A living trust is an estate planning tool available in Texas that allows you to manage your assets during your lifetime and transfer them to your chosen recipients after your death. This legal arrangement can provide control and privacy for your financial affairs.
Defining a Texas Living Trust
A living trust is a legal document you create while you are alive, which is why it is called a “living” or “inter vivos” trust. The most common form is a revocable living trust, which you can change or cancel at any time. Its purpose is to hold your assets, allowing a designated person to manage them for your benefit during your life and distribute them to beneficiaries after you pass away, often avoiding the probate process.
This function distinguishes it from a will, which only becomes effective after death and must go through probate. The laws governing these instruments are in the Texas Property Code.1Texas Public Law. Texas Property Code Subtitle B – Texas Trust Code: Creation, Operation, and Termination of Trusts Irrevocable trusts also exist; these cannot be easily changed and are used for specific goals like asset protection, but involve giving up control over the assets.
Essential Parties and Property in a Living Trust
The person who creates the trust and transfers assets into it is known as the Grantor, though sometimes called a Settlor or Trustor. The Trustee is the individual or institution responsible for managing the assets held by the trust according to its written terms. It is common for the Grantor to also serve as the initial Trustee.
A Successor Trustee is named in the trust document to ensure management continues if the initial Trustee can no longer serve.2Texas Public Law. Texas Property Code Section 113.083 – Appointment of Successor Trustee The Beneficiary is the person or entity designated to receive the assets or benefits from the trust. For a trust to have power, it must hold Trust Property, also called the trust corpus, which are the assets formally transferred into it.
Preparing to Create Your Living Trust
Before creating a trust, you must gather specific information and make several foundational decisions. You will need to compile the full legal names, addresses, and birth dates for yourself as the Grantor, for all proposed beneficiaries, and for your chosen Successor Trustee and any backups.
A comprehensive inventory of the assets you plan to place in the trust is also necessary. This includes legal descriptions for real estate, account numbers for bank and investment accounts, and descriptions of valuable personal items. With this information, you must decide on the rules for distribution, such as whether beneficiaries receive their inheritance outright or at specific ages.
Formally Establishing Your Trust Document
Once you have gathered all information and made key decisions, the next step is to create the formal trust agreement. This can be done by working with a Texas estate planning attorney or by using legal software, though professional guidance is beneficial to avoid potential errors.
Under Texas law, a trust must be a written instrument signed by the Grantor, as specified in Texas Property Code Section 112.004.3Texas Public Law. Texas Property Code Section 112.004 – Statute of Frauds While witnesses are not required as they are for a will, it is standard practice to have the Grantor’s signature notarized. Notarization is important if the trust will hold real estate, as a notarized signature is required to record the property deeds.4Texas Legislature. PROPERTY CODE CHAPTER 12. RECORDING OF INSTRUMENTS
Funding Your Texas Living Trust
A living trust only controls the assets that have been legally transferred into its name, a process known as “funding.” An unfunded trust is essentially an empty vessel that fails to avoid probate for any assets left out of it. Each type of asset requires a specific transfer process to be properly funded into the trust.
For real estate, you must sign a new deed that transfers the property to the name of your trust and record it with the county clerk. For bank and investment accounts, you will need to work with the financial institutions to retitle the accounts in the trust’s name. For tangible personal property like jewelry or art, you can use a document called an “Assignment of Personal Property” to transfer ownership.