Collin County Living Well Magazine May/June 2019 | Page 21

DO YOU REALLY NEED A TRUST?
By Leu & Peirce, PLLC
A
s Elder Law attorneys, one question we hear
often from our clients is: Do I need a trust? And,
ordinarily, the answer is: It depends. In its most
basic form, a trust is a document setting forth
an intent that assets be held
and managed for the benefit of certain
persons. The person making the trust
is the Grantor (also Settlor or Trustor).
The Trustee is the person administering
the trust. Sometimes the Grantor and
Trustee are the same person. The
Beneficiary is the individual who will
receive the benefit of the trust assets.
The Trustee has a fiduciary duty to
manage the assets in the trust for the
benefit of the Beneficiary. Trusts can
be revocable, such as a Revocable
Living Trust, or irrevocable, such as an
Asset Protection Trust or Testamentary
Trust.
Revocable Living Trust
Also known as Inter Vivos Trusts, Revocable Living Trusts
are trusts that you set up during your lifetime to hold assets.
If you have a Revocable Living Trust in place upon your
death, it is possible that your loved ones may avoid the
probate of your estate. During your lifetime, although your
assets are titled in the name of the Revocable Living Trust,
you always have the right to revoke the trust or amend
its provisions. Therefore, ownership of the assets will be
attributed to you for income tax, bankruptcy, creditor, and
public benefits purposes. Revocable Living Trusts can be
helpful for people who own property in states other than
Texas, or where a grantor is expecting disputes amongst
family members after his or her death. However, Revocable
Living Trusts are not a one-size fits all solution. For example,
a Revocable Living Trust is not an appropriate planning tool
for someone who may need public benefits in the future.
Irrevocable Trust
By contrast, an Irrevocable Trust cannot be revoked or
amended after it is signed, and the transfer of assets into
an Irrevocable Trust is considered a completed gift.
Common types of Irrevocable Trusts include the following:
Irrevocable Life Insurance Trust
Also known as an ILIT, this type of trust is created to assume
ownership of a life insurance policy, so that the proceeds
from the policy are not included in the grantor’s taxable
estate upon their death. The insured individual is the
grantor of the trust. The grantor cannot retain any economic
interest or control in the policy, or it remains subject to
estate taxation.
Asset Protection Trust
This type of trust is sometimes used as a
long-term planning tool to prepare for
qualification for future public benefits,
such as Medicaid and Veteran’s
Benefits. Because a transfer into an
Asset Protection Trust is considered a
transfer of assets for public benefits
purposes, a transfer penalty will apply
if done within five years of applying for
Medicaid and three years of applying
for Veteran’s Benefits.
Supplemental Needs Trust
A Supplemental Needs Trust (“SNT”) is
used to hold funds for a person who is receiving needs-
based public benefits. The Trustee of the SNT makes
distributions to the beneficiary for the purpose of enhancing
the beneficiary’s quality of life, not for basic support,
such as food or shelter. Particular care should be taken
in the creation and maintenance of SNTs. Specific rules
apply to SNTs based on whether the SNT is created by
the beneficiary or a third party. And, distributions from
SNTs must be handled carefully to avoid disqualifying the
beneficiary from eligibility for public benefits.
Testamentary Trust
A Testamentary Trust is a trust created through the terms of
a Will. Testamentary Trusts can be a helpful for protecting
incapacitated or minor beneficiaries, or to allow the testator
some control over the future use of assets.
Despite all the buzz about avoiding probate, probate in
Texas is relatively quick and inexpensive. Do not allow
yourself to be pressured into purchasing a complicated trust
plan under the logic that the probate process is something
to be feared and avoided. Further, even if you have
a Revocable Living Trust in place, you still need current
ancillary documents, including a Statutory Durable Power
of Attorney, Medical Power of Attorney, HIPAA Release
and Authorization, and a Living Will (Advanced Directive),
among other documents. Visit an Elder Law attorney to
discuss the estate planning options that are available and
advisable for you.
Lori Leu, Erin Peirce, Lauren Olson, Laura Chavero, and Zachary Stubblefield are Elder Law attorneys
with Leu & Peirce, located in Plano, Texas. They can be reached at 972-996-2540.
COLLIN COUNTY Living Well Magazine | MAY/JUNE 2019
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