What is the difference between a living trust and a living will?
A living will in Texas is actually a Directive to Physicians and only comes into effect if certain things happen. Clients have also called it the “pull the plug” document. It comes into effect if a) you are terminally ill or suffering from an irreversible condition, b) you cannot communicate at all, and c) there are no more treatments to try. At that point the document is looked to to see what you have previously said you want if in that state. A living trust is usually called a revocable trust (at least by me). It is a way to title and manage your assets through a trust document. It is “living” because, as the owner, you can amend the terms of the trust or revoke it while you are living. Once you pass, it becomes irrevocable and the terms lock down.
What is the difference between a trust and a will?
A will is a document that you have prepared (hopefully) way ahead of your death that is put through the court’s probate process to do two things: a) appoint someone to act as executor for your estate, and b) distribute the assets to your beneficiaries after settling your debts. A will by itself has no effect at all, and only has effect after the court approves it and appoints the executor. Since it has no effect while you are living, once prepared and signed, it can be stored away. A trust is basically a contract you make with yourself as to how you will hold and manage your property. Since it is a contract, it does not go through the court probate system and your named successor trustee steps in and settles your estate after your death. The trustee can only manage the property that is titled in the trust, so anything left outside the trust may or may not be subject to the probate process. Because of that, once a trust is prepared and signed, some “homework” has to be completed to get your assets titled in the trust.
What if I don’t really know what I have?
The cornerstone of most plans is either a will or a trust. If you have a will as your basic planning document, it will have something like this at the top of the first page: The Last Will of Joe R. Smith. It will also have in the distribution section a paragraph or two stating who gets your assets. Typically it goes something like: all to my spouse if he/she survives me, if not, then to my children equally. If you have a revocable trust, it will have something like this at the top of the first page: The Joe R. Smith Revocable Trust. It will also have on the first page something similar to: This Trust Agreement is entered into on _________ (date), by and between Joe R. Smith, of ________ County, Texas, as Grantor, and Joe R. Smith, Trustee. To confuse things, a trust is usually accompanied by what is referred to as a pour-over will. It looks similar to a regular will, but in the distribution section it leaves all assets to the trustee of the Joe R. Smith Revocable Trust. In the supporting role to the trust, it puts anything left out of the trust, into the trust.
Why should I get a trust?
Not everyone should. The typical reasons are these: owning out of state property, having a disabled beneficiary, and having a concern about privacy and the probate process. Owning out of state property will likely require complying with the probate rules of that state in order to transfer title to someone else. A disabled beneficiary receiving Medicaid or SSI should not receive a lump sum from your estate mainly because it will put him/her over the resource limits. The probate records in most of the large counties in Texas are online, which for several years allowed anyone to know what all you had and who inherited it from you. Although the legislature has tried to address some of the privacy concerns by allowing a bypass of the inventory of assets in some cases, the record is still available through the web.
I don’t care who gets my stuff after I’m gone, why should I get a will?
If you truly don’t care, then maybe you shouldn’t. However, if you don’t have someone named to be an executor and settle things, someone will have to step up and do it. This is especially true if you have real estate and/or accounts with no beneficiary or joint owner. This could take some time, as in years. It is a more complicated probate process and costs more than if you had a will.
How can things be set up so my son can do whatever is needed for me if I get sick?
If your plan is based on a will, you should also have had prepared at the same time a durable power of attorney. This is a standard form put forth by the Texas legislature where you name your agent to act in your place for all financial matters. You can also name an alternate. If this is properly signed and notarized, your agent should be able to do whatever you need. If you are ill and you have real property for sale, the power of attorney will need to be filed with the County Clerk to show that your son has the authority to sign the deed for you as seller. For some of your regular monthly bills, You could set up automatic payments at your bank. Also, if you have setup online banking you could give your information (log in and password) to your son and he could access your accounts. Obviously, whoever you select, he/she should be a very trustworthy person.
I have an old will that I brought from California. Is it good here?
Maybe. The real question is how old is it and does it still reflect what you want? If an out of state will does not meet the requirements of a Texas court in probate, the person apply to be your executor may need to go through extra steps to get the will through the process. It would depend on the judge. If it is really old I would assume many things have changed in your family and you should seriously consider updating everything. At the least, get Texas powers of attorney and a directive. You don’t want your family arguing with the bank or hospital that your documents are essentially “the same” as the typical Texas documents they are used to seeing.
How much does a will or trust cost?
There is no set range of fees for wills or trusts. As you have probably found out, the cost of estate planning documents can vary greatly among lawyers. Some of this is a result of the costs of overhead and all that, but most lawyers don’t really know how much others charge for any particular document. Discussions among lawyers about fees and prices for particular services can be considered price fixing, which is illegal, so it’s not something typically done. In addition to the cost of overhead there are a few more issues that play into the price of a will or trust. A very experienced lawyer will charge more, even if he hands the work over to a young lawyer in the office to prepare. The older lawyer will then “review” the work (and charge for his time) making the document pretty pricey. Difficult or unusual requests from the client can cause the drafting work to take longer, which will directly affect the end cost if the lawyer is charging by the hour. Lastly, although most lawyers feel that they can prepare a will, fewer are comfortable preparing trusts. This is mainly because the State Bar has emphasized wills over trusts for years and most lawyers have followed that thinking. Even if you have a good reason to get a trust, some lawyers will try to talk you into a will with a trust clause. Although the trend is moving toward flat fees for document preparation, even then there are some lawyers that vary the flat fee based on what it appears the client is worth. The short answer is that the cost of a will or trust will entirely depend on the lawyer you select to prepare your documents.
Why is a trust more expensive?
Typically a trust is about 3 times the cost of a will. This is due to the fact that extra forms are prepared to accompany the trust, especially for funding purposes. Funding is the process of transferring assets into the trust and is a necessary step in making the trust work. Deeds are also included to move real estate into the trust. This funding “homework” often involves followup calls or even meetings with the lawyer to make sure everything does get transferred. The extra documents and deeds makes for more preparation work and more cost to the client. You also have to consider that the cost of a will does not include the cost of probate at some point in the future, so comparing the cost of a will and a trust has to include that future unknown expense.
Who should have copies of my documents?
For your will or trust, the person you’ve named as executor or successor trustee will need the originals, not copies, so they should know where you are storing your documents. Your agent under your durable power of attorney or medical power of attorney should have copies of those documents and also of your Directive to Physicians.
Where should I keep my originals?
With your other important documents, such as insurance policies and deeds. It is really important that your family knows where these are kept. You run the risk of family members throwing important things away if you hide documents in really weird places or in old envelopes or boxes. Some of the strangest places I’ve had clients tell me they’ve put important information are in the freezer marked as food, buried in the pasture near a rattlesnake den and in the gun safe. I think it is a better idea to put important documents in important looking containers so they won’t simply get tossed out. I’ve made a blog post about this that can be found here.
How long does it take to get documents?
From my end, documents can be done fairly quickly, but sometimes it takes clients some time to get information to me and to proof the documents. Typically the process involves these steps:
1) Getting complete contact information from the client (either by email or at an initial meeting),
2) If the information was sent by email, a phone consultation with the client to discuss distributions to beneficiaries,
3) Drafting and sending the documents to the client to review,
4) Making changes (if needed) and printing the documents, and
5) Meeting to sign and notarize the documents.
Typically, from a client’s perspective, it should only take a total of perhaps two hours or so to do everything. A little time to fill out the questionnaire, some time set aside to read over the draft, and about 20 minutes to sign. A few things can slow this process down, however. A delay in getting the contact information of the people he/she wants to name can cause a long delay. Taking a long time to review the draft can also slow things down. The quickest “turn around” on documents comes with clients who send in all information at the beginning and quickly review the draft. If that happens, documents can be done quickly. The shortest time I completed documents for a client was within a week. The longest goes into years because the clients got stuck on either getting me the information or approving the draft.
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