An irrevocable trust is a type of trust that, once established, cannot be modified or terminated by the grantor. This type of trust is often used for asset protection or estate planning purposes. But what happens when an irrevocable trust is not established in Texas? In this blog post, we’ll explore the answer to that question and provide some insights into how irrevocable trusts work in Texas.
What is an irrevocable trust?
An irrevocable trust is a type of trust that cannot be revoked or amended after it has been created. This type of trust is typically used for estate planning purposes, as it can provide more asset protection than a revocable trust.
There are several benefits to creating an irrevocable trust, including the ability to avoid probate, minimize taxes, and protect your assets from creditors. However, there are also some drawbacks to consider, such as the loss of control over the assets in the trust and the inability to make changes to the trust if your circumstances change.
If you are considering creating an irrevocable trust, it is important to consult with an experienced estate planning attorney who can help you determine if this type of trust is right for you and your family.
The three conditions that must be met in order for an irrevocable trust to be established in Texas
In order for an irrevocable trust to be established in Texas, three conditions must be met:
1. The settlor must have the capacity to create a trust. This means that they must be of sound mind and body and able to understand the implications of creating a trust.
2. The settlor must express their intention to create a trust. This can be done verbally or in writing, but it must be clear that the settlor intends to create an irrevocable trust.
3. The settlor must transfer property into the trust. This can be done by transferring ownership of the property into the name of the trust or by transferring possession of the property to the trustee.
Once these three conditions have been met, an irrevocable trust has been established in Texas.
The consequences of not meeting these conditions
If the above conditions are not met, then the trust is not irrevocable and can be amended or revoked by the settlor. This may have negative consequences for the settlor, including losing control over the assets in the trust and incurring taxes on the trust property.
How to establish an irrevocable trust in Texas
There are four basic requirements for establishing an irrevocable trust in Texas: (1) the settlor or grantor must have legal capacity to create the trust; (2) the settlor must express the intention to create an irrevocable trust; (3) the trust must have a valid purpose; and (4) the trustee must have authority to manage the trust property.
If these requirements are met, then an irrevocable trust is established in Texas. However, there are some situations in which an irrevocable trust may not be established in Texas. For example, if the settlor did not intend to create an irrevocable trust, or if the trustee does not have authority to manage the trust property, then the irrevocable trust may not be established.
It is important to consult with an attorney before establishing an irrevocable trust in Texas to ensure that all of the requirements are met and that the irrevocable trust is properly established.
Texas Case Law
In Texas, an irrevocable trust is not established if the settlor revokes the trust. The settlor must also have the capacity to revoke the trust.
Matter of Totten
179 N.Y. 112, 71 N.E. 748 (1904)
Facts & Procedural History
After Fanny Amelia Lattan (Decedent) passed away, Emile R. Lattan (Plaintiff) filed a claim against Decedent’s estate for $1,775.03. Plaintiff alleged that this money was owed to him because of the deposits Decedent had made to the Irving Savings Institution as Plaintiff’s trustee, which Decedent later withdrew. This claim was rejected by the administrator of Decedent’s estate. The Surrogate Court dismissed the claim on the merits, but the Appellate Division reversed the Surrogate Court’s judgment and allowed the claim to stand. The administrator, as well as certain heirs and next of kin, appealed to the Court of Appeals.
The Court of Appeals reversed the judgment of the Appellate Division, holding that the Appellate Division erred in reversing the judgment of the Surrogate Court. The Court of Appeals stated that, standing alone, a person’s deposit of their own money in a trust account for another person does not establish an irrevocable trust during the lifetime of the depositor. A savings bank deposit is revocable until the depositor dies or completes the gift’s transfer to the beneficiary. In cases where the depositor dies before the beneficiary and does not revoke the gift, there is a presumption that an absolute trust was created. Here, Plaintiff was not aware of the accounts he demanded to be compensated from until after a year after the Decedent had passed away. The money within the accounts in question had been withdrawn prior to Decedent’s death, and all the passbooks for the accounts still open beyond her death were delivered to the beneficiaries entitled to their balances.
The Takeaway
Matter of Totten shows that, where a depositor does not transfer their gift to their specified beneficiary and withdraws the funds from the trust account, an irrevocable trust has likely not been established.
Conclusion
In Texas, an irrevocable trust can only be established if the settlor expressly states in the trust agreement that the trust is to be irrevocable. If there is no such provision in the trust agreement, then the trust will be considered revocable and can be amended or revoked at any time by the settlor. As always, it is best to consult with an experienced attorney to ensure that your trusts are properly established and administered.
Do you need an Experienced Probate Attorney to help?
An experienced probate attorney can help you determine whether or not an irrevocable trust has been established in Texas. If you are the trustee of an irrevocable trust, you may not be able to change the terms of the trust without the consent of all the beneficiaries. However, if you are a beneficiary of an irrevocable trust, you may be able to challenge the terms of the trust if you believe they are unfair or if you need to access funds for your own health or education expenses.
Call us today for a FREE attorney consultation. (512) 273-7444.
