The Anatomy of an Estate Plan and Living Trusts

I hope this article finds you well. Now is a good time to review or create an estate plan. Everyone has two estates – a probate estate and a non-probate estate. The former is transferred via the probate system and the latter is transferred via contract law or beneficiary designations. A complete discussion of probate/non-probate can be found here.

Transferring probate property may be done one of two ways, either through a will or a Living Trust. If you do not have a will, the state provides one for you. There are many significant differences between how a will and Living Trust work. Let’s start with a will. If you have a properly draft will AND it is accepted by the court, an executor is then appointed, the will is published, an inventory is published, and you wait. The waiting period is designed to alert creditors (and potential heirs) who may be owed money so they can collect before the estate is distributed. furthermore, a will can be contested up until the probate is closed. If all goes well, the executor is given permission to re-title property and distribute the estate. In addition, a guardian is appointed if minor children are left with no parents. Note: A will is a permanent public record and anyone with internet access can view the entire probate record which includes the names of all the parties (the deceased, the heirs, the executor, etc.), and the inventory – or who got what. How do you feel about this?

Living Trusts

A Living Trust is a horse of another color. A Living Trust, if properly funded, allows someone to manage their assets privately, during a disability and at death. Nothing is filed and no one has access to the contents except those the trust was shown to. The transfer of assets is almost simultaneous with death, completely private, and hard to contest. There must also be a companion will to deal with any assets not in the trust like cars, collectibles etc. If executed properly a person can avoid probate entirely. 

Anonymity

Recently clients have been asking me about owning assets anonymously, in particular LLCs. This method is possible in Texas because the state of Texas does not require the names of the persons forming or acting as trustee of a trust. Therefore, the trust can form the LLC and the creators’ names(s) will not show up in public records. If the same person puts their residence in a trust (using a unique name – i.e., not “The James and Mary Jones Living Trust”), someone seeking to locate their assets will find themselves very frustrated. 

In order to determine whether a will or Living Trust is the best option, a discussion should be had with a qualified professional. Asset protection and estate planning are discrete disciplines but are best carried out together. David Disraeli, the personal CFO

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