When it comes to preparing for the future, there are many opinions relative to which estate planning strategy is the best. The fact is that the answer is different for every person and for every married couple. Elliott Burdette explains the differences between, as well as the pros and cons, of Wills and Living Trusts.
Prospective Client: My husband and I are trying to get our papers in order so that we can get some Wills prepared. Someone told us we should do a Living Trust instead – what’s the difference?
A Will is a document that says who gets what at the time you die. It is only effective after death and then it is admitted to a probate court and then what is called “accepted to probate.” It is then given legal validity and its terms are honored. With a Will, you have to file an inventory with the Court in which you list your financial assets and you disclose your probate assets to the Court. With a Trust, it’s a different legal document governed by contract law. A Trust can have effect at the time you create it. A Trust can say who gets what at the time you die, so it becomes a substitute for a Will. But a Trust also says what happens if I become incapacitated at some future time in my life. We name a successor trustee to manage our affairs, and help avoid a costly guardianship. Some people say you can just get a Power of Attorney. But, in some Powers of Attorney where they’re older than 3 to 5 years, not everybody will honor them. But if assets are transferred into a Trust and there’s a successor trustee named, no one would have to have a guardianship of the estate. So you avoid that, and at the time of death, even though in Texas the probate system is streamlined, and simpler than most states, you still have to do something. With a Trust you don’t have to do that at all. Some people also like a Trust because you don’t have to disclose your assets or finances to the public, and become part of public records, like you do with a Will. With a Trust, it’s a bigger job up front to fund the trust, and more costly. With a Will, less work needs to be done before the time of death, and it’s cheaper. So when people ask me what is better, I always say my rule of thumb is it depends on your circumstances, and the older someone is, particularly when people are 65 and older, when risk of incapacity is greater, I think it is makes more sense to have a Trust and have it fully funded and have the whole family involved in the process so they know what will happen if there is incapacity and they can avoid the risk of guardianship or have to deal with probate later on.
Prospective Client: If you’re younger, like we are, early 40’s, would a Will be something you’d recommend?
Burdette: Yes, it becomes a judgment call about a Will or a Trust at that time. Some people say, “Well, if someone becomes incapacitated you could just do a guardianship.” But, it’s still a nightmare to have to go through a guardianship. Wills cost less and you may want to choose it for that. So it’s a subjective call and there’s no clear right or wrong, considering how streamlined Texas probate is.