USA – TEXAS Law and Practice Contributed by: Perrin Clark, Ytterberg Deery Knull LLP
3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Revocable Trusts Revocable trusts are commonly used to consolidate and hold assets during life. This provides continu - ity of management, particularly upon the incapacity or death of the grantor. Upon the death of the gran - tor, revocable trusts help avoid the need for ancillary probate with respect to real property located outside the jurisdiction of original probate. Finally, revocable trusts help keep the decedent’s estate plan confiden - tial, because only the decedent’s will, not the trust instrument governing the revocable trust, is filed as part of the probate proceeding. Irrevocable Trusts Irrevocable trusts are commonly used with a variety of estate planning techniques as discussed in 2.6 Trans- fer of Assets: Vehicle and Planning Mechanisms . Grantor Trusts Grantor trusts are often created so that the trusts are ignored for income tax purposes and the gran - tor remains responsible for reporting the trust’s tax attributes on their individual tax return. Non-Grantor Trusts Non-grantor trusts are also commonly created, so that transactions between the grantor and the trust are recognised for income tax purposes and the trust must report its tax attributes on its separate tax return; provided that certain tax attributes, such as taxable income and any associated tax liability, may be carried out to a beneficiary with distributions from the trust. Charitable Funds and Foundations Foundations are often created to facilitate clients’ charitable endeavours. However, in recent years, cli - ents have increasingly opened accounts with donor advised funds, rather than create new foundations. Donor advised funds are treated as public charities for the purposes of determining deductibility rules appli - cable to clients’ donations, and clients’ accounts with donor advised funds are not subject to the annual 5% distribution requirement that applies to foundations.
tor retains a right to receive payments based on a fixed percentage of trust value for a period of years, while the remainder interest is left to other beneficiaries, thereby reducing the value of any gift made by the grantor to the trust. • Qualified personal residence trust (QPRT) – a type of statutorily authorised split-interest trust with respect to which the grantor donates their resi - dence and retains the right to use the residence for a period of years, while the remainder interest is left to other beneficiaries, thereby reducing the value of any gift made by the grantor to the trust. • Charitable lead trust (CLT) – a type of split-interest trust in which a charity is given a right to receive an annuity or payment based on a fixed percentage of trust value for a period of years, while the remain - der interest is left to non-charitable beneficiaries, thereby reducing the value of any gift made by the grantor to the trust. • Charitable remainder trust (CRT) – a type of split- interest trust in which one or more non-charitable beneficiaries are given a right to receive an annuity or payment based on a fixed percentage of trust value for a period of years, while the remainder interest is left to charity, thereby reducing the value of any gift made by the grantor to the trust. More than one of these techniques can be combined within a single estate planning strategy, potentially amplifying the overall efficacy of the strategy. Which techniques and what strategy are most appropriate is client specific and dependent on individual facts and circumstances. 2.7 Transfer of Assets: Digital Assets Texas has adopted the Texas Revised Uniform Fidu - ciary Access to Digital Assets Act (TRUFADAA) – see Texas Estates Code Chapter 2001. The TRUFADAA provides a fiduciary with the right to access the dece - dent’s digital assets, subject to the service provider’s terms-of-service agreement; provided, any direction in a decedent’s will, trust, power of attorney, or other record prevails over contrary provisions in such terms- of-service agreement; and provided, further, that any direction left by a decedent in a service provider’s online tool specifically with respect to such directions, prevails over all of the above.
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