent and no surviving sibling or descendants of siblings, the surviving parent inherits the entire estate.

Siblings with No Surviving Parents: When a person dies with no surviving parents, the surviving siblings or their descendants share the estate equally.

No Surviving Parents or Siblings: When a person dies with no surviving parents or siblings or descendants of either, the estate will be divided into two equal shares. One share will be provided to any paternal relatives and the other share to any maternal relatives starting at your grandparent’s generation. The Texas probate courts will continue to search back through generations until a surviving relative is discovered.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.