BY: Jonathan D. Berry, J.D.
Senior Vice President
(817) 502-2931
In my previous life, as a practicing estate planning attorney, I would often joke with clients who brought me their documents for review. When this review included a revocable trust, I would often ask the age (or retirement date) of their previous planner. As was the case sometime in the past, revocable trusts were primarily used for probate avoidance within the Texas Probate System. However, this has all seemed to change in the last ten years, and it has changed because of one statutory phrase… “less restrictive alternatives to Guardianship.”
Having become a Trust Officer and watched real-life scenarios play out, I know that revocable trusts are more important than ever. Our team asks numerous questions during a planning meeting or new client introduction, and one famous question is, “But what if you don’t die?” This often sets off a whirlwind of emotions and thoughts, a bit of rambling, and finally, the answer of “I don’t know.”
Guardianship is an up-and-coming new facet to estate planning that, unfortunately, has been cast aside in the past. Guardianship is handled through the Texas Estates Code and system and thus is directly linked to proper estate planning. Previously, it was thought that guardianship was only needed in extreme instances of minor children (who have no assets) or severely disabled with intellectual disability (often no assets to enable Medicaid waivers). However, with generational trends of both lack of multigenerational living arrangements and the increase in memory care assistance, guardianship has come to the forefront of planning.
One prime example of using a revocable trust would be an elderly male with a net worth of 8 million dollars, no immediate family, and no family close in proximity, with a current revocable trust. This gentleman names Argent as a successor trustee, and when he becomes incapacitated, Argent takes over his financial care. The gentleman does not have to worry about elder abuse, a ne’er-do-well neighbor/friend, an elder scam, or his own mismanagement of funds.
Further, he is able to live a relatively normal life (albeit maybe with some assisted care) with very little outside intervention. Additionally, this is all done outside the purview of the Texas Probate System, and the courts view this as a win because it is a less restrictive alternative to guardianship.
A second example of the benefit of revocable trusts lies in yours, mine, and ours scenario. Here, a couple has a second marriage and a blended family. Children exist from prior marriages as well as second marriages. The likelihood of spousal simultaneous death was .04% (The Actuary January 1994 – Volume 28, No. 1). Although this statistic may have changed, it does not erase the likelihood that one spouse will outlive the other. With a blended marriage, the revocable trust allows for proper movement, management, or creation of further trusts that do not alienate any of the heirs and, more specifically, the remaining spouse. Also, it is often the case that one spouse is the financial officer of the family. In this instance, the revocable trust with a corporate trustee allows for the financial management, oversight, and bills to be outsourced while protecting the remaining spouse and the heirs, thus removing a burden from the surviving spouse. This is especially important within our day to protect and prevent financial exploitation of the elderly. All this occurs during the lifetime of the remaining spouse, not after both deaths.
Revocable trusts are versatile tools that can be highly effective in preparing for scenarios where you do not die. Examples include:
- Changes in capacity
- Shifts in family structure
- The passing of the family CFO
- The protection of blended families
Designating a corporate trustee as the trustee of a revocable trust can significantly enhance the manageability of these situations.
