Living trusts can be an essential aspect of a person's estate plan. Estate planning in Texas and everywhere else utilizes a will to dispose of any assets owned at the date of death by the testator, who is the person who made the will. Estate planning uses living trusts to dispose of assets during life with the option of making the transfer of assets either revocable or irrevocable.
The key difference between living trusts and a will is that the transfer of assets during life through a trust vehicle obviates the need to have those assets go through probate upon death. Probate is the legal administration of assets through the decedent's estate, along with paying creditors and disposing of those assets that remain through the dictates of the will. Assets may be taxed in some instances when they go through probate.
Additionally, probate is a public process that opens the individual's economic activities to public scrutiny; whereas, living trusts are private instruments that are generally protected from public view. A will is administered by an executor and a trust is handled by a trustee. It should be understood that even without state or federal taxes owed by the estate, there are fees that must be paid for attorneys, appraisers, executors or administrators, and filing fees.
However, the living trust can avoid those expenses through the strategy of transferring assets during one's lifetime. Sometimes, a trust designates that it shall be funded by certain income streams or assets, but the trustee or the trustor, who is the one who makes the trust, forgets or neglects to make the necessary deposits into the trust. This can result in unexpected probate in a Texas probate court with respect to assets that mistakenly remained in the name of the testator at death. Strong estate planning, good record-keeping and attention to proper procedures are recommended protocol for assuring that trust assets are not mistakenly funneled into probate after the testator's death.
Source: The Wall Street Journal, "The Crucial Difference Between Wills and Trusts", Michelle Perry Higgins, Jan. 8, 2015