Will or Trust?
One of the most common questions we are asked at Anderson Law Firm is “do I need a Will or a Trust?”. Each person’s situation is unique but everyone should have a Will and some people should also have a Trust. Anyone who says that everyone should have a Trust is probably not an attorney or not a Texas Estate Planning Attorney, doesn’t understand Texas law, and is absolutely wrong.
What is a Will?
A Will is a document wherein the person executing the document (the testator) names one or more persons (the executor) to manage and distribute the testator’s probate estate upon the testator’s death.
A person’s probate estate includes property that is titled in a person’s name, not a trust or other entity, and which is not automatically transferred upon death by some non-probate method.
Examples of common probate property include a house deeded in a person’s name, vehicles, personal belongings including jewelry, bank accounts, stock, and brokerage accounts with no beneficiary designation.
Examples of non-probate property include trust property, life insurance or brokerage accounts with a designated beneficiary (a non-probate transfer method), and retirement accounts.
There are several critical aspects of a Will that everyone should understand:
- The Will only gives the executor control over probate property but not non-probate property.
- A Will isn’t worth the paper it is written on until the testator has died AND the Will has been probated in court by a probate judge.
- Your spouse might not inherit your property if you do not have a Will.
- In general, a Will must be probated within four years of the testator’s death but there are numerous exceptions to this rule that can be explained by a probate attorney.
- A Will must be executed following strict legal procedures in order to be valid.
- A person who is legally incapacitated (alzheimers or stroke for example) cannot execute a Will.
What is a Trust?
A Trust involves a relationship where property is held by one party for the benefit of another. The Trust is created by the grantor (a/k/a settlor, trustor, or donor) who appoints a trustee to manage the trust property for the trust’s beneficiaries. When property is put into the Trust, ownership of the property is actually transferred to the trustee.
Unlike a Will, a Trust can be created and used to manage a person’s assets while they are still alive. These types of trusts are called Living Trusts. Most living trusts are Revocable Living Trusts wherein the grantor retains total power over the trust and may amend or terminate the trust at any time. Trusts that are created upon someone’s death are called Testamentary Trusts.
Up until 2011, three common reasons for creating a Trust in Texas were:
- Ownership of land located in multiple states.
- To provide for the health, education, and maintenance of a person (including yourself) who cannot or should not be allowed to directly own or control the Trust assets. A Trust can achieve the results of a Durable Power of Attorney but allows for more complex control over the trustee than is possible over an agent on a power of attorney.
- To conceal the nature and amount of a person’s assets, especially after they pass away.
Before 2011, a person’s probate estate was public record. Trusts were used to keep family’s assets private. However, in 2011 Texas law changed and probate assets are no longer required to be public record. Trusts are no longer needed to conceal the nature and value of estate assets.
What about probate avoidance?
Texas has the absolute best, most efficient, and affordable probate system in the nation. If you have a good Will, the odds are in your favor that the probate process will be quick and uneventful.
In Texas, Trusts can actually be more costly and difficult than probating a Will. Trusts require constant maintenance. It is not uncommon for people to buy property or open bank accounts but forget to put them in their Trust. These assets are probate assets not Trust assets. Using a Trust to avoid probate requires constant oversight.
Trusts have been around for centuries and are truly amazing. Their seemingly simple structure conceals a virtually limitless adaptability. Trusts are the only viable solution for many complex legal and financial scenarios. Unfortunately, a trust can be overkill for the average Texan.
If you already have a Trust, the Anderson Law Firm can evaluate your assets to ensure they have been properly placed in your Trust.
Anderson Law Firm is highly proficient at creating, modifying, and evaluating Wills and Trusts. Give us a call. This is Texas. The usual laws do not apply.