Friday, September 19, 2014
Monday, December 2, 2013
Which is better a will or a living trust
Often, a question that I receive is, “Instead of a will, would it be better if I had a living trust?” Generally, the answer is, “No”.
Some attorneys have sold this as an estate-planning tool that solves all problems, and it really doesn’t. A trust can be challenged just like a will. Therefore, it doesn’t insulate the estate from potential litigation, and you can have the same popular fights over a trust as you can with a will.
There are legitimate reasons to enter into trust. If you have assets that would be subject to estate tax, you need to make sure your estate planning documents include appropriate trust to minimize the estate taxes. That’s one reason people need a trust. For everybody else, which is most of us that do not have estate tax planning concerns, the only reason you’d want a living trust as opposed to a will is if you did not want your heirs to have to report to the court an inventory. In other words, it was of great concern to you that your assets will become public knowledge upon your death, because you will have to file an inventory with a will that’s probated. You don’t have to inventory the assets of a trust, which keeps things private. For a few people, that is a paramount concern, and that’s a good solution.
The other is, although Texas has a great streamlined probate procedure, not all states do. Texas probate does not transfer property, real property – land and real estate – in other states, which requires what we call an “ancillary probate” in another state. Usually, we can avoid that by having a trust and transferring that vacation home or that second property or that condo that’s in another state into a trust so it passes outside of probate.
Other than that, living trusts are not a good, all-purpose solution. They usually cost more than a will, they have ongoing administration costs, you may have to file an annual tax return for them, and so they’re not a one-size-fits-all tool.
written by Attorney David M. Pyke, a Dallas probate lawyer specializing in probate law, wills and trusts.
Some attorneys have sold this as an estate-planning tool that solves all problems, and it really doesn’t. A trust can be challenged just like a will. Therefore, it doesn’t insulate the estate from potential litigation, and you can have the same popular fights over a trust as you can with a will.
There are legitimate reasons to enter into trust. If you have assets that would be subject to estate tax, you need to make sure your estate planning documents include appropriate trust to minimize the estate taxes. That’s one reason people need a trust. For everybody else, which is most of us that do not have estate tax planning concerns, the only reason you’d want a living trust as opposed to a will is if you did not want your heirs to have to report to the court an inventory. In other words, it was of great concern to you that your assets will become public knowledge upon your death, because you will have to file an inventory with a will that’s probated. You don’t have to inventory the assets of a trust, which keeps things private. For a few people, that is a paramount concern, and that’s a good solution.
The other is, although Texas has a great streamlined probate procedure, not all states do. Texas probate does not transfer property, real property – land and real estate – in other states, which requires what we call an “ancillary probate” in another state. Usually, we can avoid that by having a trust and transferring that vacation home or that second property or that condo that’s in another state into a trust so it passes outside of probate.
Other than that, living trusts are not a good, all-purpose solution. They usually cost more than a will, they have ongoing administration costs, you may have to file an annual tax return for them, and so they’re not a one-size-fits-all tool.
written by Attorney David M. Pyke, a Dallas probate lawyer specializing in probate law, wills and trusts.
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