WILLS vs. LIVING TRUSTS IN TEXAS

By Kirk R. Wilson, J.D., LL.M.

Revocable living trusts are widely used in a number of states, including California and Florida, but are not as common in Texas. A Will, rather than a living trust, is the estate planning vehicle of choice for most Texans. However, this is changing.
The primary difference between a Will and a living trust is that a Will requires a court-supervised probate proceeding after a person’s death to administer the estate, whereas assets held in a living trust pass to the designated trust beneficiaries without court involvement.
Several reasons are commonly given for using a Will rather than a living trust in this State. A trust is more expensive to create than a Will. Assets have to be transferred into the trust after it is set up in order for the trust to work, which is not necessary for a Will. And a probate proceeding in Texas, if the executor qualifies as an Independent Executor, is much quicker and generally less expensive than in other states where living trusts are prevalent.
In many cases these reasons justify the use of a Will rather than a living trust, but not always. When a person owns real property in another state, having a living trust will avoid the necessity for two probate proceedings, one in each state, which makes a living trust more desirable than a Will.
Also, a living trust provides a significant lifetime advantage if a person becomes incapacitated. With a living trust, the trust assets will continue to be managed for the person’s benefit by the successor trustee without the necessity for a court-supervised guardianship proceeding. In contrast to a Texas probate proceeding with an Independent Executor, which involves minimal court supervision, a Texas guardianship proceeding requires extensive court supervision. This can be costly and time-consuming.
A guardianship proceeding can also be avoided with a durable financial power of attorney, but banks and other financial institutions often refuse to recognize any power of attorney other than their own. This is not a problem with a living trust that holds title to a person’s financial accounts.
Another advantage of a living trust over a Will is that once assets are transferred into the trust, they will be controlled by and eventually distributed as specified in the trust agreement. A Will, on the other hand, only controls the disposition of assets that become part of the court-supervised probate proceeding.
Many types of assets pass automatically at the owner’s death outside of the probate process, including property held in joint tenancy or pay-on-death form, life insurance, and retirement accounts. These types of assets pass to a designated beneficiary regardless of what the owner’s Will may say. So the estate plan contained in a person’s Will can easily and inadvertently be defeated by forms of title that avoid probate. This problem is minimized with a living trust where title to assets is held by the trust, or the trust is named as the designated beneficiary.
Another advantage of a living trust over a Will is privacy. With a Will and a court-supervised probate proceeding, an inventory of a decedent’s estate becomes a matter of public record. A living trust, on the other hand, is privately managed and not subject to public scrutiny.
Finally, even though a Texas probate proceeding is relatively quick, there are court costs and legal fees to be paid, and in Montgomery County a court appearance by the named Executor - which may be the surviving spouse or an adult child & is required. This is not the case with a living trust.
For these reasons, living trusts are becoming more popular in Texas, and this trend is likely to continue.

[The author is a Woodlands-based estate planning attorney at the firm of O’Donnell, Ferebee, Medley & Frazer, P.C. He is licensed to practice law in Texas and California, is a board-certified probate, estate planning and trust law specialist in California, and holds an advanced law degree (LL.M.) in taxation. He can be reached at (281) 875-8200. The firm’s website is www.ofmflaw.com.]

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