As an estate planning attorney here in Texas, my clients often wonder if they need a trust rather than will. Many clients put off the process altogether and only take action when something major happens in their lives. Steve had just inherited his mother’s estate including a home in California. Suddenly he has many more assets than he even anticipated he would inherit and was thinking about his own heirs when he called me.
“Chris, as sad as it was to lose my mom, she was suffering, and is glad to be reunited with dad up there in heaven,” he began. “Between you and me, I feel more relieved than anything else. I’m most relieved that I finally got through the probate process in two separate states.”
“Yes, Steve, probate can make you wait a long time to get your inheritance, ” I told him. “Even if it’s not too long, it’s just bad timing when you really need to be processing the death of your loved one on an emotional level, not trying to get their stuff.”
“But Chris, it’s got me thinking, I still haven’t done my will. Maybe it’s time,” Steve told me.
“I think so Steve, but I always think so. What are you, in your mid-fifties or so? It really is time to set up your estate plan for your family.”
“I’m ready now Chris. I’ll probably have to include my parents’ house in California. I think we’re going to keep it. The value will probably just keep going up. Maybe we’ll rent it out,” he said. “But man, that probate was a drag in California. I needed a lawyer out there. I never even met him. Nobody should have to deal with that. Isn’t there some legal paperwork we can set up so when I die, my family doesn’t have to go through probate in California? Or even here at home too.”
“Steve, are you wondering if you should set up a trust instead of a will?” I asked him. “Please let me go over some options for you”
Estate planning is something many of us like Steve put off and try to avoid, but it is necessary. It often leads us to consider tough questions, like “who needs a trust instead of a will” to protect their loved ones? A will is a familiar and seemingly simple option. But, is it always the best choice? This leads many folks to consider if a trust is a better route for them. Let’s take a closer look at these tools and discover who truly needs a trust instead of a will in Texas.
Who Needs a Trust Instead of a Will in Texas?
A will dictates the distribution of your belongings after your death. However, it must go through a process that can become lengthy and expensive called probate. This process can expose your estate to public record and slow down the distribution of your assets to your heirs and family members.
Here in Texas, the probate process, governed by the Texas Estates Code, has gotten more streamlined over the years. Even with these improvements, many Texans find that a living trust still offers some pretty helpful advantages over a will.
Benefits of a Revocable Living Trust
A revocable living trust can become a strong alternative for individuals in Texas seeking a smoother and more controlled way to pass their assets to the next generation. Let’s break down a few key benefits:
1. Probate Avoidance
This is the big one. Setting up a revocable living trust can help your loved ones sidestep the sometimes time-consuming and costly probate process. This works because assets in a living trust are already designated for specific beneficiaries, there’s no need for a court to determine who gets what.
2. Maintaining Your Privacy
While the probate process itself can become public, transferring assets through a revocable living trust cannot. Thus it assures you privacy in your estate matters. Think of it as an added layer of security that ensures your financial affairs are kept just that—your affairs.
3. Handling Things in Case You Become Incapacitated
What if something unexpected happens that leaves you unable to manage your affairs? If you have a revocable living trust set up, a successor trustee—someone you’ve appointed—steps in and handles everything. You decide in advance how this is done, keeping the control right where you want it to be, without court intervention.
4. Protecting Your Loved Ones with Unique Needs
Do you have a beneficiary with unique needs? An estate planner can design the revocable trust to protect their long-term care and well-being, removing any worries you may have. This extra care can give you some well-needed peace of mind, especially as you grow older.
Common Scenarios Where a Trust Makes Sense
Deciding who needs a trust instead of a will isn’t always clear-cut. However, here are some common circumstances in Texas where having a trust is definitely the way to go:
- Blended Families: Avoid potential issues when children from different marriages come into the picture.
- Unmarried Couples: Protect your assets and your partner’s interest.
- Protecting Children From Themselves: Worried about their money-management skills? A trust dictates how you leave money to your children, letting you distribute assets gradually, at predetermined ages.
- Having Property in More Than One State: If you own properties beyond Texas, a trust is a real timesaver for probate issues that can arise in different jurisdictions. If your complex estate reaches beyond Texas, then a trust is truly your best option for efficient and reliable estate planning benefits.
- Significant Mineral Rights: Do you hold substantial mineral rights? An estate planning attorney can create a revocable trust that manages this tricky part of your estate more easily.
- Having a complex estate involving businesses, investments, real estate, or substantial assets.
- Desire for Increased Control and Privacy.
Even though revocable trusts may offer flexibility and avoidance of probate, revocable trusts remain subject to estate taxes. Federal estate tax is levied on estates surpassing a predetermined exemption, which stands at $12.92 million as of 2023. These complexities make seeking the help of experienced estate planning attorneys in Texas critical when creating an estate plan that best suits your specific requirements. If you think your assets could fall under these taxable thresholds, it might be worth looking at incorporating some tax-savvy estate planning strategies with a professional. Estate planning attorneys are well-versed in helping manage estate taxes.
Now, what if state inheritance taxes come into the equation? Not all states have them, but some do, and the rates and exemptions are generally lower than the federal levels. If you have property in a state with an estate tax, trusts can help minimize those state-specific taxes, when assets exceed state thresholds.
Comparing a Will and a Revocable Living Trust
Both wills and living trusts help dictate asset distribution after your death. However, each one can offer their own valuable tools, benefits, and implications depending on your situation and desires. When comparing a will with a trust, think of the different levels of control each one offers. Ask how they hold up when we think about privacy concerns? Also consider the asset management options in case of incapacity during the trust creator’s lifetime.
How a Revocable Living Trust Protects Assets in Texas
In Texas, creating a revocable living trust provides several important layers of protection for your trust assets:
- Protection from Creditors: Because assets are transferred into the ownership of the trust, a revocable trust offers numerous safeguards that limit exposure to creditor claims. You’ll likely have peace of mind knowing your estate’s core components have a form of defense in unexpected financial circumstances.
- Shielding Assets from Contested Wills: Trusts tend to be much harder to contest. Think of it this way: You’ve explicitly stated your wishes, reducing the room for family disputes over asset distribution and keeping things calm when tensions run high. Less drama means more time for grieving and a lot less lawyer fees.
- Maintaining Family Harmony: Especially in situations like second marriages or blended families, using a trust can help sidestep many common sources of friction, keeping those bonds intact as everyone transitions through an emotionally tough period. Trust-based plans offer clarity that may contribute to greater unity among those you love. A lawyer can tell you all about it.
Choosing an Estate Planning Tool in Texas
So, who needs a trust instead of a will in Texas? A Texas resident with substantial mineral rights could benefit greatly from a trust. These assets can be complex, particularly when thinking about fair and effective distribution upon your death. This highlights how an estate planning attorney can be an incredible resource, assisting you in determining whether your assets necessitate the level of protection and organization a revocable living trust affords.
A simple will is easier and faster to create, often making it the better option. Many people like how affordable it is to create. But a Texas resident who wants privacy and faster asset distribution to their heirs might want to create a living trust. Remember, estate planning attorneys in Texas specialize in this field and can work with you to craft the estate plan that works best for you.
Factors To Consider Before Hiring An Estate Planning Lawyer
Do I need a lawyer to do my estate planning process? An estate planning attorney is not just an advisor but a skilled strategist who tailors your estate plan to suit your circumstances. So before you make that call, consider some essential factors to ensure a seamless transition for your estate:
- Estate Value and Asset Composition.
- Tax Optimization Strategies.
- Blended Families or Multiple Beneficiaries.
- Asset Protection Concerns.
- State-Specific Requirements.
These are some factors that will determine who needs a trust instead of a will. Whether a will or a trust ultimately fits best is a very personal question. Every individual has specific desires for asset distribution, making each situation a personal decision. Your personal feelings on probate and maintaining privacy after your death will further inform your decision.
Reasons To Not Use a Trust
While useful in many situations, trusts don’t work for everyone or for all asset types. It’s important to consider potential drawbacks before using one. Here are some situations where a will might be more suitable for your needs:
Cost
Setting up a living trust is often more complex than creating a will and usually requires professional help. This makes setup costs more expensive. In Texas, a simple will generally only requires that it be properly signed and witnessed by two disinterested individuals over the age of 14, while a trust typically requires legal and financial guidance.
Ongoing Administration
Because your assets must be titled in the name of the trust, transferring assets like real estate, vehicles, bank, and investment accounts, involves more steps than simply listing them in a will. With real estate, for instance, you’ll need to prepare and record a new deed naming the trust as the property’s owner.
Similarly, with financial accounts, you’ll need to retitle them accordingly. While manageable, this process can seem burdensome for some people.
Some Assets Don’t Belong in a Trust
Certain assets are not suitable for a living trust. Retirement accounts, such as IRAs and 401ks, already include beneficiary designations. Placing these assets in a trust could incur undesirable tax consequences or even violate IRS rules.
Transferring ownership of life insurance policies to a trust is generally not recommended either. Doing so could make the proceeds of the policy part of your taxable estate. It is essential to consult with a qualified estate planning attorney to determine which estate planning tools are most appropriate for your assets and unique circumstances.
FAQs about who needs a trust instead of a will
Why use a trust instead of a will?
If privacy and faster distribution of assets to heirs after your passing is what you want, then a trust might be better for you. They sidestep probate, a sometimes time-consuming court proceeding. Trusts provide greater control, are more private, and less prone to legal disputes. They are particularly valuable for safeguarding your estate in case of unexpected events and shielding beneficiaries with unique needs.
What are reasons to not have a trust?
Although trusts provide several advantages, the cost and maintenance might be too much for you. They generally cost more than wills. Trusts can also become cumbersome to manage, potentially outweighing their benefits for smaller or less complicated estates. Make sure you talk to your financial advisor before hiring an attorney.
What is the major disadvantage of a trust?
Some kinds of trusts are irrevocable. This means you lose the right to make changes or revoke the trust after it’s finalized, requiring extra planning and caution from the outset. This makes it really important to weigh the pros and cons before moving forward. Irrevocability can make trusts far less flexible compared to traditional wills.
Why would a person want to set up a trust?
A person might consider setting up a trust if they want to minimize taxes or keep the terms of asset distribution more private. Trusts ensure the safety of assets, particularly for minor beneficiaries. You also don’t have to go through the sometimes arduous probate process. A trust’s structured distribution of assets for minor children is very appealing for some families. Trusts also offer some asset protection from creditors.
Conclusion
Deciding whether someone needs a trust instead of a will in Texas ultimately comes down to what they hope to achieve with their estate plan. Both options, wills and trusts, are essential instruments to guide asset distribution, but their efficacy hinges on the specific goals of each individual. Who needs a trust instead of a will? This question needs a deep look at your assets, future aspirations, and the intricacies of probate processes. Talk to an estate planning attorney to figure out the best approach for you and those you love.
What’s Best for Steve?
“Chris, I’m no rich guy, I never thought I’d be the kind of person who would be thinking about a trust,” Steve said to me after learning about how a trust could help him.
“Steve, trusts are not only for rich guys. They can be very practical for anybody with assets they’d like to pass along,” I said. “And for you, well you have a couple of reasons why a trust could work for you.”
“You mean because I hate probate?” he asked.
“Yes, but also because you have out of state property,” I told him. “Steve, setting up a trust will cost you some bucks up front, and some time and effort. But in the long run, it’ll be best for your family. And it comes with some just in case benefits too.”
“Like in case I get dementia like my dad did. I think that’s what killed my mom, all that care taking and trying to manage his affairs,” Steve said.
“Steve, I’m not saying you might end up like your dad, but yes, if you are incapacitated, we can set up the trust so your family will have it easier than your mom did.”
“You know Chris, I think this trust thing is best for me. And now that I’m feeling a little flush with that inheritance coming in, it’s the perfect time to make an investment for my family’s best interest. California probate won’t be seeing us again.”
“Steve, I trust you are making the best decision for your family by setting up a trust. Let’s keep the momentum going and get started next week,” I said. “Can you come to my office on Tuesday?”
Steve and his wife were well prepared with a list of all of their assets when they arrived at my office on Tuesday. They spent the weekend discussing who they would want to get what and when. I was able to help them decide what kind of trust would be best for them, and by Friday, their revocable living trust was taking shape.
Schedule a Consultation with our Dallas Firm to See if You Need a Trust Instead of a Will
Thinking about whether you need a trust instead of a will can be stressful and challenging, but you do not have to face it alone. Our team of experienced Dallas family attorneys is ready to provide you with the guidance, support, and legal advocacy you need during these challenging times.
Whether you are trying to determine if you need a trust instead of a will, or any other estate planning matters, we are here to help you every step of the way. We welcome you to schedule a consultation to discuss your situation and estate planning objectives. We can answer your legal questions and discuss how we can help you move forward. Call our law office at (888) 584-9614 or contact us online to schedule your consultation.
