Most people execute a Last Will and Testament as their primary estate planning document when they create their initial estate plan. While a Will continues to remain important, you may reach a point at which a trust may become the better choice as your primary asset distribution vehicle. A better understand of what you can accomplish with both a Will and a trust is essential. At McGee Law Firm, our experienced estate planning attorney is dedicated to helping you understand how Wills and trusts work and how each may benefit your overall estate plan.
Last Will and Testament Basics
A Last Will and Testament is a legal document that allows you to make decisions relating to the disposition of your estate assets upon your death. For a Will to be valid in Texas, the Testator must have the legal capacity to create the Will, meaning you must be 18 years old, married, or serving the Armed Forces. The Testator must also have the requisite testamentary capacity, commonly referred to as being of “sound mind.” Finally, the Will must be properly executed, which typically requires the Testator to sign the Will in front of at least two witnesses over the age of 14 years old.
A Will allows you may make specific and/or general gifts to chosen beneficiaries. For example, you might leave your a specific bequest of your art collection to a museum while also making a general bequest of one-half of your remaining estate assets to your children.
If you fail to execute a Will (or trust) prior to your death you will leave behind an “intestate” estate and the intestate succession laws of the State of Texas (or the state wherein you are a resident at the time of your death) will determine what happens to your estate assets. Typically, that means that your spouse and/or children will inherit from your estate if they survive you. If you are not survived by a spouse or descendants, more distant relatives will inherit your estate. At any rate, when you die intestate you forfeit the right to decide what happens to your estate assets after you are gone.
Your Will also provides you with the ability to decide who will oversee the administration of your estate by allowing you appoint someone as your Executor. Furthermore your Will offers you the only officially recognized opportunity to nominate a Guardian for any minor children you may have in case one is needed at the time of your death.
Trust Agreement Basics
A trust is a relationship wherein property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. As the Settlor of the trust, you create the trust terms that are used to direct the administration of the trust. Over the decades, trusts have evolved to become an extremely useful and popular estate planning tool. A trust can help further a wide range of goals, including:
- Avoiding probate – given the time and cost often involved in probating an estate, probate avoidance is a common estate planning goal. Assets held in a trust, however, bypass probate, making a trust a popular alternative to a Will as a primary estate planning distribution tool.
- Protecting the inheritance of a minor child – a minor child cannot inherit directly from the estate of a parent. To protect your child’s inheritance, you may wish to create a testamentary trust which allows you to appoint someone of your choosing as the Trustee. In addition, the same trust can be used to stagger the distribution of assets instead of handing your child a large lump sum inheritance when he/she is still relatively young and financially inexperienced.
- Planning for incapacity – a revocable living trust lets you appoint yourself as the Trustee and someone you trust as the successor Trustee. Assets are then moved into the trust for you to manage as long as you are capable. If incapacity strikes at some point in time, control of the trust assets automatically shifts to your designated successor.
- Protecting assets — an irrevocable living trust is frequently used to protect assets from creditors and numerous other threats. Assets transferred into an irrevocable trust become trust property. As such, they remain out of reach of known and unknown threats.
At the McGee Law Firm we would be honored to help you create your Last Will and Testament as well as help you establish a trust as part of your comprehensive estate plan. Contact the team today by calling (817) 899-3286 or fill out our online contact form.