Testamentary Trust vs Revocable Living Trust

Wills & Trusts

The terminology related to estate planning can be confusing to those unfamiliar with this area of law. However, estate planning amounts to addressing your financial legacy, and putting the time and effort in up front helps to ensure that all the hard work you have put into providing for your loved ones will be carried out according to your wishes as effectively and efficiently as possible. Toward this end, it is important to gain a working knowledge of some of these estate planning terms. One important place to start is with the distinction between testamentary trust vs. revocable living trust. The experienced Texas estate planning attorneys at Ibekwe Law recognize how difficult it can be to begin the estate planning journey, and we make it our mission to make the process as informative, helpful, and painless as possible. Contact our experienced attorneys at 512-505-2753 to learn which types of estate planning documents would be right for your unique circumstance.

Understanding Trusts

The State of Texas addresses the matter of trusts in general as follows:

  • Trusts are legal tools, which serve as accounts that hold assets for a beneficiary or beneficiaries – for any number of reasons that can include reducing the tax burden involved.
  • The elements of a trust are the same across all trusts, including the trustor (also known as the settlor or grantor) who creates the trust, the beneficiary (or beneficiaries) to whom the assets flow, and the trustee (also known as the grantee) who is the third-party assigned to carry out the trustor’s instructions.
  • The trustee can be anyone chosen by the trustor, including a spouse, a guardian, a financial institution, or someone who has been granted power of attorney.

Testamentary Trusts

A testamentary trust, however, is established through a Last Will and Testament (will), which means that it is not a separate estate planning tool – the way most trusts are. In fact, a testamentary trust is sometimes called a trust under will. With a testamentary trust, there is no chance of avoiding probate.

A will has no legal power until it passes through the often-complicated, expensive, and lengthy process of probate. After all the assets in your will are probated, they pass into the testamentary trust established by and laid out in your will. In other words, your testamentary trust is established after your death (by the court) and not during your lifetime the way a revocable living trust is, and this is one of the primary distinctions in the matter of testamentary trust vs. revocable living trust.

While testamentary trusts do go through the probate process, they also have many advantages. The accomplished Texas estate planning attorneys at Ibekwe Law, PLLC can help you determine if a testamentary trust is right for your specific situation.

Revocable Living Trusts

A revocable living trust – as the name implies – is during a person’s lifetime and is revocable – or can be changed – at their discretion. In fact, all of the following apply to revocable living trusts:

  • Your revocable living trust can be changed – or even revoked – at any time (at your discretion).
  • You, as the trust’s grantor, can also act as the trust’s grantee.
  • Assets can be set up for transfer to the beneficiary or beneficiaries upon a triggering event that you specify in the revocable living trust.
  • The assets in your revocable living trust belong to you – as the grantor – until they are transferred via the triggering event specified in the trust.
  • The assets in your revocable living trust are not shielded from lawsuits brought against you by your debtors (the way they would be in an irrevocable living trust).
  • When carefully and correctly constructed, a revocable living trust helps to ensure that your loved ones will not be subjected to probate in relation to your estate (for all those assets included in the trust).
  • Your revocable living trust converts to an irrevocable living trust upon your death, which makes all the terms contained therein legally binding at that time.
  • A revocable living trust protects you and your family’s privacy in relation to your estate (in a testamentary trust, which is implemented through your will and which goes through probate as a result, the outcome is a matter of court record, making the information public).

With a revocable living trust, you can change your mind on the matter at any given moment, and making changes according to your intentions remains your legal prerogative. In fact, you can cancel your entire revocable living trust if you make that decision at a later point. Additionally, the assets in your revocable living trust remain your own property – due to the control you maintain over them.

Choosing Between a Testamentary Trust vs. Revocable Living Trust

The question of testamentary trust vs. revocable living trust is a challenging one, and each person will have their own unique financial and legal interest to protect. Your well-considered revocable living trust can afford you all the following (that a testamentary trust cannot):

  • Allowing your family to bypass probate
  • Minimizing the tax burden your family experiences
  • Keeping the transfer of your estate a private matter

One point, however, that must be made about your revocable living trust is that any assets that are not addressed within the legal document (and that do not assign a beneficiary) will need to proceed through probate.

Reach out to an Experienced Texas Estate Planning Attorney Today

Each type of trust has its own advantages and disadvantages. The skilled Texas estate planning attorneys at Ibekwe Law can help you find the best path forward for you and your loved ones. Our compassionate attorneys want to ensure that your assets remain protected and that your wishes are carried out to your beneficiaries. To learn more, please do not wait to contact or call us at 512-505-2753 today.