Trust or Will?
Living trusts are a way to leave property to your family after death without needing the probate process. Probate is the court process of evaluating a will, determining heirs, paying the decedent’s creditors, and distributing assets of the estate. Proponents of living trusts tout the savings of not having to go through probate.
Despite the benefits of living trusts, there are drawbacks. Setting up a living trust takes longer to setup, involves more upkeep and maintenance, and is more difficult to change, compared to a last will and testament. Even if you have a living trust, you still should create a last will and testament as a back-up or you may need one as a pour over will if your trust isn’t fully funded.
When are Wills Better?
For most people in Texas, there are ways to avoid most of the cost of probate. Most property can be transferred from a family’s estate to family members without the need of probate.
For example, married couples can agree in writing that community property will go to the surviving spouse when one person dies. This is called a right of survivorship. Joint tenancy property or real estate can also be passed with a right of survivorship. Bank accounts can be made payable-on-death to a spouse. Life insurance policies and retirement accounts can include beneficiaries.
For most people making these changes would account for most if not all their assets and prevent the need for costly probate. If you are still young (under 55) and relatively healthy, then a will may be a better choice than a trust because the cost of maintaining the trust for many years can be expensive and will quickly outweigh the savings of not having to probate a will.
When are Living Trusts Better?
As a rule, the wealthier you are, the more you can potentially save by avoiding probate. If you have significant assets later in life, and will likely not acquire additional property, then a trust may be a better choice. If you own a business that might be harmed by the probate process, then a trust may make sense.
The Bottom Line About Trusts and Wills Most people are better off executing a will and then making sure their assets are setup in a way that allows them to pass to their spouse or family member without needing probate, such as through a right of survivorship agreement or designating beneficiaries. This will reduce the amount of work needed to be performed in the probate process and keep the costs down.