When starting your estate plan, it is best to understand that one size never fits all. Estate plans are best when tailored to your needs, but it raises the question of which plan is the best for you and your family? The two most common types of estate plans are Will-Based Plans and Trust-Based Plans. The best one for you will depend on your goals and needs. If your goal is to keep control over your assets, then a Will-Based Plan may be the best choice. However, if your goal is to plan for incapacity or maintain privacy, then a Trust-Based Plan may be the better choice. So, what’s the difference between these two plans?
Staying in Control
Wills don’t take effect until after the person making the will (the Testator) has died. Meaning, a Testator keeps control of their assets until then (unless of course you become incapacitated, in which case a court may decide who controls your assets). And when the Testator dies, the will dictates how those assets are given to the beneficiaries.
Control works a little differently under a living trust. The Trustee of the trust is the one who manages the trust. The trust documents will set out goals and limits, but the Trustee is the one in control. Usually, upon creation of a living trust, the Trust Maker is the Trustee. However, if the Trust Maker becomes incapacitated, the Trust dictates who the successor trustee will be and usually requires that the successor trustee manage the Trust for the incapacitated Trust Maker’s benefit.
The Dreaded Probate
While “probate” has become a frightening word, it is merely the process of the court ensuring the instructions left in your will are followed, and your estate is closed out properly. While it may seem like a lot, in Texas the process is generally straight forward.
One major difference between a will plan and a trust plan is that trusts do not go through the probate process. If keeping out of court is your main goal, then a trust based plan is one way to keep from having to go through probate. But if it’s easy, why avoid probate?
One thing to remember, court proceedings are matters of public record, this includes your will. The court reviews the wills it probates, and those wills become public information, which can be read by anyone. However, trusts are one method to keep final wishes private. Unlike probate, generally only the Trustee and the Beneficiaries read the trust documents.
The Plan You Hope You Never Need
While never fun to imagine, planning for incapacity is important. Remember, a will only takes effect after you have passed away. This means a will, by itself, cannot be used to plan for incapacity. But other documents in a will-based plan, like the Powers of Attorney documents or a Pre-Designation of Guardianship, can do some of the incapacity planning.
Unlike a will, trusts can be set up for many reasons, and incapacity planning is one of them. This means that instructions for your care and property management can be set up in the trust itself and will go into effect if you ever become incapacitated. This can help avoid the situation where a court has to appoint someone to manage your assets for you.
Knowing Which Plan is Best
Each plan has its own benefits and obstacles, and each can be crafted to help meet your needs. But knowing which one is best will depend on your goals and concerns. Plus, as those goals and concerns change over time, your plan can change to best suit you. It’s important to re-evaluate your plan every few years to make sure it’s still the best choice for you. If you need help to craft a plan, or need to review an old one, we can help you determine the best choice for you.
Give Us a Call
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.