As an alternative or supplement to a will, an individual may choose to establish a trust. An individual may establish a revocable trust (also known as a living trust) or an irrevocable trust.
In Texas, a revocable trust is often used if a person desires a high degree of privacy (as a trust agreement, unlike a will, does not need to be filed with a court). A person may also choose to use a revocable trust if they want to designate a bank or other corporate fiduciary to manage his or her affairs in the event of incapacity or if the individual owns real estate in multiple states. Living trusts can also be used to avoid probate and are commonly used for this purpose in states with expensive probate procedures (such as California). However, since Texas has a very streamlined system of independent estate administration, there usually isn’t any significant advantage to using a living trust, especially if the sole goal is to avoid probate in Texas.
Irrevocable trusts are often used to hold the assets of young or incapacitated beneficiaries, to obtain creditor protection benefits, and for gift and estate tax planning purposes. These trusts allow a person (the “grantor” or “settlor”) to make gifts of property and provide specific instructions on how the gifted property may be used and managed in the future. Irrevocable trusts may be established during the grantor’s lifetime under a written trust agreement (inter vivos irrevocable trusts) or at his or her death under a will (testamentary trusts).