A living trust in Texas is a written legal arrangement you set up during your lifetime to hold your property, with you usually acting as your own trustee and primary beneficiary while you’re alive, and a successor you choose stepping in to distribute everything to your named beneficiaries after you die. It is governed by the Texas Trust Code in Title 9 of the Texas Property Code and functions as a private alternative to probate. It also gives you a plan for who manages your finances if you become incapacitated.
How a Living Trust Works
A living trust separates legal ownership of property from the right to benefit from it. You draft a written document, transfer assets into the trust’s name, and set the rules for how those assets are managed and eventually distributed.
Three roles make the arrangement run:
- The settlor (also called grantor) creates the trust, contributes the assets, and sets the terms. In most living trusts, the settlor is also the initial trustee and the main beneficiary during their lifetime.
- The trustee manages the trust assets under the document’s instructions. You name a successor trustee to take over when you die or can no longer serve.
- The beneficiary is the person entitled to benefit from the assets. While you’re alive, that’s typically you. After your death, it’s whoever you’ve named: a spouse, children, or others.
Because the settlor can keep a life interest, retain the power to revoke or modify the trust, and control how it is administered, Texas law treats a living trust as valid immediately on creation rather than as an after-death transfer.1State of Texas. Texas Property Code 112.033 – Reservation of Interests and Powers by Settlor You keep full control of your property as long as you’re alive and competent.
What a Living Trust Is Used For
Avoiding Probate
The main reason Texans create living trusts is to keep their estate out of probate court. Assets you own in your personal name at death generally go through probate, even in Texas, where independent administration already streamlines things compared with many other states. Probate typically runs 6 to 12 months, longer for complicated estates, and attorney fees, court fees, and executor compensation can take a meaningful share of a smaller estate’s value.
Assets held inside a funded living trust skip probate entirely. The successor trustee follows the trust document, distributes the property, and never files anything with a court. Nothing becomes public record. If you own real estate in more than one state, a living trust also spares your family separate probate proceedings in each state where you own property.
Planning for Incapacity
A living trust also gives you a plan for what happens if you can no longer manage your own finances. Without a trust or a durable power of attorney, your family may have to petition a court for guardianship, which is slow, expensive, and subject to ongoing court supervision. With a living trust, your named successor trustee can step in right away to pay bills, manage investments, and handle financial decisions on your behalf, with no court involvement.
Privacy
A will becomes a public record once it is filed in probate. A living trust does not. The terms, the assets, and the beneficiaries stay out of any court or government file. Families who want their financial affairs kept confidential often cite privacy as the single biggest draw.
Creating the Trust Document
Under the Texas Trust Code, a living trust is enforceable only if there is written evidence of its terms bearing the signature of the settlor or an authorized agent.2State of Texas. Texas Property Code Chapter 112 – Creation, Validity, Modification, and Termination of Trusts Texas does not require the trust document itself to be notarized, but notarization is strongly recommended. It verifies the settlor’s identity and makes the document much easier for banks and other institutions to accept. A notary in Texas typically charges $5 to $10 per signature.
Before drafting, gather:
- Legal descriptions and tax identification numbers for every parcel of real estate you plan to include, taken from your existing deeds.
- Account numbers for bank accounts, brokerage accounts, and any stock or bond certificates.
- Full legal names and current addresses for every beneficiary and every person you want to name as a successor trustee.
- Clear instructions on how and when assets should pass to your beneficiaries: lump sum, staggered over several years, or held until a beneficiary reaches a certain age.
Online templates can work for very simple estates. They often fall short for anyone with real estate in multiple counties, a blended family, or business interests. Texas estate planning attorneys commonly charge a flat fee of $1,500 to $3,500 for drafting a living trust, depending on the complexity of your assets and family structure. The document itself defines the trustee’s powers, the beneficiaries’ rights, and the conditions under which the trust operates, terminates, or distributes.
Funding the Trust
Signing the document creates the legal framework. The trust stays empty until you actually transfer ownership of your assets into it. This step is called funding, and it is where many people fall short. An unfunded trust does nothing to avoid probate for the assets left out.
Real Estate
You prepare and sign a new deed, often a special warranty deed, transferring the property from your individual name into the trust’s name. The deed has to be notarized and then recorded with the county clerk in the county where the property sits. Recording fees in Texas start at around $25 for a one-page document, with a small charge per extra page. Property in multiple Texas counties means a separate deed filed in each.
Financial Accounts
For bank accounts, brokerage accounts, and similar assets, you contact each institution and request that the account be re-titled in the name of the trust. The institution usually asks for a copy of the trust document or a certification of trust. A certification of trust is a shortened summary confirming the trust exists, identifying the trustee, and describing the trustee’s authority, without revealing the full terms, your beneficiaries, or your distribution plan. Texas Property Code Section 114.086 authorizes these certifications, so you can prove your authority to third parties while keeping the rest of the trust private.
The Pour-Over Will
Some assets almost always slip through: a bank account you opened recently and forgot to re-title, an inheritance that arrived shortly before you died. A pour-over will directs that anything still in your personal name at death be transferred into your living trust. The catch is that those assets still have to go through probate before they get there. A pour-over will is a safety net, not a substitute for proper funding.
Amending or Revoking the Trust
You can change a revocable living trust at any time. Under Texas Property Code Section 112.051, the settlor may revoke, modify, or amend a revocable trust, but if the trust was created in writing, any change must also be in writing.2State of Texas. Texas Property Code Chapter 112 – Creation, Validity, Modification, and Termination of Trusts You cannot expand the trustee’s duties through an amendment without the trustee’s express consent.
Small changes like adding a beneficiary, adjusting a distribution percentage, or naming a new successor trustee can be handled with a simple written amendment. Once you have accumulated several amendments, or if the changes are extensive, a full restatement is cleaner. A restatement replaces the original document with a single updated version so your successor trustee and beneficiaries do not have to piece together several documents.
Revoking the trust entirely is also an option. You sign a written revocation and re-title the assets back into your personal name. For real property, that means preparing and recording a new deed transferring the property out of the trust, mirroring what you did to fund it.
What Happens When You Die
When the settlor dies, the successor trustee takes over with a defined set of responsibilities. Texas requires the successor trustee to notify all beneficiaries within a reasonable time, with the notice typically giving the trustee’s name and contact information, confirming that the trust exists, and informing beneficiaries of their right to request a copy of the trust document.
The successor trustee then gathers the trust assets, pays outstanding debts and taxes, and distributes the remaining property according to the trust’s terms. All of this happens without court supervision and without any public filing. If a trustee mismanages assets, fails to distribute property, or otherwise violates the trust, beneficiaries can petition a court to remove the trustee or seek damages under the Texas Trust Code.
Family members who serve as trustee are entitled to reasonable compensation under Texas law and often waive it. If you name a bank or trust company instead, expect annual management fees in the range of 1% to 2% of the trust’s assets, with lower percentage rates on larger trusts.
Taxes
Income Tax While You Are Alive
A revocable living trust is a “grantor trust” for federal income tax purposes. The IRS essentially ignores it: all income from trust assets is reported on your personal tax return under your Social Security number. Under the IRS’s Optional Method 1, you do not need to obtain a separate Employer Identification Number for the trust or file a Form 1041.3Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 You give your SSN to the payers of income and report everything on your 1040 as usual.
Estate Tax
A revocable living trust does not reduce or eliminate federal estate taxes. Because you keep full control during your lifetime, the IRS counts all trust assets as part of your taxable estate at death. For 2026, the federal estate tax exemption is $15,000,000 per individual, so estates below that owe no federal estate tax whether assets sit in a trust or in your personal name.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Texas does not impose a state estate tax or inheritance tax.
Stepped-Up Basis
Assets in a revocable trust still get a stepped-up basis at your death. Their tax basis resets to the fair market value on the date of death.5Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent If you bought stock for $10,000 and it is worth $100,000 when you die, your beneficiary’s basis becomes $100,000. A quick sale at that price produces no capital gains tax on the $90,000 of lifetime appreciation. The benefit applies whether the asset passes by trust or by will.
After the settlor’s death, the trust becomes irrevocable and must obtain its own EIN. The successor trustee may need to file Form 1041 for income the trust earns between the date of death and the final distribution to beneficiaries.3Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1
What a Revocable Living Trust Does Not Do
A revocable living trust offers no protection from your creditors. Because you can revoke the trust, pull assets out, and change beneficiaries at any time, courts and creditors treat the assets as yours. A lawsuit, judgment, or bankruptcy reaches them. Only irrevocable trusts, where you permanently give up control, can potentially shield assets from creditors.
It also does not help you qualify for Medicaid. Medicaid counts assets in a revocable trust the same as assets in your personal name when evaluating long-term care eligibility, and the program’s five-year look-back examines any transfers made in the five years before you apply. Moving assets out of the trust inside that window can trigger a penalty period of ineligibility.
Revocable vs. Irrevocable
Texas law presumes that a trust is revocable unless the document expressly says otherwise.2State of Texas. Texas Property Code Chapter 112 – Creation, Validity, Modification, and Termination of Trusts A revocable living trust, the kind this article describes, gives you maximum flexibility but no asset protection and no estate tax advantage. An irrevocable trust permanently removes assets from your control and from your taxable estate. Once funded, you generally cannot take the assets back, change beneficiaries, or alter the terms without the beneficiaries’ consent or a court order.
Irrevocable trusts are used for different goals: reducing estate taxes on very large estates, shielding assets from creditors, or qualifying for Medicaid. The price is losing control of what you put in. Most Texas families start with a revocable living trust and look at irrevocable options only if their estate exceeds the federal exemption or they have specific asset-protection goals.