Wills & Trusts in Texas: They Are Not The Same

We’ve all heard the phrase “wills and trusts” when people talk about estate planning, and many either don’t know the differences between the two, or believe that they are one and the same thing.  So let me help you understand the difference between a Will and a Trust.

What is a Will?

A Will is more than just fancy paper with the words “Last Will and Testament” scrawled across the top of it.  A Will is a legal document through which you can reach out from the grave and dictate what you want done with your assets, debts, real estate, businesses, children etc.

The first part of a Will is the naming of an executor.  This is the person whom you want to implement the instructions contained in your will.  Usually this is a spouse, adult child, relative or trusted friend.

The second part of a Will is the disposition of your estate.  Simply put, what to do you want done with your stuff. Do you want it all to go to your spouse?  Your kids? Your kids but not until they reach a certain age? The church or other charitable organization?  Or do you have something else you want done with your stuff? Your Will is your opportunity to do what you want, with your stuff, after you have died.

In summary, a Will can

  • Distribute your assets, real estate, businesses, etc.
  • Determine who will be in charge of the distribution of your estate, and
  • Declare/Appoint a guardian for any minor children

A Will does NOT

  • Determine who will make medical decisions for your before you die
  • Direct your physicians on end of life decisions (like a Living Will)
  • Avoid probate
  • Protect your assets from creditors
  • Keep your affairs private.  Wills are public documents

What is a Trust?

While there are many kinds of Trusts, one of the most basic trusts is known as a Revocable Living Trust.  A Revocable Living Trust is a legal entity (like a corporation or business) that is created through legal documents.  It is set up to hold and manage some or all of your assets. In this fashion you as a person do not own the assets any more, and thus they are not a part of your estate.  Rather, they are owned by the Trust, and (assuming you are the Trustee) you merely manage them.

A Trust can be funded through your Will (referred to as a “Pour Over” or Testamentary Trust), or funded while you are still alive.  A Revocable Living Trust is funded while you are still alive, but can be revoked at a later date, so long as you are still alive and competent to do so.

This form of ownership can have many advantages.  First, it can protect assets from creditors while you are still alive.  Should you get sued, it will be more difficult for the creditor to get judgments against assets that you do not own, even though you may manage them, live in them, or use them.  

Second, assets that are owned by the trust are NOT owned by you.  This means that they are not subject to probate because, again, they are not assets that you own when you die.  This can dramatically reduce the need for a probate action, or eliminate it all together. No probate means your private matters are kept private.  And yet, if set up properly, you maintain control of the Trust and all of the assets until you pass away.

Just as a Will is carried out through an Executor, a Trust is managed by a Trustee.  The trustee can be instructed to disburse your assets upon your death, or at some later point in time.  The Trustee can be a beneficiary, or a neutral third party. The control and decision is ultimately yours.

The negatives of a Trust are that they require some effort when they are created.  Assets need to be transferred into the trust, and in many cases title needs to be transferred.  This is not difficult, and the attorney that drafts your Trust can walk you through the steps necessary.

In Summary, a Trust can

  • Avoid probate
  • Keep your affairs private
  • Protect your assets from creditors
  • Take effect immediately (as opposed to a Will which only has legal significance AFTER you die)

A Trust does NOT

  • Declare a legal guardian for your children
  • Determine who will make medical decisions for your before you die
  • Direct your physicians on end of life decisions (like a Living Will)

What is Best for Me?

Well that is a question that can only be answered by a qualified attorney.  Each person’s goals and situation is different. If you are trying to decide which estate planning documents are best suited for you, contact the Burgfechtel Law Offices PLLC in Plano TX at (972) 544-6565.  The initial phone call with Attorney R. Jeffrey Burgfechtel is Free.  Get your affairs in order today so that you know your assets, businesses, and children are protected.