A will is an important estate planning document, but it is by no means the only estate planning document. In Texas, assets passed through a will are exposed to probate. For many people and families, that can be disadvantageous. A revocable living trust can provide a cost-effective, reliable estate planning solution. At SimpleLawTX, we have extensive experience with revocable trusts. Our firm helps people find the right answer for their specific situation. A Texas estate planning lawyer can explain how a revocable living trust can help your family avoid probate in Texas.
A Revocable Living Trust Changes How Property Passes at Death
A will controls property that remains in a person’s probate estate at death. A revocable living trust works differently. The person creating the trust, known as the settlor, transfers selected property to a trustee during life. In many cases, the settlor serves as the initial trustee and continues to use and manage the property much as before. Texas law (Texas Property Code § 112.051) allows the settlor to revoke or amend the trust unless the trust instrument expressly makes it irrevocable. That flexibility allows a person to retain substantial control over the estate plan while alive.
The Advantage of Bypassing Probate
In Texas, the probate advantage associated with a revocable living trust comes into play when the settlor dies. The reason is that any property already held in the trust does not need to pass under the settlor’s will. Instead, the successor trustee takes over management of the trust and distributes the assets according to its terms. That can allow a family to transfer substantial property without asking a probate court to authorize the transfer through the administration of the estate.
The Trust Must Actually Be Funded
Signing a revocable living trust is only the first step. To obtain the probate-avoidance benefit, the settlor generally must transfer appropriate assets into the trust. Lawyers commonly refer to that process as “funding” the trust. For real estate, funding may require a properly prepared and recorded deed transferring title to the trustee. Bank and investment accounts may need to be retitled. Other property may require assignments or other ownership documents. The correct procedure depends on the type of asset and the way it is currently owned.
Failing to fund the trust can defeat one of the primary reasons for creating it. Suppose a person signs a trust stating that a house should pass to the person’s children, but title to the house remains solely in the person’s individual name until death. The trust language does not automatically move that individually owned property into the trust. The family may still need probate or another appropriate estate proceeding to transfer the property. The State Bar of Texas specifically identifies failure to transfer assets into the trust as a common reason property remains subject to probate.
You Should Coordinate the Trust With Other Nonprobate Assets
A revocable trust does not need to own every asset in order to create an effective probate-avoidance plan. Notably, some assets already pass outside probate because of beneficiary designations or the form of ownership. Life insurance proceeds, retirement accounts, payable-on-death accounts, transfer-on-death arrangements, and certain jointly owned assets may transfer directly to a beneficiary without passing under a will. Texas also recognizes other probate-avoidance tools.
Texas Estate Planning Tip: The key is coordination. An estate planning lawyer can determine which assets should be transferred to the trust and which should pass directly through another mechanism. An attorney with experience handling revocable trusts in Houston can help to ensure that you and your family have the right plan in place.
You May Want to Use a Pour-Over Will as a Safety Net
A revocable living trust does not eliminate the need for a will. Most trust-based estate plans also include a pour-over will. Texas law (Texas Estates Code § 254.001) expressly allows a person to devise property through a will to the trustee of an existing revocable trust. After the property reaches the trust, the trustee administers and distributes it under the terms of the trust agreement. Among other things, a pour-over will protects against the possibility that the settlor accidentally leaves property outside the trust. For example, someone may buy a new asset and die before completing the necessary trust transfer. If you have any questions about the benefits or limitations of a pour-over will, an experienced Houston estate planning attorney can help.
Avoiding Probate Can Make Administration Easier for the Family
Avoiding probate can reduce the number of court filings and procedural steps that surviving family members must handle after a death. Texas offers relatively efficient probate procedures, including independent administration, so a revocable trust does not automatically make sense for every estate. Still, families may prefer a trust when they want to reduce court involvement, keep trust terms private, or create a more direct process for transferring and managing assets after death. Unlike a probated will, a living trust generally does not have to become part of a public probate file merely because the settlor died.
We Can Help Your Family Avoid Probate With a Revocable Living Trust
Avoiding probate is a common estate planning goal in Texas. A revocable living trust can be one of the most effective tools for limiting your exposure to probate. At SimpleLawTX, we are proud to be leaders in estate planning. With extensive experience setting up revocable living trusts for families, our Houston estate planning lawyer is standing by, ready to help you and your family find the best solution. Your initial consultation with our Texas living trust lawyer is strictly confidential.
Call Our Texas Estate Planning Attorney Today
At SimpleLawTX, our Texas estate planning attorney is standing by, ready to help. If you have any questions about revocable living trusts, we are here to help. Contact us right away to set up a completely confidential, no-obligation case review. With an office in Houston, we handle estate planning matters throughout Texas.
An estate plan helps to ensure that you, your family, and your finances are protected as much as possible. You cannot predict the future, but you can prepare yourself and your family. An estate plan is about more than merely writing a will. It should be comprehensive. In Texas, every adult should have a durable power of attorney. At SimpleLawTX, our Texas estate planning lawyers are committed to making estate planning easy and understandable and helping you get a durable power of attorney in place.
What is a Durable Power of Attorney?
Broadly explained, a durable power of attorney is a legal document that allows you to appoint another person to manage certain financial and property matters on your behalf.
In Texas, the person creating the document is called the principal, and the person receiving authority is called the agent or attorney-in-fact. The agent may be authorized to handle matters such as bank accounts, real estate, taxes, investments, business interests, and other financial transactions.
What makes the power of attorney “durable” is that it can remain effective even if the principal later becomes incapacitated. Depending on how the document is drafted, the agent’s authority may begin immediately or only after the principal becomes incapacitated.
Note: A durable power of attorney does not generally authorize medical decision-making. Texas uses separate documents, such as a medical power of attorney, for health-care decisions. Texas Estates Code § 752.051 expressly makes the distinction between a financial and medical POA.
A Durable Power of Attorney Protects You During Incapacity
A durable power of attorney allows an adult, known as the principal, to authorize another person to act as an agent in financial and property matters. What makes the document “durable” is that the authority can continue even if the principal later becomes disabled or incapacitated. Under Texas Estates Code § 751.0021, the document must contain language providing that the authority is not affected by later incapacity or becomes effective upon incapacity. It must also satisfy Texas execution and acknowledgment requirements.
That the power of attorney is durable is critically important for estate planning in Texas. Why does it matter? The reason is that an ordinary authorization that ends when a person loses capacity may become useless precisely when help is needed most. A properly drafted durable power of attorney allows the designated agent to step in and handle authorized financial matters without requiring the principal to sign new documents after losing the ability to understand or execute them.
You Can Decide When Your Agent’s Authority Begins
Texas gives the principal flexibility over when the agent may begin acting. The statutory form allows a person to make the power effective immediately or to make it effective only upon disability or incapacity. It is sometimes called a “springing” power of attorney because the agent's authority springs into effect after the specified condition occurs.
Unless the durable power of attorney document defines incapacity differently, Texas Law generally treats the principal as incapacitated when a physician certifies in writing, following a medical examination, that the principal is mentally incapable of managing his or her financial affairs. Still, the specific circumstances always matter.
The Document Can Give an Agent Broad or Carefully Limited Powers
A durable power of attorney does not have to be an unrestricted grant of financial authority. Texas law permits a principal to determine which powers an agent receives. The statutory form identifies categories involving matters such as real property, banking, business operations, insurance, estates and trusts, claims and litigation, personal and family maintenance, taxes, and other financial transactions. Texas Estates Code Chapter 752 explains the scope of these statutory powers.
It is important to emphasize that some particularly consequential acts require more specific authorization. Under Texas Estates Code § 751.031, an agent generally cannot create, amend, revoke, or terminate an inter vivos trust, make gifts, create or change survivorship rights, or create or change beneficiary designations merely because the document contains a broad general grant of authority. Those powers must be expressly granted. If you have any questions about these issues, an experienced Houston estate planning attorney can help.
Choosing the Right Agent is Just as Important as Signing the Durable POA Document
A durable power of attorney can confer substantial authority over bank accounts, property, investments, and other assets. The principal should select an agent who is trustworthy, financially responsible, organized, and willing to act in the principal's interests. Texas law imposes legal obligations on an agent who accepts the appointment and acts under the power of attorney. The law treats the acting agent as a fiduciary and imposes duties to inform and account for actions taken on the principal's behalf. Still, the best thing that you can do is to be sure that you select a competent agent, whether a family member, friend, or professional.
A Durable Power of Attorney Can Help Your Family Avoid a Crisis
The strongest reason to execute a durable power of attorney is that incapacity often occurs without warning. A serious accident, stroke, illness, cognitive decline, or other event can suddenly leave an adult unable to manage accounts, pay bills, handle property, deal with insurers, or conduct other financial affairs. Without advance authorization, family members do not automatically receive unlimited legal authority to manage another competent adult's property merely because they are a spouse, child, or close relative. In some circumstances, a court-supervised guardianship may become necessary to obtain authority over an incapacitated person's estate.
We are Leaders in Estate Planning in Texas
Estate planning is complicated, especially when it comes to issues of preparing your finances. A durable power of attorney can help you ensure that you have empowered a trusted person to protect your best interests no matter what tomorrow brings. At SimpleLawTX, we have the professional expertise that you can trust when it matters most. If you have any questions about setting up a durable power of attorney, we are here to help. Contact us today to set up a strictly confidential, no-obligation initial case consultation. With a main office in Houston, we handle estate planning issues throughout Texas.
