This part of a 3 part series answering frequently asked questions about Texas alternatives to guardianship.
I want to leave property to or for the benefit of a minor or incapacitated person when I die. Can I do so in a way which avoids guardianship?
Yes. A well-drafted will or trust will create a trust for a person who is a minor or who is incapacitated. The trustee can be someone you trust to administer the property for the benefit of the minor or incapacitated person. In most cases, the trustee is authorized to use the money to pay for the person’s health, education, maintenance and support. (Sometimes it is prudent to use a special needs trust to help assure the availability of Medicaid or other government benefits.) When the minor reaches an appropriate age (most people pick an age beyond 18, since the child may not be ready to manage property as an 18-year-old), the trust can terminate and the property can be distributed to the child.
A relative left something to my minor child without creating a trust. Is there some way to get it into a trust now?
Yes. Even if property is left to a minor outside of a trust, a guardianship management trust (sometimes called an 867 trust because they are set up under Section 867 of the Probate Code) can be established. Court approval is required, and these trusts are less flexible and more expensive to establish than a trust in a will. In most cases the trustee must be a bank or trust company. Also, the age of trust termination is set by the court and has to be 18, 25 or some age in between. Guardianship-style accountings are required each year, and there are restrictions on the compensation a trustee can receive. For these reasons, banks and trust companies are sometimes reluctant to take small trusts. If no bank or trust company will take an 867 trust, the court may appoint an individual, but the individual must post a bond, which may be difficult to obtain.
How big must an 867 trust be for a bank or trust company to be interested in handling it?
Because of accounting requirements and restrictions on fees, banks and trust companies are reluctant to take on 867 trusts below a certain size. The minimum size varies from bank to bank and somewhat depends on the nature of the assets in the trust. In some cases, banks and trust companies have declined to accept trusts with assets of less than $400,000. Other banks and trust companies will accept certain trusts under $100,000. It may be necessary to shop around to learn which banks and trust companies — if any — are interested.