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Will v. Living Trust (Part I): Living Trusts Don’t Solve Everything

A common misconception is that a living trust (a trust created during life) is a better option than a will that creates trusts after your passing.  Generally, this idea is generated by friends, relatives or legal professionals from states like California where the probate system is onerous, time consuming and, therefore, expensive.  However, as discussed in my article in the Spring edition of Strong Points, Texas and many other states (e.g Washington & New Jersey) have an abbreviated probate process that will approve a will and allow your executor to administer your estate with very limited court involvement.  Therefore, many estate planning goals can be achieved at a lower overall cost using a will that does not create trusts until after your death.

To understand why a will is often the more cost-effective option we must understand two underlying principles of living trusts.  First, it is more expense to purchase a trusts than it is to purchase a will.  Second, a trust only controls the property that is transferred out of your name and into trustee’s control.  Accordingly, a living trust requires you to incur transactional costs to transfer property out of your name (as an individual) and into the name of the trustee.

Therefore, unlike a will, a living trust no impact or control over property that is not transferred into the control of the living trust during your life.  Therefore, if a single piece of property is not transferred into the trustee’s name then your descendants may (and often will…no pun intended) have to probate your estate.  Due to the abbreviated probate options available in Texas, the cost of probating a single piece of property is often the same as probating all of your property.  Therefore, your efforts to plan ahead and the additional costs you incurred to purchase and fund a living trust may all be foiled by a single oversight when re-titling your property.

Accordingly, although living trusts have their uses in Texas (as they do in all states) they are not the one-stop estate planning tool that many are led to believe.  In my next offering we will discuss some of the more common uses for a living trust in Texas.

Royce Lanning

Phone Number: 866-912-8639

Fax Number: 281-210-1361

[email protected]

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