You Might Need a Revocable or Irrevocable Trust

Depending on the nature of the property you own and how it’s titled, you may want to ask your lawyer to create a trust that will help you meet all your estate planning needs. To prepare for such an appointment, be sure to take along two lists – one noting all the properties you own and the other indicating the beneficiaries you want to help by naming them in the trust.

Your attorney will need to ask some general questions to help you decide which one of these trusts is best suited to your current financial situation.

Before describing some of the precise differences between revocable and irrevocable trusts, this article will note some of the general reasons why they’re often desirable.

What general benefits do trusts often confer on estate planning clients?

  • They can help maximize family privacy. Most property that passes to beneficiaries under trusts is never publicly disclosed — except to the extent that certain taxes may be owed on gifts given or received. Obviously, when property passes through probate, members of the public can learn about your estate by reviewing court records. Therefore, trusts offer greater privacy;
  • Trusts can help protect your assets from outside creditors. While this goal can be achieved if you’re not attempting to defraud others when you have the trust created, you must be prepared to answer questions if creditors sue you. If you want to put assets in a trust in hopes of getting around specific Medicaid rules and regulations, you must let your lawyer explain how the government prevents fraud in this legal area;
  • They can provide specific tax advantages. For example, since property or assets placed in an irrevocable trust account are considered owned by the trust and not by the grantor who had it created, those assets will not be treated as part of your estate (for tax purposes) at the time you pass away. (However, any assets in a revocable trust when you die will be taxed as part of your overall estate);
  • Trusts can provide added financial security to a dependent disabled person. In order to qualify for some Social Security benefits, recipients must meet certain financial criteria. If they own too much property or are too wealthy, they won’t be qualified to obtain key benefits. One legal way to get around this problem is to place assets in an irrevocable trust and name the disabled person as a beneficiary. Your Houston estate planning attorney can explain this process in greater detail. Aging parents and others often set up trust accounts like this to be sure seriously disabled family members will have enough to live on in the future – long after others have passed on;
  • At the time of a divorce, most trust funds should remain protected. However, you cannot place funds in a trust prior to a divorce to try and defeat your spouse’s community property rights;
  • Properly created trusts have long helped grantors provide for the basic needs of their loved ones.

It’s important to note that all trusts are categorized as either “testamentary” or “living” (inter vivos) trusts. The latter type become viable during the grantor’s lifetime – while testamentary trusts – which are directly linked to your Will — don’t go into effect until you’ve passed away.

What are some specific benefits of revocable trusts?

  • They can provide ongoing control over all trust assets. If you create a revocable trust, you can decide if you want to serve as the trustee and move certain assets in and out of the trust when you choose, depending on the terms you created for the trust;
  • You can change the terms of the trust when you choose. This might mean picking a new trustee or altering the list of beneficiaries;
  • They are relatively easy to handle at tax time. As the grantor (or creator) of this trust, you can simply declare your earnings from the trust in your personal tax return.

What are some specific benefits of irrevocable trusts?

  • The trust assets are usually considered safe from the reach of outside creditors. This will prove true if you didn’t have the trust created to defraud others. Courts will review all aspects of the trust’s initial drafting when checking to be sure it wasn’t set it up to defeat known debts;
  • As noted above, disabled people needing to receive special Social Security benefits can often receive critical added funds from properly drafted irrevocable trusts;
  • For tax purposes, the IRS and others don’t usually view these trust assets as being owned by the grantor at the time of his/her death. Therefore, any assets in the trust at the time the grantor dies will not be added to assets outside the trust when calculating any estate taxes that may be due.

Always keep in mind that the laws controlling the creation of trusts change periodically. Be sure to always confer with your Houston estate planning lawyer who keeps up with such changes before ever trying to create or modify a trust. Attorneys also stay abreast of all new state probate laws that may affect clients’ estate plans.

Should you need any help with creating or updating a trust account, please feel free to contact one of our Murray Lobb attorneys. We’re ready to provide the legal advice you’ll need to fully protect your assets in the future. Our firm can also help you revise your estate plan as your family continues to grow and new investments are added to your portfolio.

Basic Requirements for Creating a Trust in Texas

Before meeting with your lawyer to create a trust, it should prove helpful to first review the following general legal terms and requirements that govern this effort. Once you understand your duties and the different parties you’ll need to name in the trust, you’ll be better prepared to begin listing the property you wish to transfer through your trust.

Key terms such as grantor, trustee, beneficiary and trust agreement

If you’re the party seeking to create a trust, you may be referenced in the trust document as the grantor, settlor or trustor. In order to create a valid trust in Texas, you must have the present intent or goal to create this type of document that allows you to protect property in a trust during your lifetime. Depending on the exact type of trust you create, you may also retain the right to fully control the property during your lifetime – which may include moving specific bits of property it in and out of the trust according to your needs.

Among your various duties as the grantor, you’ll need to decide who you want to name as the trustee – or controlling party – of your trust. If you choose to create the type of trust that must be managed and controlled by another party, you’ll have to decide if this should be your lawyer, a family member or another party with strong financial management skills.

As the creator of the trust, it will also be up to you to carefully describe all the duties you want your trustee to handle and how you prefer that those duties be carried out. And if you’ve chosen to act as the trustee, you should also name a potential “successor trustee” who can step in and take over if (or when) you become incapacitated — or pass away.

Additional requirements that must be met when creating your trust

You’ll need to be of sound mind, fully capable of understanding all that you’re trying to do with your property and have a proper legal purpose for the trust. In other words, you’ll just need your lawyer to state the specific type of lawful trust that you’re creating – such as a revocable, irrevocable or spendthrift trust – and which parties will receive the benefit of the properties held within the trust.

Texas law also mandates that your trust fully complies with all the requirements of the Statute of Frauds. This basically means that the trust is set forth in writing and is properly executed in full keeping with that statute so that it’s legally enforceable in a court of law. Your Houston estate planning attorney can also explain to you why certain gifts must become vested within set time periods so that they’re not in violation of the Rule Against Perpetuities.

Why you may need more than one trust

In addition to creating a trust that provides all your property with certain tax advantages during your lifetime, you may also wish to create an educational trust that will benefit your grandchildren or even one to cover the needs of a beloved pet after you pass away.

A simultaneous review of your entire estate plan will also benefit you

Whether you’re married or single, it’s always wise to carefully review all your assets with your attorney when creating a trust. In some cases, you may even want to go ahead and change how certain property is currently titled and change some investment accounts so that they’ll pay out directly to specific beneficiaries at the time you pass away – thereby lessening the duties of any party you’ve named as your trustee.

Please feel free to contact one of our Murray Lobb attorneys so we can create the type of trust you currently need. We’ll also help you review your overall estate plan and provide you with legal advice about the right way to properly manage any property or business interests not currently covered by a trust.

What Kinds of Property Can Be Placed in a Revocable Living Trust?

A revocable living trust is an estate planning document that allows its trustee to actively control many properties and possessions during an entire lifetime. Both new and older possessions can be freely moved in and out of this trust and left to various beneficiaries. Once the trustee passes away, all the property still held by the trust can immediately pass to the beneficiaries and avoid incurring unnecessary probate fees.

Since real estate, business interests and personal possessions can be quite varied, it’s wise to discuss their individual characteristics with your lawyer before placing them in this type of trust. This especially holds true if you plan on buying and selling some of your possessions on a regular basis. In some cases, it may be easiest to allow a few less expensive properties to pass through probate when their value will help minimize any fees.

Here’s an overview of the type of personal possessions, real estate, business accounts and other items that you may want to place in your revocable living trust (RLT).

Types of property often placed in a revocable living trust

  • Real estate and houses. You can place these in a revocable trust, even if they’re encumbered by mortgages. Of course, any debt still owing on the property will pass to the beneficiary;
  • Legal interests you own in most small businesses. You’ll need to give this very careful thought since you’ll want to be sure your beneficiaries can capably run the business and handle other required tasks. Also, you and your Houston estate planning attorney need to carefully read all the small print in your business contracts to be sure they don’t specifically forbid the transfer of your ownership interests into a trust. Other formalities may also become pertinent. For example, if you’re a partner in a group governed by a partnership ownership certificate, that document may have to be changed to indicate your trust is the legal owner of your share in the business. Somewhat similar issues may arise if you own shares in certain types of corporations;
  • Stocks, bonds, bank and security accounts. While it can prove useful (if allowed by the terms of each account) to place all of these in your revocable living trust, it may be simpler to just a name a TOD (transfer on death) beneficiary for one or more of these accounts. Ownership can then pass directly to your beneficiaries as soon as they produce legal proof of your death;
  • Copyrights, trademarks, royalties and patents. These can all be placed in your LRT (living revocable trust). After you pass away, the rights – and limitations – that governed these interests will pass on to your beneficiaries;
  • Gold, silver and other precious metals. Before deciding whether it’s wise to place these in your trust, be sure to get them accurately appraised;
  • Prized pieces of artwork, antiques (and less expensive) furniture. Be sure that all these unique items are properly insured before placing them in your trust;
  • Your collectibles. These often include coins, stamps and other unique items you may have spent a lifetime collecting. (Be sure all these items are also properly appraised and insured).

Should you place your life insurance policy into your revocable trust?

If you’re considering this move because you’re trying to protect the policy proceeds from having to go through probate, be aware that such proceeds automatically bypass probate and go straight to your named beneficiaries. However, if the only beneficiary of your policy may still be a child should you suddenly pass away, you may want to put the life insurance policy into your trust and name the living trust as the beneficiary. Your lawyer can then make sure that the trust names an adult to manage the proceeds of the life insurance policy for the specifically named child until s/he reaches adulthood.

How should 401(k), 403(b), IRA and qualified annuity accounts be handled?

You can create various tax problems for yourself by trying to transfer these into your LRT. Ask your lawyer if it would be better to just change the beneficiaries named for these accounts.

Should you place ownership of any vehicles in your trust?

If you use them regularly, this is often not practical. However, if you own one or more antique autos, you may want to talk with your attorney about whether it’s fully beneficial to hold title to them in your trust – or if there’s a better way to keep them out of the probate process.

Can oil and gas mineral rights be placed in a revocable living trust?

What you can do with these depends on the precise nature of the rights you hold. Ask your Houston business law attorney if you should create an assignment to these rights or try to formally obtain a new deed before transferring them into your revocable living trust.

Please contact us and allow one of our Murray Lobb attorneys to help you draw up any living revocable trusts you may need to help protect your personal property and possessions.

Handling Employee Requests for Religious Accomodations

Whether you’re running a large corporation or a small business, it can be challenging to properly reply to employee requests for religious accommodations. However, if you’ll listen carefully to what’s being asked and thoughtfully weigh all your options, you should be able to respond appropriately. As the employer, it’s your duty to strike the proper balance between honoring a legitimate request and prioritizing the most crucial needs of your business.

Here’s a brief overview of the key topics involved with honoring religion rights in the workplace after receiving employee accommodation requests.

Employment discrimination based on religion is forbidden by law

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees based solely on religion. Upon first learning about this statute, most employers ask how the term “religion” is defined — and exactly when they must fully abide by this law. Stated succinctly, employers should try to make reasonable accommodations based on religious beliefs (and practices) whenever doing so will not place an “undue burden” on their businesses.

How does the EEOC define “religion?”

The Equal Employment Opportunity Commission provides a very broad definition of “religion” that is not limited to just well-known faith groups such as Christians, Jews, Buddhists, Muslims and Hindus. The EEOC states that the employee’s beliefs can be new or uncommon – and separate from those espoused by any formal group or sect. The practice the employee wants to honor must be sincerely held and of a clear, religious nature – as opposed to a mere political, social or economic philosophy.

What are some of the most common types of requested religious accommodations?

  • Permission to attend special worship services during normal work hours;
  • A request by a female employee to wear a headscarf or “hijab” at work;
  • Permission for a male employee to wear his hair long – in keeping with religious beliefs. Some Jewish men also ask to wear “skull caps” or yarmulkes on special religious days;
  • Time off on specific “holy days” – or a day like Saturday or Sunday, in keeping with faith practices;
  • A flexible work schedule that allows for “breaks” during which specific types of prayers may be said;
  • A request to be exempted from specific job tasks, such as dispensing birth control pills or handling specific duties that help advance war efforts. (Members of the Jehovah’s Witnesses and other faith communities might make these types of requests);

While this list is not intended to be exhaustive, it should provide you with a better understanding of the types of accommodations employees may request.

How can employers determine if a request will cause an “undue hardship”?

After making sure you understand the specific nature of each request, you’ll have to decide if your business can still function smoothly if you grant the accommodation. Here are some questions you should be sure to ask yourself.

  • Will making the accommodation prove unduly expensive? For example, what should you do if an employee asks to take off work to attend a Good Friday church service? Will saying “Yes” leave a key job or position uncovered in the person’s absence? Do you have any other employees willing to cover for the individual needing to leave? If no one volunteers to help, can you afford to pay any overtime to a qualified employee (or an outside temp) to cover the position?
  • Is the request one that might violate your company’s legitimate health or safety rules? If so, can you find another way to work out the situation? For example, if a young man wants to wear his hair long in keeping with his stated religious beliefs – can you simply let him wear his hair tied in a ponytail during work hours — or keep it hidden under a work hat that you provide or consider acceptable?
  • Will it prove to be too disruptive to your regular office routine? Should you allow an atheist (or employees of different faiths) to wait and enter meetings normally started with Christian prayers after those prayers have concluded? It might be simpler to just pray with those of like mind at a different time on certain days. That way, you can probably avoid ostracizing those who have said that they don’t wish to take part in your specific prayer practices.
  • Is there a danger that granting one employee’s request to honor faith practices will lead to too many other, similar requests? The EEOC urges employers to consider all requests made very seriously — and to try and accommodate them whenever it’s reasonable. Few employees are likely to abuse this type of request. However, you might consider placing a statement in your employee handbook that all such requests must be made on a sincere basis — and that they’ll probably be granted if they don’t cause any great disruption in the company’s normal workflow – or provision of critical customer services.

All employers, managers and supervisors must avoid all forms of workplace retaliation

Unfortunately, there will always be a few biased supervisors or managers who may resent having to make any religious accommodations. Therefore, you must make sure that once any requests have been granted – the employees are not “punished” in any way.

For example, you cannot force all employees requesting permission to wear special religious clothing, hats or scarves to sit in a back office together where they’ll be less visible. That could be viewed as “retaliation” and make your company vulnerable to a lawsuit based on discrimination.

Conclusion

Be sure to treat every employee’s request for a religious accommodation with sincere respect. And always keep detailed notes in each employee’s file as to why you did or did not grant a request in case there are any later lawsuits. (For example, if you decide a request will prove to be too costly or place an “undue burden” on your business – make sure you can prove that with adequate facts and figures.)

Please feel free to contact one of our Murray Lobb attorneys with any questions you may have about making workplace accommodations based on religion (or disability). We can provide you with the legal guidance you’ll need to keep your business running smoothly.