Historically, the most prevalent method of disposing of someone’s assets at death was the use of a Traditional Will. Regardless of whether the Will was very simple or it included complex tax planning provisions, the use of the Will as the mechanism for laying out the division and distribution of assets at death has always been widely used.
However, in recent years, with the increasing difficulties related to probate in some states, the use of Revocable Living Trusts has increased as an alternative method to laying out someone’s desires for the division of their estate upon death.
Although both methods of estate planning have benefits, estate planning professionals in Texas differ as to which method is most appropriate.
Traditional Estate Planning
Under traditional estate planning, the key document used to control the disposition of a person’s estate upon death is the Will.
As detailed in our Wills section of this website, the Will can include a variety of provisions. It can be simple, or it can include complex tax provisions. It can specify:
- Division of Assets
- Naming of a Trustee and/or
- Guardians for Minor Children with
- Spendthrift Provisions
- Naming of Executors
- Paying of debts at death
Although it does not become effective until the Testator has died, the Will generally addresses all of the issues related to the division of a person’s estate at death.
Because the probate process in Texas is fairly simple, the probate of a well-drafted Will can generally be completed efficiently and in a cost-effective manner.
Revocable Living Trust Planning
Under a Revocable Trust Planning scenario, the key document used to control the disposition of a person’s estate upon death is the Revocable Living Trust.
Generally, a Revocable Trust has been described in much greater detail elsewhere, but generally, the Trust is created for the purpose of avoiding probate upon death and therefore becomes effective during the lifetime of the Grantor of the Trust.
The goal behind the Trust is to transfer all of the assets to the Trust during the Grantor’s lifetime and then, upon his death, all of his assets are divided and distributed pursuant to the terms of the Trust agreement.
Because all of the assets have been supposedly been placed in the Trust, no need exists at the time of death to go through the probate process.
However, it is important to understand that very few of these trusts are ever funded fully with all of the Grantor’s assets. Accordingly, it becomes necessary to probate the Grantor’s Will to dispose of the remaining assets that were not placed in the Trust. When this happens, the original purpose for creating the Trust - to avoid probate - was completely frustrated.
While some Texas estate planning attorneys will tout the fact that a Revocable Trust can save estate taxes, any and all tax-saving alternatives that can be employed in a Revocable Trust can also be used in a traditional Will.
Will v. Revocable Trust Compared
A Will does not become effective until someone has died and is therefore fairly easy to amend or modify. The Revocable Trust on the other hand becomes effective as soon as it is created, and it is therefore more difficult to amend.
Generally, a well-drafted Will can be drafted at a much lower cost than a Revocable Trust. Likewise, because a Revocable Trust generally ends up omitting certain assets, it is necessary to have a Will in addition to the Trust. As a result, it becomes necessary to have a simple Will in addition to the Trust, which increases the cost of the process.
It is sometimes difficult to understand the process of owning all of your assets out of Trust during your lifetime. Conversely, under a traditional estate planning scenario, you retain all of your assets as you normally would. Only after someone has died does title to his assets transfer to someone else.
In Texas, the use of the traditional method estate planning is generally preferred over a revocable trust plan. The traditional method is more cost-effective, in spite of the costs of going through probate. Likewise, most people in Texas understand the concepts related to a Will more completely than they do revocable living trusts. Regardless, the decisions related to the best method for a particular client to use should be considered carefully. The attorneys at Ford+Bergner LLP advise clients on these issues frequently and would be glad to assist you with this decision.