The Ultimate Guide on Trust Lawyer in Celina

When we first think of the word “trust”, we think of the concept of a relationship. In estate planning, the concept of “trust” is not based on your feelings towards another person. On the contrary, it deals with the preservation of assets and generational wealth building. Many would go so far as to say that it is the most powerful form of wealth building, ensuring the next generation is not starting from scratch, but rather, picking up from where you left off. This distribution of wealth is how you create a legacy for your family and generations to come.

There are trust lawyers in Celina, Texas who offer estate planning services at reasonable prices. In this article, we will discuss an ultimate guide on why you should contact a trust lawyer in Celina TX.

What is a Trust?

A trust is a legal arrangement in which one person holds property in trust for another. The settlor (trustor) transfers title to property or other assets to the trustee, who owns and manages the trust estate for the benefit of another person (beneficiary).

In most jurisdictions, the trust must satisfy a number of legal requirements in order to be legally effective and valid. The settlor of the trust will carefully select successor trustees to act on their behalf once they have passed away to ensure the trust document is followed. The successor trustee will not have the ability to change or modify the trust. Successor trustees do not have to live in the same state as the settlor or beneficiaries. 

The successor trustee has a critical role in this legal process and multiple key responsibilities when acting as a fiduciary for a trust estate. The trustee’s duties include strict accounting and administration of the trust. The trustee must account for all income and expenses annually and make distributions in terms of the will or other document that created the trust. There could be a testamentary trust, which is created in a traditional last will and testament or a revocable/irrevocable trust which is created during the settlor’s lifetime. 

How Do Trusts Work?

Trusts are a legal vehicle by which to pass assets and real estate on to others without burdening future generations. Trusts are considered the “gold standard” in estate planning for several reasons. Trusts form an even stronger legal agreement than a traditional last will and testament because there is also a trust agreement between the grantor and the beneficiaries. While there can be confusion about how trusts work and the abstract nature of the framework, it’s essential to remember that trusts aren’t necessarily complicated – they are quite simple. Here are some ways in which trusts can be beneficial:

  • If you’re not already familiar with trusts, they’re financial tools that can help protect your financial assets. Trusts are legally binding agreements to hold and manage your assets and protect them from creditors, tax collectors, and third parties. There are several different types of trusts, and we recommend consulting with your trust lawyer in Celina TX for additional information.
  • When you create a trust, it becomes a separate legal entity. A trust is like a company – it has its own separate bank account, checks written on its account, and a trust can own property. Unlike companies, though, trusts can only be set up by people who hold property in the form of an interest in real estate, stocks, or bonds.
  • Various types of trusts are available for individuals to use as part of their estate planning strategy. A trust can be used to avoid probate court proceedings when an individual dies without a will (intestate) or trust agreement; for protection against creditors; for asset protection during divorce proceedings; for asset protection during a health crisis; or simply as an investment vehicle for holding rental properties. 

What are the Benefits of a Trust?

A trust can be a powerful tool for transferring assets and sharing legal rights in your estate. Still, if you’re unfamiliar with the power this arrangement can bring, it can be challenging to understand how to work around its limitations. Below are several benefits of trust:

Avoid Probate

Probate is a court process used when a person dies with or without a will. Consequently, their property must be distributed according to either their last will and testament or the intestacy laws of their state. Probate can be an expensive and time-consuming ordeal, for the surviving spouse, partner, or children. The cost of probates can range from $10,000-$20,000, depending on the complexity of your estate, the number of heirs you have left behind, and the volume of assets which must be distributed. 

Save Taxes and Legal Expenses

A trust avoids taxes and legal expenses by holding assets for beneficiaries instead of for yourself or your heirs.

Revocable Trusts:

Revocable trusts are the simplest of all trust arrangements from an income tax standpoint. Any income generated by a revocable trust is taxable to the trust’s creator (who is often also referred to as a settlor, trustor, or grantor) during the trust creator’s lifetime. This is because the trust’s creator retains full control over the terms of the trust and the assets contained within it. Typically, during the creator’s lifetime, the taxpayer identification number of the trust will be the creator’s Social Security number. All items of income, deduction and credit will be reported on the creator’s personal income tax return, and no return will be filed for the trust itself. Revocable trusts are considered “grantor” trusts for income tax purposes. One could think of them as being invisible to the IRS and state taxing authorities. 

Irrevocable Trusts:

Most irrevocable trusts have their own separate tax identification numbers, which means that the IRS and state taxing authorities have a record of the existence of these trusts. Income of a trust that has a tax identification number is reported to that tax identification number with a Form 1099, and a trust reports its income and deductions for federal income tax purposes annually on Form 1041. There are two primary taxation categories of irrevocable SNTs: (1) grantor trusts and (2) non-grantor trusts.

Protect Your Assets

If you have assets that you would like to keep out of your children’s control, such as a house or family business, a trust can be used to hold those assets while you are alive. Many people are concerned about what will happen to their assets when they pass away. In the past, people were forced into probate court to access their money and property. However, now with the help of an experienced trust attorney in Celina, Texas, people can save thousands of dollars in legal fees and avoid probate court altogether.

Avoid Guardianship

Guardianship is another common concern among parents who wish to protect their children’s inheritance. When parents pass away without naming a guardian for their minor children (under the age of 18), their estates can be subject to various court orders. Guardianship of a minor in Texas is the legal process to protect any child under the age of 18 years old from neglect, abuse and exploitation. As the guardian, you provide care for the child and manage his or her money. The legal process starts with an application to gain the guardianship. You are considered the interested party, or applicant, on the document called Application for Appointment of Permanent Guardian. The application is filed in the county where the minor resides. A trust attorney in Celina can help in this process. 

Keep Your Affairs Private

A trust can be used to keep your affairs private. If you have a will, the courts may order that your estate be divided and distributed according to the terms of your choice. However, if you have a trust, the money in the trust cannot be allocated until after your death. This keeps all of your assets out of probate court, where they may be subject to public inspection and potentially challenged by relatives who disagree with their inheritance. A trust also protects your family from future lawsuits and disputes over who gets what upon your death.

Preserve the Family Business

If you own stock in a publicly traded company, it is possible that some shares could be sold at a loss if another company made a takeover bid. If this happened, it would likely result in costs for both sides. For example, one company would have to buy back shares from its competitors at a loss, while another would have to pay taxes on any profit from those sales. This could lead to additional costs and expenditures for both parties, which could inevitably hinder their ability to operate at a profit down the line. 

Prevent Disinheritance while Providing for Children and Grandchildren

You can use the trust to prevent a loved one from disinheriting you by passing over all or part of their estate in favor of someone else. You can also use trusts to ensure that your children will receive an inheritance if you die while they are still minors and have no other means of support. Trusts can also be used to ensure that your grandchildren will receive an inheritance if you die before they reach adulthood. This trust will fund their education costs or assist them in buying a business. 

What are the Most Common Types of Trusts?

Trusts are one of the most valuable tools available in estate planning. Although they can appear abstract and complicated, choosing the right trust lawyer in Celina will make all the difference. 

Revocable Living Trust

A revocable living trust is a probate avoidance tool and is a type of trust that allows a person to appoint someone as a trustee to carry out the terms of the trust document. Further, a revocable living trust can be created at any time during your lifetime by executing a document known as a “trust agreement.” The grantor can name trustworthy individuals or financial institutions to serve as trustees for the trust. This is an invaluable tool if you were to become ill or incapacitated because your trustee would handle your finances during this period. Trustees are fiduciaries and must always act in the best interest of the trustor or beneficiary. 

A revocable trust can be dissolved or revoked at any time by the grantor. You are essentially retaining incidents of ownership; thus, the assets are still yours in the eyes of the law. A revocable trust may be used by someone who wants to ensure that their assets will be distributed according to their wishes in the event of their death but does not want to give up control over those assets while alive.

This type of revocable living trust can be created by your trust lawyer in Celina TX, specializing in estate planning.

Irrevocable Trusts

Irrevocable trusts are a unique type of trust. They provide for the transfer of assets during a person’s lifetime, but they cannot be changed after the death of their creator. You cannot revoke the trust and take back your assets. Additionally, you cannot change the terms of the trust once it has been established. Because you no longer control the assets that you move into an irrevocable trust, you gain certain protections. These trusts are primarily used for estate tax efficiency and asset protection purposes. You could also use an irrevocable trust to provide for a person with special needs or for Medicaid planning purposes. 

Testamentary Trusts

A testamentary trust is a trust that is created under a last will and testament. It springs into action upon your death. A testamentary trust is primarily used to manage money for children. For example, if you want to leave money to your heirs but don’t want them to touch it until they are older, you can create this type of trust. Another advantage of a testamentary trust is the ability to protect assets in other situations. If you are concerned about an adult child getting divorced and don’t want their inheritance to be lost to a divorce, a trust is one way to keep their inheritance from being considered a marital asset.

Once a testamentary trust is created, nothing happens until you die. At that point, the trust will be created, and assets moved into it, as stipulated in your last will and testament. The trust can be changed or annulled while you are living. To do this, simply revise your will with your trust attorney in Celina, Texas. However, after you have passed, it’ll be extremely difficult for your executor to make changes and it will require court intervention.

Special Needs Trusts

A special needs trust is a trust that’s created to provide financial support to a person with special needs. This includes adults with developmental disabilities and children with physical or mental impairments. A trust can be established to benefit a person with a disability, but the beneficiary doesn’t need to have a disability. 

A special needs trust can also help you provide for a loved one without jeopardizing their need-based government benefits. An adult with autism or an elderly person with dementia can collect Medicaid or SSI to pay for their basic needs, while the trust can pay for supplemental needs such as equipment, in-home caregivers, rehabilitation, and other medical costs, as well as enriching activities such as entertainment, travel, camps, and classes. If money from the trust is used for food or shelter. However, it will be considered income, and the beneficiary could lose government benefits.

A special needs trust can provide financial help for people who need assistance with daily living expenses, such as transportation or housing. The money in a trust may also be used to pay for medical bills or other costs related to the beneficiary’s disability. Third-party trusts can be funded by anyone—parents, grandparents, siblings, or friends—and can be contributed to throughout the beneficiary’s lifetime.

The assets held in a special needs trust must be managed by someone other than the person who has been granted power of attorney. The person you name as trustee should be chosen very carefully as he or she will play an important role in caring for the family member with special needs. Most importantly, the trustee should be compassionate and willing to serve in the role. He or she should also be trustworthy, informed of what can be paid for out of the trust and what cannot, willing to work with legal and tax advisors to ensure the validity of the trust, and tuned into the needs and wants of the beneficiary.

Charitable Trusts

Charitable trusts are a popular estate planning tool that can help you provide for your heirs while supporting the community and its causes. They are like living trusts but have one primary distinction: they’re more flexible.

A charitable trust is an organization formed to receive favorable federal tax treatment for a charitable purpose. In Texas, the process is easier than other states in forming a Texas Charitable Trust because we do not have a state income tax.

Unlike a living trust set up expressly to pass assets away during your lifetime, a charitable trust can be used to give assets of any size or type. If you have something valuable or unique that you’d like to leave behind for others, you can use a charitable trust as the vehicle for that gift – including real estate or other property. A charitable trust does not require a filing like an LLC, limited partnership, or corporation. However, the trust must keep orderly financial books and records and must file Form 1023, if it is to be exempt in Texas from federal income tax. This application must be filed within 15 months from the end of the month is which it was organized. A trust attorney in Celina will be able to assist you in setting up your Texas charitable trust. 

The key benefits to a charitable trust include income tax deductions, avoidance of capital gains taxation, annual income and a wish to support nonprofit organizations that are near and dear to your heart.

Your experienced trust attorney in Celina can work with you to achieve your charitable goals and build your family’s legacy.