By Larry Chamberlin, 26 May 2020
First, let me say that Chamberlin Law & Mediation draws up Wills and Trusts on a regular basis. A fairly simple Trust can run less than $2,000.00 depending on its complexity. I usually don't advise it because in most cases the client is not best served by a Trust.
The issue as to Will vs Trust is a bit complex, but it can be broken down by looking to your objectives. You may want to (1) avoid Probate, (2) protect assets or (3) be certain that bequeathals are accomplished.
Trusts don't really let you avoid Probate as simply as one might expect. There is generally some property that does not make it into the Trust so Probate may still be required. Also, depending on how you set up your Estate, Probate can be very simple, for example, with the proper Will construction and using a Muniment of Title application rather than going for full Probate and having the Court appoint an executor. The difference in cost and time savings can be dramatic. On the other hand, care must be taken in drafting a Will to avoid the pitfalls that sometimes occur, such as naming an “Executor” rather than an “Independent Executor.” Also, by using beneficiary statements wherever you can, you can pass the funds directly to the beneficiaries outside Probate.
Under some circumstances Trusts can protect your assets, but these circumstances are rare. If you have several million dollars in assets, for example, a Trust is not only beneficial, but advisable. There is no Estate Tax from the State of Texas, although other states do have them. Thus, the Federal Estate Tax is the primary issue. However, the lifetime Unified Credit, which currently runs at $11,580,000 for a couple, shields most estates. On the other hand, this Unified Credit has often been a favorite kick-ball of Congress and is subject to change.
Another circumstance to consider creating a Trust is if your debts are going to be high for the foreseeable future and yet the debts are not related to the assets (meaning the debts are not mortgages on the assets and the assets are not used as collateral for a debt). In this case, transferring the assets which are free of the debts may succeed in protecting them from creditors which may be able to reach them in Probate. There are legal limits to this practice, of course.
Conveying property into a Trust can provide the appearance that it will be given to the heirs more securely. That is not necessarily the case. In Probate you have to rely on the integrity of the Executor of the Will. With a Trust you must rely on that same integrity in the successor Trustee who takes over when you die. Assuming you would name the same person as Executor and successor Trustee, the Trust does not make sense merely for the secure transfer of property.
Moreover, when you put property into a Trust you are restricted on how you deal with that property from then on, similar to placing property into a corporation. The Trust property belongs to the Trust now, not you. A Trust adds a layer of complexity into your dealings that most often outweighs its benefits. For example, even when you act as your initial Trustee, you must style your dealings “As Trustee of the [your name here] Trust.” It may sound petty, but such dealings can be a nuisance. I had a couple who placed all their financial assets into a Trust and later hired me to break the Trust because they got tired of writing checks, “Napoleon Bonaparte, as Trustee of the Napoleon Bonaparte Trust.” Care must be given to transfer into the Trust only the property which benefits you by the transfer.
This description merely touches the surface of the issues. Chamberlin Law would be happy to go over your specific situation in a face-to-face consultation.
© 26 May 2020 Larry Chamberlin, Chamberlin Law & Mediation