Published by Mindi Bozeman Zanowiak, Normand Bozeman Zanowiak, PLLC
Part I explored what a trust is. Part II explored who needs a trust. In Part III, we’re exploring common misconceptions about trusts. These misconceptions center around three areas: who needs trusts, what can be accomplished with trusts, and how trusts operate.
1. Misconceptions about who needs trusts.
ACTUALLY: Many purposes for which trusts are created are unrelated to net worth.
ACTUALLY: Trusts are not one size fits all. They are tailored to an individual’s needs so a trust may be right for your neighbor and may be wrong for you.
ACTUALLY: Some trusts are created for purposes other than the disposition of property at death. A trust, in your will or in addition to your will, may be perfectly appropriate based on your circumstances.
- I need a trust in the event I go to a nursing home one day (or my parents need a trust because they may need to go to a nursing home one day).
ACTUALLY: You may (they may), but it’s a special type of trust. An inter vivos trust is not a Medicaid planning tool.
ACTUALLY: Self-settled trusts are not asset protection tools. They are subject to creditor claims in Texas.
ACTUALLY: Property conveyed to a trust retains its characterization as separate property or community property.
ACTUALLY: Maybe, however:
- People with trusts may end up in probate if the trust was not fully funded.
- Avoiding probate may not be a goal worth pursuing.
- There may be simpler ways to avoid probate.
ACTUALLY: This may be true if a third party is a trustee, but a self-trusteed inter vivos trust results in no loss of control. Additionally, certain trusts for spouses and children can be trusteed by such spouses and children.
ACTUALLY: Your trust must still be funded. This means making sure titles to any titled assets are in the name of the trust, that accounts are in the name of the trust, and that as assets change, the new assets are titled appropriately. An inter vivos trust will require maintenance as to the titling of assets. Other types of trusts may require their own income tax returns and other maintenance.
- If I have an inter vivos trust instead of a will, there won’t be anything to take care of when I die.
ACTUALLY: Though no probate proceeding may be necessary, a Trustee must still perform many of the same administrative tasks as an Executor of a will admitted to probate, such as:
- Determine assets and their values.
- Pay Decedent’s bills and ongoing administration expenses.
- File income tax returns and any transfer tax returns.
- Distribute property to intended beneficiaries.
While trusts can be perplexing conceptually, I hope this three-part series has helped you more fully understand what they are https://wisecounselwm.wpengine.com/insights/blog/part-i-of-iii-what-is-a-trust/, who needs them https://wisecounselwm.wpengine.com/insights/blog/part-ii-of-iii-who-needs-a-trust/, and some of the common misconceptions surrounding them.
To contact if you’d like help addressing any of your own estate planning needs please call 254-307-2928 or email her at [email protected]
Mindi Bozeman Zanowiak is a principal at Normand Bozeman Zanowiak, PLLC, with offices in Georgetown and Temple. Her practice focuses on wills, trusts, probate, guardianships, and nonprofit law. Mindi is Board Certified by the Texas Board of Legal Specialization in Estate Planning and Probate Law. She lives in Salado with her husband and two children and devotes her time to a variety of professional and community organizations in Bell and Williamson Counties.
This blog post provides educational information about trusts for the convenience of visitors to the site. This post is not intended to establish and does not establish an attorney-client relationship between Normand Bozeman Zanowiak, PLLC and any visitor. The information in this blog post is not legal advice.