Updated January 25, 2024
The Texas living trust is an entity into which a person transfers their assets in order to maintain control of them during their lifetime and in the event that they become mentally incapacitated. The Grantor (person who creates the trust) names a Trustee to oversee the management of the trust and Beneficiaries to inherit or benefit from the assets within the trust. The Grantor will often appoint themselves Trustee and Beneficiary to keep control of and benefit from the continued use of their assets. After death, a living trust does not have to go through probate and the Successor Trustee (appointed by the Grantor) will distribute the assets to the beneficiaries named in the trust agreement.
Laws – Property Code Title 9 (Trusts)
Will (Last Will and Testament) – A will only becomes effective when the person who created it dies and is subject to the probate court procedure. However, in Texas, probate can be avoided if the executor demands independent administration. The executor will carry out the actions of the will outside of court supervision while conducting his responsibilities in the same manner as he would in probate court.
Types
Irrevocable – Once a signature is included in the agreement, an irrevocable trust cannot be altered. The main benefits of an irrevocable trust are the protection of the assets within the trust from creditors and lawsuits and the reduction of estate taxes.
Revocable – A Grantor can edit a revocable trust at any point during their lifetime and maintain ownership over their assets. Once the Grantor dies, a revocable trust becomes irrevocable and the assets are passed on to the Beneficiaries.
Individual Roles
Grantor – Person who establishes and signs the trust agreement.
Trustee – Person in charge of managing the contents of the trust. Typically, the Grantor appoints themselves the Trustee.
Successor Trustee – Person in charge of the distribution of the contents within the trust once the Grantor dies.
Beneficiary – Individuals benefiting from the assets within the trust. Usually, the Grantor appoints themselves as one of the beneficiaries in order to maintain access to their assets during their lifetime.
How to Make a Living Trust in Texas
In accordance with Chapter 112, a trust may be created by an individual of sound mind as long as they have not been pressured into doing so. A trust agreement must provide clear written evidence of the Grantor’s intent to place property and other assets into the trust. A Trustee, appointed by the Grantor, will have the legal capacity to control the assets within the trust as they see fit. A Successor Trustee is chosen to distribute the contents of the trust to the Beneficiaries upon the Grantor’s death or in the event that the Grantor is also the Trustee and becomes mentally incapacitated. The trust agreement does not legally need to be signed by the Grantor in front of a notary public (if they do not intend to file it with the county clerk) but it could affect the beneficiaries when it comes time to distribute the assets.
Real Estate – Transferring real estate into a living trust simply means preparing the necessary deeds (either a Texas Warranty Deed or a Texas Quit Claim Deed) in order to change ownership from the Grantor to the trust.
Stocks and Bonds – To transfer privately-held stocks or bonds into a trust, a new stock certificate should be produced in the name of the trust and the old certificate is relinquished. For publicly-held stock, it’s best to open an account at a brokerage firm and use it as a depository for stocks, bonds, and mutual funds.
Motor Vehicles – In order to place a vehicle into a living trust, the title must be transferred over to the trust. To complete this process, a Texas Vehicle Bill of Sale Form must be produced.
Do I Need a Living Trust in Texas?
Fortunately for those living in Texas, the state’s probate procedures are relatively quick and inexpensive compared to others so a living trust isn’t always necessary. In most cases, the costs of a probate court process will end up being about equal to the cost of setting up and maintaining a living trust. However, property owned outside of Texas will be subject to the state’s probate procedures in which it is located. Placing these properties into a living trust will avoid probate.
While a living trust might not save a person money or time in the State of Texas, they are often more difficult to challenge compared to a will. A will can only be contested once a person dies so, for those with concerns about family members contesting their will, a living trust will allow the Grantor to defend themselves while they’re still alive. Another benefit of a living trust is the assets are not made a public record once the Grantor dies, allowing their families/beneficiaries to maintain privacy.
As with most states, Texas has a small estates law which can be advantageous for the beneficiaries of a deceased individual with no will or living trust. A Texas Small Estate Affidavit Form can be completed for a judge’s approval without going through the whole probate process for individuals with an estate worth $50,000 or less.