This trust’s name is a perfect descriptor. Once executed, you can amend or revoke it at any time. On the other hand, you cannot amend or revoke an irrevocable trust under any circumstances. One characteristic that all trusts have is that they are either revocable or irrevocable. If a trust instrument does not provide that it is irrevocable by express terms, then the trust is considered to be revocable.
Many people refer to a revocable trust as a “living trust.” You can choose to revoke the trust instrument at any time and simply revert back to owning the trust assets in your own name and, any assets held in a revocable trust continue to be treated as if they are still owned by you outright. In this way, a revocable trust is not much different than a checking account, in that, you are free to deposit or withdraw money or other property from the trust at any time.
There are a number of misconceptions about the benefits a revocable trust can provide. The most common one involves creditor protection. Placing your assets in a revocable living trust DOES NOT protect those assets from creditors. If you have a judgment against you by a creditor, or if you are going through a divorce, the assets in the RLT will not receive any special protection and will be as accessible as any other assets that you own as an individual in your name.
Establishing a trust-based plan rather than a will-based plan is more labor intensive (both on your side as the client and the attorney’s side as the drafter). As a result, trust-based plans are generally significantly more expensive.
Once a trust is established, it MUST be funded in order to have a legal existence. You have three choices on how to fund it. You may want to just fund it nominally at first and let it remain dormant until your death when your pour-over will actually “pours” all of your assets into the trust for management and/or distribution.
Your second choice in funding is to selectively fund the trust. You may want to retitle important brokerage or bank accounts in the name of the revocable trust so they will be readily accessible to a successor trustee in the event of your incapacity. If you own real property in areas outside of Texas, it is a good idea to go ahead and title them in the name of the trust in order to avoid an ancillary probate in the other state when you die.
Your third choice is to fully fund the trust at its inception with your assets that can be properly managed in trust. Fully funding the trust is a significant endeavor. You will need to identify all your assets that are held in your name: your home (if you want it in your trust), all other real property, bank accounts, CDs, mineral interests, etc. Once the trust is drafted and executed, you must contact all the holders of these assets, provide them with the Trust Certification, and ask them to retitle everything in the name of the trust. But the work does not stop there. Moving forward, you must remember that anytime you acquire such assets you must insure they are each titled in the name of the trust.
If your purpose for having a trust is to avoid probate, then you will need to fully fund it AND continue to ensure all assets acquired in the future are titled in the name of the trust. If you fail to do that and there are assets outside the trust at your death, the pour-over will must be probated in order to move these “left-out” assets into the trust for distribution.
First, it is important to note that a RLT is not for everyone and I do not recommend them for everyone. Your specific circumstances dictate whether or not a RLT is advisable. If you lived in California, I could tell you one-hundred per cent that you need a RLT. Probate is a nightmare in California and more expensive than you can imagine. Attorney’s fees are set by statute, and they can be quite sizeable. Additionally, it can take a very long time to finalize a probate in California.
We are so lucky that Texas is a “probate-friendly” state. Texas makes it relatively easy to probate an estate at a fraction of the cost of other states. In addition, if there are no problems, it is possible for a probate to be finalized in 90 days (as opposed years in California).