Revocable Trust for Single Individual
(Pot Trust for Children) (TX)

Summary

This template Revocable Trust for Single Individual (Pot Trust for Children) (TX) is for an unmarried settlor as part of a generational wealth transfer plan for the settlor's children and grandchildren. Upon the death of the settlor, all assets are left to the settlors' children in a pot trust. This template includes practical guidance, drafting notes, and alternate and optional clauses. This trust distributes all of the trust assets to the settlor's children in a single trust when the settlor dies. The assets remain in the pot trust until the youngest child reaches age 21. The trustee has broad discretion in providing for the children and is not required to treat them equally. When the youngest child reaches the age of majority, the trustee divides the trust into individual trusts for each child. The settlor determines the age or ages at which distributions of principal are made. This trust template is intended as a general drafting aid for nontaxable estates and will require modification according to the particular circumstances of the settlor, trustee, and beneficiaries, and in accordance with the specific intentions of the settlor. A revocable trust is one element of a comprehensive probate avoidance strategy in the state of Texas. The most common reason a settlor may prefer to avoid probate is privacy. The revocable trust also includes elements of disability planning, as assets held in trust can be managed by the trustee without a judicial determination of incapacity in a guardianship matter. One of the biggest pitfalls regarding revocable trusts is that settlors fail to fund the trusts during their lifetime. An unfunded trust may lead to unintended consequences under Texas state law. A common practice is to minimally fund the trust as a "standby trust." This prevents clients with expansive holdings from expending time and effort to retitle all currently held and later acquired titled property. Be aware that for most clients, however, it is best to fully fund the trust at the outset. The exhibit at the close of this template is intended to help prevent the unfunded trust problem by creating a standby trust with nominal funding on the day it is executed. However, you should advise your client to coordinate and routinely update the estate plan. For example, assets not contributed to the trust—after-acquired property held in joint tenancy with right of survivorship, accounts with a payable on death designation, or tax deferred accounts passing by contractual beneficiary designations—will not be distributed in accordance with the trust terms. Life events occurring after the execution of this Agreement may also necessitate revisions and amendments to the trust. During the 2019 legislative session, the Texas Legislature enacted Section 112.0335 of the Texas Trust Code. Unless the terms of the trust provide otherwise, if a trust is revocable by the settlor (or the settlor's spouse), Chapter 255 and § 355.109 of the Texas Estates Code will apply to the construction and interpretation of at-death transfers, as if the settlor were a testator and the trust beneficiaries are devisees. This new code section essentially creates new default rules of construction and interpretation that can be avoided by careful drafting. See Tex. Prop. Code § 112.0335(a). While § 112.0335 applies only to settlors who die on or after September 1, 2019, the potential application of Chapter 255 and § 355.109 of the Texas Estates Code could create unintended and damaging results for the client. Practitioners must draft revocable trust agreements thoroughly so that Chapter 255 and § 355.109 are not inadvertently applies to a revocable trust's at-death transfers contrary to the settlor's intent. Notwithstanding the creation and funding of the trust, probate may be required. Once the client gives you a completed questionnaire, you should provide a checklist to help them understand the additional action required to implement and coordinate the estate plan beyond executing the documents. This includes, for example, recording new deeds for real property, updating beneficiary designations with investment, retirement, checking, and savings accounts, and more. For related templates, see Revocable Trust for Single Individual (Basic) (TX), and Letter to Client (Funding of Revocable Trust) (TX). For a detailed discussion of trusts, see Characteristics and Uses of Trusts (TX), Requirements and Restrictions on Trust Purposes and Administration (TX), and Revocation, Amendment, and Termination of Trusts (TX).