Wills vs. Trusts: Which One Is Right for You?
June 13, 2022
You have started thinking about the need to create an estate plan. If you have done any research at all, you have probably found there are many types of documents under the estate planning umbrella—including wills and trusts. The two are similar but also dissimilar because one does things the other cannot, and vice versa.
Instead of attempting to decide on your own whether a will, trust, or both is the best option for you and your family, let The Law Office of Mario Flores, PLLC, help you explore the differences between wills and trusts. I serve estate planning clients in Austin, San Marcos, Georgetown, Round Rock, and the rest of Texas.
Why Is Having an Estate Plan Important?
The most important reason for having an estate plan is to document what you want to happen to your estate when you die or can no longer manage it for yourself. If you fail to make these decisions now, while you can, the Texas courts and the laws of intestate succession will make them for you.
Taking the time to work with an estate planning attorney to discuss your options to develop your estate plan and keep it updated as needed puts you in charge. Not only will your plan provide you with peace of mind, but it will also give your heirs and beneficiaries the same. Typically, a well-rounded estate plan includes wills, trusts, or both.
What is a Will?
A will provides your final instructions regarding payment of debts and distribution of your estate when you die. The will is filed with the probate court upon your death and administered by the executor you named in the will to see that your instructions are carried out.
Two types of wills are valid in Texas. A formal will is typewritten, usually prepared by an attorney. You sign the will before two witnesses over the age of 14 who do not have an interest in your estate.
A holographic will is a handwritten, unwitnessed will. It must be written entirely in the hand of the maker, and certain language must appear within it. That would include such language as a title, opening line, and revoking prior wills. Although holographic wills do not require witnesses or an attorney, they are easily challenged, largely due to their inherent lack of formality. Instructions may be contradictory or open to interpretation. If it was not prepared by an attorney or witnessed, there is no one to testify to your intent when creating the will.
One of the benefits of a will is that if you have a minor child at the time of your death, you can name a guardian in a will. You cannot do so in a trust. Moreover, wills are usually less complicated than trusts and take less time to create.
One of the drawbacks of a will is that it must be filed with the probate court which makes its content, heirs, and beneficiaries a matter of public record. In addition, wills are more easily challenged by disgruntled parties you exclude from your estate, and creditors may file claims against the assets of the estate.
What is a Trust?
A trust establishes a legal entity to manage your assets from the moment it goes into effect which, in most cases, is while you are alive. As the settlor of the trust, you transfer assets from your individual ownership, such as your home, land, bank accounts, and stocks, into the trust.
The trustee you name manages the trust. Most of the time, that will be you while you are alive. Upon death, incapacitation, or if you simply are no longer willing to serve as trustee, the successor trustee, whom you also name when you create the trust, assumes the role.
The three major types of trusts are revocable, irrevocable, and testamentary.
A revocable trust is a living trust that can be revised from the time you establish it until you die. You can remove assets from the trust and change the beneficiaries. Because you can revise it, a revocable trust does not have some of the same tax advantages and creditor protections as an irrevocable trust.
An irrevocable trust is also a kind of living trust, which goes into effect while you are alive. Assets, terms, and beneficiaries of an irrevocable trust cannot be changed once you create it.
A testamentary trust does not go into effect until you die because it is established in your will. As with a revocable trust, you can make changes to it until you die, at which time the trust is irrevocable. These are often used to preserve assets in trusts for minor children and grandchildren.
One of the benefits of living trusts is that they are not subject to probate. Testamentary trusts are subject to probate because they are part and parcel of your will. Because living trusts are not probated, the terms, assets, and beneficiaries remain private. These trusts also protect assets from creditor claims against your estate because you did not own the assets. Rather, the trust did. Additionally, because living trusts avoid probate, beneficiaries can benefit from them sooner.
How Do I Decide Which One Is Right for Me?
Among the major considerations in deciding whether to create a will or trust are the types of assets you own, the tax benefits you want to achieve while you are alive, and the creditor protections you receive once you die.
Many people require both a trust and a will. For example, someone with a minor child may need a will in order to name a guardian.
The best way to decide whether a will, trust, or both will best serve your wishes is to discuss your options with an experienced estate planning attorney. Your attorney will walk you through all options and provide the information you need to make these important decisions.
Skilled Legal Guidance
It’s never too early to build your estate plan, but it can be too late. At The Law Office of Mario Flores, PLLC, I provide clients in and around Austin, Texas, with skilled legal guidance for wills, trusts, and every other type of estate planning document. I take the time to thoroughly explore your options so choosing between creating a will or trust is an easy one. If you are ready to begin your estate plan, call my office to schedule a consultation.