A common pitfall in DIY estate planning is focusing solely on obtaining documents. Checking items off a list – Medical Power of Attorney, done, will, done, can work in certain situations. However, in nearly every context, it is far better to consider the individual’s or family’s goals holistically, and then determine the best vehicle(s) to help achieve those goals.
Families with young children often ask about a revocable living trust. These trusts can be a fantastic option – they allow maximum flexibility in terms of how assets will be distributed as well as provide protection in the event of future parental incapacity. A revocable living trust allows parents to decide, for example, exactly how much (and when) their children or other beneficiaries will receive assets from their estate. And with such a trust, the title to assets included in the trust passes immediately, avoiding probate.
That said, a trust requires additional administrative action to ensure that the Trust is funded correctly. Any new assets must be re-titled into the trust, and certain assets such as IRAs may not be held by a Trust. An incorrectly funded trust can cause numerous headaches down the road.
Wills, on the other hand, are perhaps the most common method of transferring assets upon an individual’s passing. These documents typically gift assets outright to beneficiaries, but can be drafted to include a number of trust provisions to take place upon the individual’s death. This can be a great way to ensure the protections of a trust, while avoiding some of the administrative work that comes with a revocable living trust. That said, wills must be probated in order for the assets to pass to the beneficiaries. For some, the cost and public nature of probate is undesirable.
Both options are perfectly valid under the Texas Estates Code, but neither are not without their pluses and minuses. Please contact Balmos Law to discuss your goals and how to develop a plan to meet them.