What are the Requirements of a Valid Trust in Texas?

by Rania Combs on May 23, 2011

When people think about trusts and trust funds, images of people like Paris Hilton come to mind. But trusts not just for the wealthy.

What are the benefits of creating a trust?

Trusts can be set up to manage assets for those who are minors, spendthrifts, or have special needs; to ensure that assets in the trust ultimately pass to one’s children in the case of a blended family or if a surviving spouse remarries; or to protect trust assets from creditors and potential lawsuits against the beneficiaries.

They are beneficial because the Settlor (the person who establishes the trust) can direct how the assets should be managed, who will manage the assets, and how and when the assets should be distributed to the Beneficiaries.

What are the requirements of a valid trust in Texas?

The following are the legal requirements for a valid trust in Texas:

  1. The Settlor must have a present intent to create a trust. According to the Texas statutes, a trust is created if the Settlor manifests an intention to create a trust. No specific words are required.”
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  3. The Settlor must have capacity to convey assets to the trust. The Settlor has capacity if:
    • he or she is over the age of 18 or has been lawfully married or a member of the armed forces, and
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    • is of sound mind, which means he knows the nature and extent of his property, the persons who are the natural objects of his bounty, the disposition that he is making, and how these elements relate to form an orderly plan for the disposition of his property.
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  4. The trust must comply with the Statute of Frauds. A trust may be created orally through a declaration of trust; however, if it involves the transfer of real property, it must be in writing.
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  6. The trust must have a legal purpose. The terms of a trust may not require the trustee to commit a criminal or tortious act or an act that is contrary to public policy.
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  8. The Settlor must identify the property covered by the trust and place it in the trust for the benefit of the beneficiary. The Texas statutes specify that a trust cannot be created unless there is trust property.
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  10. The trust must have a Trustee who holds legal title of property for the benefit of the trust’s Beneficiaries. If there is no Trustee named, or if the Trustee that is named does not want to serve or cannot serve for any reason, the court can appoint a Trustee for the trust.
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  12. The trust must have ascertainable Beneficiaries. If the Settlor does not name the Beneficiaries with sufficient certainty, the trust will fail.
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  14. The trust my not violate the Rule Against Perpetuities, which says that an interest is not good unless it must vest, if at all, not later than 21 years after some life in being at the time of the creation of the interest, plus a period of gestation.
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A trust can be set up and funded during a Settlor’s lifetime, or even at the death of the individual who established it. Even if you aren’t wealthy, trusts can help you ensure that your assets are managed according to your wishes during your lifetime and after you die.

Return to Texas Wills and Trust Online home page →

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