When you create an estate plan, you have various legal tools you can incorporate into your strategy. You may consider creating a will or various types of trusts as part of your estate plan. But which options should you choose for your Texas estate plan?
What Is a Will?
In a will, a person can direct the distribution of their estate after their death. Wills serve several functions, including:
- Naming an executor to administer the decedent’s estate
- Designating beneficiaries and determining what assets or share of the estate they will inherit
- Nominating guardians for the decedent’s minor children (if both parents have passed away)
A will goes into effect after a person’s death. As a result, a person may amend, replace, or revoke their will at any time before their death. However, Texas law imposes specific requirements for a person to create or amend a valid will, including:
- The person must be at least 18, married, or serving in the military
- The person having testamentary capacity (the ability to understand the nature of their assets, appreciate the consequences of creating a will, and identify beneficiaries)
- Putting the will in a signed writing
- Having at least two witnesses (not beneficiaries in the will) to the person’s signature, or writing and signing the will entirely in the person’s handwriting (also called a holographic will)
What Is a Trust?
A trust is a legal structure in which a trustee manages assets on behalf of beneficiaries, according to the terms of the trust document that established the trust. Although trusts come in various forms based on their purpose or objective, they fall into two broad categories: revocable and irrevocable. Revocable trusts allow the person who created the trust, called the grantor, to change or terminate the trust at any time during their life. Irrevocable trusts do not permit grantors to amend or revoke the trust.
People incorporate trusts into estate plans for various purposes, such as:
- Passing assets to beneficiaries without the time, expense, and publicity of probate
- Protecting assets from creditors or lawsuits
- Ensuring management of assets during incapacity
- Mitigating estate taxes
- Qualifying for means-tested government benefits, such as Medicaid
Key Differences Between Wills and Trusts in Texas
Although people can use wills and trusts to pass assets to beneficiaries, they have differences between them, including:
- Probate: Putting a will into effect requires probate, a court-supervised process of administering a deceased person’s estate. Conversely, trust administration does not involve court supervision.
- Effective date: Wills take effect upon a person’s death, whereas trusts usually become effective upon the grantor’s execution of the trust document and funding of the trust.
- Privacy: Probating a will means the person’s estate becomes a matter of public record, whereas trust administration can remain private.
Which Option Should You Choose?
Many people have both wills and trusts as part of their estate plan. Although a person may arrange to pass their wealth to beneficiaries via trusts, a will can serve as a critical backstop for any assets remaining in the person’s estate upon their death, as the will can appoint an executor to manage the estate and include residuary clauses to pass assets to designated beneficiaries.
You may consider having both a will and a trust if you want to avoid passing assets through probate, plan for future incapacity, or have complex finances (including property in multiple jurisdictions or sophisticated assets).
Contact Our Estate Planning Lawyers Today
Because you have numerous options for a comprehensive estate plan, you need knowledgeable legal advice to help you craft a strategy tailored to your specific circumstances and goals. Contact Guest & Gray today for a free, confidential consultation with a Texas estate planning attorney to learn more about what wills and trusts do and for experienced counsel about which legal tools you should incorporate into your estate plan.
