There are two types of trusts in Texas available and they both have their own unique set of pros and cons: inter-vivos trusts and testamentary trusts.
What is an inter-vivos trust?
An inter vivos trust, also known as a living trust, is created during the lifetime of the grantor or trustor – the person who sets up the trust. The main advantage of setting up an inter vivos trust is that it can help to avoid probate, a legal process that’s conducted to settle a person’s estate after they die.
Another advantage of an inter-vivos trust is that it can give you more control over how your assets get managed. You can specify exactly how and when you want your assets to get distributed. For example, you can set up the trust so that your assets reach your beneficiaries immediately upon your death, or you can set up the trust so that your assets are distributed over a period of time.
There are also some disadvantages to setting up an inter-vivos trust. It can be more expensive than a testamentary trust. It can be more difficult to change than a testamentary trust. Once you’ve set up an inter-vivos trust, you can’t make any changes to it without the consent of all the beneficiaries.
Understanding testamentary trusts
A testamentary trust is a trust that’s created after the death of the grantor or trustor. A main advantage of a testamentary trust is that it can be easier to change than an inter-vivos trust. If you need to make any changes to the trust, you can do so by simply changing your will.
The most common disadvantage of a testamentary trust is that it may not help to avoid probate. Probate is a legal process that’s conducted to settle a person’s estate after they die, and all testamentary trusts must go through probate. Another disadvantage of a testamentary trust is that it doesn’t take effect until after the death of the trustor. This means that the trustor can’t take advantage of any of the benefits of the trust during their lifetime.
Both inter-vivos trusts and testamentary trusts have their own distinctive features. It’s important to weigh all these factors carefully before deciding which type of trust is right for you. Speaking with a legal professional who knows the law is a good first step.