WILLS VS. TRUSTS: WHICH ONE IS RIGHT FOR YOU?
A will, or last will and testament, is a document that names your beneficiaries after you pass and it designates which of your assets each will receive. Estate planning is essential for anyone who cares about how their passing impacts their spouse, children, or beneficiaries.
When people start the process of estate planning – leaving instructions in place for when you’re gone – the concept of the living trust also usually comes up. How does a living trust differ from a will?
A living trust, unlike a will, does not have to go through probate court supervision to be administered, and in contrast to a will, it does not become a public record. It is private.
Therefore, not everyone will need a living trust, especially those with few assets and no large debts.
If you are embarking on estate planning in Southlake, Texas, contact the Redding Law Office. Attorney Chelsea Redding will help explain the options to you, assess your situation, and advise you whether you’re better off with a living trust, a will, or both. The Redding Law Office serves clients in Tarrant County, Denton County, Flower Mound, Keller, and Colleyville, Texas.
Why Estate Planning Is Important
If you die without a will or trust in place, it is considered dying intestate in legal terms. Your estate – basically, everything you own (except for joint assets) – will have to go through probate, and there are no instructions on how to distribute your assets to beneficiaries, the court will decide. For this, they will use the state laws of intestacy.
Also, if you have minor children, the court will be forced to name a guardian for them since you did not do so in your will. Naming a guardian cannot be done in a trust, so that’s one reason many people need both a will and a trust.
To avoid the court deciding everything, both a will and a living trust can be used to name beneficiaries and assign assets to them, the difference being that a will must go through probate court proceedings, which can be lengthy and expensive.
Everyone pretty much understands the basic purpose of a will – to name who gets what upon your passing. Beyond that, there are other requirements of a proper will. For one, you must name a personal representative, who will administer your estate when you’re gone as the executor in probate proceedings.
You can also use your will to name a guardian, or guardians, for your minor children, pay debts and taxes, and; even forgive debts owed to you.
A will cannot designate someone to manage your estate should you become incapacitated. For this, you will need to award a durable power of attorney, who could be the same person – family member, friend, or associate – that you named as your personal representative.
Another form of will is called the “pour-over” will. The pour-over will executes along with your living trust so that assets you forget to transfer to the trust will transfer when you’re gone. However, like any will, a pour-over will has to go through probate proceedings.
Again, the major disadvantage of a will is the necessity of probate court supervision, along with the fact that it becomes a public document.
Living Trusts Explained
Like a will, a living trust designates beneficiaries and assigns assets to them, but it requires a few more steps to be implemented. Once you create the trust as the grantor or settlor, you become the trustee of your estate, so you continue managing all of your affairs on your own. However, you must transfer all your assets into the trust, which sometimes requires changing the deed or title of your real property to reflect trust ownership.
In a living trust, you also name a successor trustee, who will administer your estate and its distribution of assets when you’re gone. A successor trustee is also empowered to take over management of your trust should you become incapacitated. A power of attorney is generally not needed.
As mentioned earlier, however, a trust cannot name someone to care for your minor children when you’re gone. It also cannot designate how taxes or debts are paid.
While the main advantages of a living trust over a will are avoiding probate and keeping everything private, there are potential downsides.
One disadvantage is that assets you forget to assign to the trust will still have to go through probate, even if you establish a pour-over will. Another is that you have to take the added steps of transferring your assets – from homes to cars to bank accounts and more – into the trust. The administration of a living trust is more initially time-consuming than that of a will, which is not administered until you are gone.
Which One Is Right for You?
Each person’s situation is different, and for some, a simple will is all that is needed, especially if the estate is small, debts are low, and the family situation is stable. For others, a living trust may be a better option. You need to consult with an experienced estate planning attorney to discuss your personal situation and weigh your options.
While a will, moreover, is a fairly straightforward document, a living trust can be more complicated to create and administer while you’re still alive. A will doesn’t take effect until after you’re gone, and then your personal representative has to do all the administrative work.
Hiring an Estate Planning Attorney to Help
If you’re in Southlake, Texas, or in the nearby communities of Flower Mound, Keller, or Colleyville, or anywhere in Tarrant County or Denton County, contact the Redding Law Office to begin your estate planning process. If you already have a will or trust in place, Attorney Chelsea Redding can review and help update them for you. Life situations change, so your estate planning instruments need periodic review and possible revision.
The Redding Law Office is a small, boutique law firm dedicated to estate planning. Attorney Chelsea Redding prides herself on personalized attention and service to each client.