- Toll-Free: 1-888-500-KAZI
- info@kazilawfirm.com
Most people who call us about an irrevocable trust in Dallas are trying to solve one of two problems: they are worried about a lawsuit or a creditor reaching what they have built, or they are watching a parent’s savings disappear into the cost of long-term care and want to know whether anything can still be done.
Those are different problems with different answers, and Texas law treats them very differently. This page covers what an irrevocable trust can and cannot shield in Texas, how the Medicaid look-back period constrains the timing, and what Dallas County families should know before transferring anything.
An irrevocable trust works by ending your ownership. Property you transfer in belongs to the trust, is managed by a trustee who is generally not you, and is distributed to beneficiaries under terms you set at the outset and cannot casually rewrite.
Everything an irrevocable trust does for you follows from that single fact. A creditor with a judgment against you cannot reach property you do not own. Medicaid cannot count as your resource an asset that is not yours. Your taxable estate does not include what you have given away. The protection is real precisely because the surrender of control is real.
Texas trust law is set out in the Texas Trust Code, primarily Chapter 112 of the Texas Property Code, which governs how trusts are created, modified and terminated.
Before spending money on a trust for creditor protection, understand how much protection Texas already gives you for free. This is the conversation we have most often, and it saves clients a great deal.
Add these together and a typical Dallas family’s balance sheet is already substantially exempt. Moving a homestead into a trust can actively weaken that position, and can jeopardise the homestead exemption and over-65 tax ceiling on your property tax bill. Anyone recommending it without walking through those consequences is not paying attention.
Irrevocable trusts earn their keep on the assets Texas does not exempt — a brokerage account, rental property, a business interest, a second home — and on protecting the next generation. A spendthrift trust for your children shields their inheritance from their divorce, their creditors and their own decisions in a way an outright gift never can.
You cannot transfer assets to escape a creditor who is already in the picture. The Texas Uniform Fraudulent Transfer Act allows a court to unwind transfers made with intent to hinder, delay or defraud a creditor — and courts look hard at timing. A transfer made after an accident, after a demand letter, or while a claim is foreseeable is likely to be set aside, and the attempt can make the underlying case considerably worse.
Asset protection is planning you do when nothing is wrong. Done in a crisis, it is not planning.
Dallas County has a large and growing population of adults caring for aging parents, and this is where irrevocable trusts are most often discussed and least often understood.
Assets in a revocable living trust remain yours for Medicaid purposes. They are countable resources. If long-term care planning is the goal, a revocable trust accomplishes precisely nothing — a point worth being clear about, because families routinely believe otherwise.
When someone applies for Medicaid long-term care benefits, the state reviews asset transfers made during the 60 months preceding the application. Assets given away or moved into an irrevocable trust in that window generally trigger a penalty period during which the applicant is ineligible — calculated by dividing the value transferred by the average monthly cost of nursing home care.
The practical consequence: an irrevocable trust used for long-term care planning has to be funded well before it is needed. Five years and a day works. Eighteen months before a diagnosis usually does not, and can leave a family worse off than doing nothing, because the money is now both unavailable and disqualifying.
Texas operates a Medicaid Estate Recovery Program, administered by Texas Health and Human Services, which seeks reimbursement from the estates of certain deceased recipients. Texas applies recovery relatively narrowly and provides hardship waivers and exemptions, but families are often blindsided by a claim against the house after a parent’s death. Property properly held in an irrevocable trust for the full look-back period is generally outside the probate estate the program reaches.
We cover the mechanics in more detail on our Texas Medicaid estate recovery and Medicaid eligibility pages.
Holds a home or savings outside countable resources, subject to the look-back. The settlor typically retains the right to income but not principal.
Supplements rather than replaces public benefits for a beneficiary with a disability. A first-party trust funded with the beneficiary’s own money — a settlement or an inheritance — has payback requirements; a third-party trust funded by parents or grandparents does not, which is why an inheritance should be directed to the trust and never to the individual.
Restricts a beneficiary’s ability to assign their interest and blocks creditors from attaching it before distribution. The most broadly useful protective structure and the one most families should be asking about.
Owns a life insurance policy so the death benefit sits outside the taxable estate and delivers liquidity when it is needed.
Pays an income stream for a term or for life, with the remainder to charity. Produces a current deduction and can defer capital gains on appreciated assets.
Texas has no state estate tax, no inheritance tax and no state income tax on trusts. Federally, the 2026 estate and gift tax exclusion is $15 million per person and $30 million for a married couple, with an annual gift exclusion of $19,000 per recipient. The IRS estate and gift tax guidance sets out the current rules.
For most Dallas families this means estate tax is not the reason to create an irrevocable trust. Two tax points do matter, though, and both cut against over-using them:
Real property transferred into a trust must be deeded and the deed recorded with the Dallas County Clerk Recording Division. Getting this step wrong — or skipping it, which happens more often than you would think — leaves the trust unfunded and the protection illusory.
Trust disputes and related proceedings in Dallas County are heard by the county’s three statutory probate courts, which sit downtown in the George Allen Courts Building. Unlike counties where probate work lands on a general county docket, these are specialist courts, and that cuts both ways: proceedings are more predictable, and poorly drafted instruments are more likely to be scrutinised.
If you own property in more than one North Texas county — a home in Dallas and land in Collin or Kaufman, for example — each parcel is deeded and recorded in its own county. A trust is a common way to keep that from turning into multiple proceedings later.
It probably is if you want to protect an inheritance from a beneficiary’s creditors or divorce, you are planning for long-term care with a five-year runway, you have a beneficiary on needs-based benefits, or you hold significant non-exempt assets.
It probably is not if your wealth is mostly homestead and retirement accounts, you may need the assets yourself, you are reacting to a claim that already exists, or nobody has explained the basis and control trade-offs to you. In that case, start with our wills and trusts overview for Dallas and our asset protection page.
The Kazi Law Firm is a boutique estate planning practice serving Dallas and North Texas from Frisco, twenty-five minutes up the Dallas North Tollway. We draft Medicaid asset protection trusts, special needs trusts, spendthrift and life insurance trusts — and we are equally willing to tell you that Texas exemptions already cover you and you do not need one.
Schedule a consultation, or start with our Dallas estate planning overview.