5 Types of Trusts and How They Protect Your Legacy

In our previous post, we talked about how our top Estate Planning Lawyers in Decatur can help you decide between having a will or a trust, or both!

In today's post, we’ll explore five of the most common and valuable trusts used in Texas estate planning and explain how each can benefit you and your loved ones.

When planning for the future of your family and your assets, one of the most effective tools available is a trust. Trusts offer Texas families peace of mind, flexibility, and protection that simply can’t be matched by a will alone. However, not all trusts are created equal.

Understanding the different types of trusts and how each one serves a unique purpose is key to building an estate plan that protects your legacy for generations to come.

1. Revocable Living Trust - What It Is:

A revocable living trust is a flexible estate planning tool that you can create during your lifetime. As the name suggests, it can be changed or revoked at any time while you are alive and mentally competent.

How It Protects Your Legacy

Avoids Probate: 

Assets placed in a revocable living trust bypass the probate process, saving your beneficiaries time, money, and headaches.

Maintains Privacy: 

Unlike a will, which becomes part of the public record, a trust remains private.

Provides Continuity: 

If you become incapacitated, your successor trustee can step in immediately to manage your assets without court intervention.

 

Gives You Control:

You maintain control of the trust assets during your life and dictate how they are managed and distributed after your death.

Ideal For:

Families who want to simplify the transfer of assets, maintain privacy, and avoid probate in Texas.

2. Irrevocable Trust - What It Is:

An irrevocable trust cannot be changed or revoked once it is established, except under limited circumstances. Once you transfer assets into this trust, you give up control, which often provides significant legal and tax protections.

How It Protects Your Legacy

Removes Assets from Your Estate: 

Assets in an irrevocable trust are typically excluded from your taxable estate, which can help reduce estate taxes for high-net-worth individuals.

Provides Asset Protection: 

These trusts shield assets from lawsuits, creditors, and divorce proceedings.

Supports Medicaid Planning: 

Irrevocable trusts can be structured to help you qualify for Medicaid benefits while preserving assets for your family.

Ideal For:

Those concerned with minimizing estate taxes, protecting assets from creditors, or planning for long-term care expenses.

3. Special Needs Trust - What It Is:

A special needs trust is designed to benefit a loved one with disabilities without jeopardizing their eligibility for government assistance programs like Medicaid or Supplemental Security Income (SSI).

How It Protects Your Legacy

Preserves Benefits: 

Assets in the trust do not count against the beneficiary’s eligibility for means-tested programs.

Provides for Quality of Life: 

The trust can pay for services and expenses not covered by government benefits, such as education, recreation, or specialized medical care.

Ensures Long-Term Care: 

Appointing a reliable trustee ensures funds are managed responsibly for the beneficiary’s lifetime.

Ideal For:

Families with a child or adult dependent with disabilities who need supplemental support without disrupting government aid.

4. Charitable Trust - What It Is:

Charitable trusts allow you to support causes you care about