Texas Trust Attorney Serving Huntsville & The Woodlands

Types of Trusts Used in Texas Estate Planning

Revocable Living Trust

A revocable living trust (sometimes called a revocable trust or living trust) is created during your lifetime and can be changed or revoked entirely at any time as long as you have capacity. You typically serve as your own trustee during your lifetime, maintaining full control over the assets in the trust. You name a successor trustee who takes over management if you become incapacitated or upon your death.

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The primary advantages of a revocable living trust are: (1) assets held in the trust avoid probate entirely and pass directly to beneficiaries after your death without court involvement; (2) if you become incapacitated, your successor trustee can manage the trust assets without the need for a court-ordered guardianship of the estate; and (3) the distribution of trust assets is private, unlike a will which becomes a public court record when probated.

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A revocable living trust does not provide asset protection during your lifetime — because you retain full control and the right to revoke it, your creditors can still reach trust assets. It also does not reduce estate taxes (your taxable estate still includes trust assets). Its primary value is in avoiding probate and managing incapacity.

A trust only controls what is actually in it. Failing to transfer assets into the trust — a step called 'funding' — is one of the most common and costly estate planning mistakes. An unfunded trust does not avoid probate. Ryan Putz assists clients with funding their trusts at the time of creation.

Testamentary Trust

A testamentary trust is created inside a will and comes into existence only at your death. Because it is created by your will, it does not avoid probate — the will must still be probated, and the trust is then established and funded from the estate. Testamentary trusts are commonly used to hold inherited assets for minor children (holding the inheritance until a specified age) or for other beneficiaries who should receive assets in stages rather than all at once. They are less expensive to create than a standalone living trust and serve an important purpose for parents who want controlled distributions for children without the complexity of a full trust-based estate plan.

Irrevocable Trust

An irrevocable trust is one that, once created and funded, generally cannot be changed or revoked by the settlor. Because the settlor gives up control of the assets, the trust can achieve goals a revocable trust cannot: asset protection from future creditors, removal of assets from the taxable estate for federal estate tax purposes, and establishment of Medicaid eligibility by removing countable assets from the applicant's ownership. The trade-off is loss of control — assets transferred to an irrevocable trust are no longer yours.

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Common irrevocable trust structures include the Medicaid Asset Protection Trust (sometimes called an Irrevocable Income Only Trust), the Irrevocable Life Insurance Trust (ILIT), and various charitable trust structures. Each has specific planning applications, and the decision to use an irrevocable trust requires careful analysis of your goals, timeline, and the applicable look-back periods for Medicaid eligibility.

Special Needs Trust (Supplemental Needs Trust)

A special needs trust (SNT) is designed for beneficiaries who receive — or may in the future receive — means-tested government benefits such as Supplemental Security Income (SSI) or Medicaid. If a disabled beneficiary receives a direct inheritance, the funds may disqualify them from benefits until the inheritance is spent down. A properly structured special needs trust holds assets for the beneficiary's supplemental needs — expenses beyond what government programs cover — without counting as the beneficiary's own assets for program eligibility purposes.

Special needs trusts require precise drafting to comply with federal and state requirements. A poorly drafted trust can inadvertently disqualify the beneficiary from the very benefits it was designed to protect. Ryan Putz drafts special needs trusts with careful attention to the governing federal statutes and Texas-specific rules.

Spendthrift Trust

A spendthrift trust includes provisions that prevent a beneficiary from voluntarily assigning their interest and prevent a beneficiary's creditors from reaching trust assets before the trustee distributes them. Under the Texas Trust Code (Texas Property Code § 112.035), a valid spendthrift provision protects trust assets from most creditor claims against the beneficiary. This is particularly valuable when leaving assets to a beneficiary who has creditor problems, an unstable financial situation, a substance abuse history, or simply a tendency to spend recklessly.

Charitable Trusts

Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) allow clients to benefit both family members and charitable organizations through the same trust structure, often with significant income tax and estate tax advantages. A CRT pays income to the grantor or other beneficiaries for a term or life, with the remainder passing to charity; a CLT pays income to charity first, with the remainder passing to family. These structures are most commonly useful for clients with highly appreciated assets, significant estate tax exposure, or a strong charitable giving intent.