Trusts vs. Wills – What’s Right for You?

There are a wide variety of estate planning tools that are available in an estate plan. Each have their own purpose and function, but all are designed to work together to provide the maximum amount of protection to your estate. Wills and trusts are some of the most common estate planning documents. But what is the difference between them, and how do you choose what’s right for your needs?

What is a Will?

A will is a legal document that states your wishes and how you want your estate to be handled. There are many different types of wills from which you can choose.

What a will can do:

• Name an executor to distribute your estate
• Decide beneficiaries for your assets
• Designate guardians to care for children
• Express medical care preferences in the event of incapacitation.

If you have young children and assets to your name, it is always a good idea to have a well-written will. Without a valid will in place, the courts will have to decide how your assets are distributed, appoint guardians for your children, and other instructions for your estate.

What is a Trust?

A trust is an arrangement that allows a trustee (designated by you) to hold and manage the funds in the trust. Trusts are very flexible and can be designed with the terms that you want.

What a trust can do:

• Plan for incapacity
• Designate what happens to your property and assets
• Help minimize estate taxes
• Protect your estate from becoming public record

Should You Have Both a Will & a Trust?

Just because you have one document doesn’t mean that you can leave out the other. Most people can benefit from having both a Will and a Trust because it may be able to provide more protections for all aspects of their estate and legacy.

Things to consider when choosing whether to have a will, trust, or both:

• Probate – Probate is required when there is property in a Will that is solely in the name of the deceased. Many people try to avoid probate because it is costly and time-consuming.
• Privacy – If you want to keep your estate private, you can do so with a trust. Wills are required to undergo the probate process, which means your estate will become public record.
• Cost – In general, a living trust may cost more upfront to set up than a will because it is more complex to prepare.
• Backup – Having a will in addition to a trust can serve as a backup in the event that any newly acquired property was not transferred to your trust.

Discuss How to Protect Your Future

Choosing between a will, trust, or both essentially boils down to what your family’s needs are and your unique situation. At Adams Law Firm, our team of Katy probate and estate planning attorneys can assess your family’s goals and help you find an estate plan that meets your needs. We provide customized planning and personal service throughout each client’s case. Schedule your initial consultation to learn more about the various estate planning resources available to you.

As you enter your gray years or after you have accrued a noticeable sum of money and assets, you should think about creating a will as part of your estate plan. This legal tool will be invaluable to your loved ones as they figure out who gets what inheritances and how specific assets should be managed after you pass away. However, sometimes the opportunity to create a will comes and goes before one is actually drafted and signed. What happens then?

Texas Intestate Succession Laws

When a person passes away without create a will, it is known as intestate succession. Any asset or property that would have been included in a typical will can be subjected to Texas’s intestate succession laws. Anything that would not be covered in a will are not.

Some assets that probably won’t be affected by intestate succession are:

• Property put into a trust
• Finances gathered from life insurance policies
• 401(k), IRA, and retirement funds
• Bank accounts labeled “payable-on-death”
• Real property held in joint tenancy

As far as everything else, the state will step in and distribute property and assets based on its own laws. This is clearly not an ideal situation as there is nothing personal about it. In many intestate succession proceedings, people are disgruntled to find that they did not inherit something they were certain would be deemed for them had a will been created.

Without a will, the following will happen to assets subject to state distribution law:

• Child inherits everything: Decedent passes away with children but no living spouse, parent, or sibling.
• Spouse inherits everything: Decedent passes away with spouse but no living child, parent, or sibling.
• Parent inherits everything: Decedent passes away with parent but no child, spouse, or sibling.
• Sibling inherits everything: Decedent passes away with sibling but no child, spouse, or parent.

Situations get more complicated as more surviving family members are added. If a decedent passes away with a spouse and children, for example, the spouse will gain all of the community property and one-third of the separate property, and all else will go to the children. Another example is passing away with a spouse and parents, in which the spouse inherits all community property, all separate property, and half of separate real estate, and parents get what is left.

As it can be seen, intestate succession benefits no one. Even if things work out in the end, it was merely by luck of the draw. Better to start planning now and avoid complications that will frustrate your loved ones after you are gone.

Contact Adams Law Firm to speak with a Katy probate and estate planning lawyer today.