Protecting Your Family: Understanding Wills and Trusts

When it comes to protecting your kids and family in the event of your death, you may find yourself asking: Which is better, wills or trusts? Is there a significant difference between the two? Today, I will explain these differences and why you might need both. I’m Jennifer Nichols, owner of J. Nichols Law, and I help people in Texas protect their assets so they can pass them according to their wishes.

Planning for what happens after you pass is a tough conversation, but it is an essential part of caring for your loved ones. Ensuring that the right plans are in place can save your family from costly and time-consuming complications down the road.

The Importance of Having a Will

One of the first decisions you need to make is how to protect your assets. In Texas, if you don’t have a will in place, the state will decide how your assets are distributed. After working a lifetime to build your assets, do you really want the state to determine who inherits them?

A well-crafted will ensures that your assets are distributed according to your wishes. It helps avoid family conflicts and costly disputes, ensuring your loved ones receive what you intended. Additionally, a will allows you to:

• Appoint an executor to manage your estate.
• Designate guardians for your minor children.
• Make specific bequests to individuals or charities.

Wills can also incorporate trusts to leave assets to beneficiaries in a trust instead of outright, which can provide additional protection and management for those assets.

Why a Will Alone May Not Be Enough

While having a will is crucial, a simple will may not be sufficient to fully protect your estate in today’s complicated legal and financial landscape. For example, if you leave everything to your spouse in a simple will and they remarry after your passing, your assets could end up with their new spouse instead of your children.

Moreover, if you have a blended family, your spouse may leave their estate to their children instead of yours. If your will leaves assets outright to a minor, Texas law prohibits minors from owning or managing property. In such cases, the court will appoint a guardian to manage the minor’s assets until they reach maturity, which can be a costly and time-consuming process.

The Role of Trusts in Estate Planning

To preserve your assets for your loved ones, you may need a trust. There are many different types of trusts available, each designed to cover specific situations:

1. Contingent Testamentary Trust: This type of trust is set up in your will for beneficiaries under a certain age (e.g., 25). If the beneficiary is under that age at your passing, their inheritance is held in trust until they reach the designated age.
2. Spousal Testamentary Trust: This trust comes into play after the death of one spouse and allows the surviving spouse to access the trust during their lifetime. Upon their passing, the remaining trust assets are passed to the children.
3. Special Needs Trust: This trust provides for a disabled loved one without jeopardizing their eligibility for government benefits like Medicaid or Supplemental Security Income.
4. Retirement Benefits Trust: This standalone trust can be used for spouses or children, allowing retirement benefits to be paid out over the spouse’s lifetime or managed within the trust for minors.
5. Irrevocable Life Insurance Trust: This trust keeps life insurance proceeds out of your taxable estate, allowing the death benefit to pass to beneficiaries free of estate taxes.

Choosing the Right Estate Planning Tools

The right choice between a will and a trust depends on your specific circumstances. Combining a well-drafted will with a properly structured trust ensures that your estate is preserved, and your assets pass to the intended beneficiaries.

If you or someone you know wants to protect their assets, please schedule a consultation with J. Nichols Law. We’ll explore all of your options to ensure your legacy is protected.

Thank you for reading! If you find this information helpful, please consider sharing it with others who may benefit. Together, we can help ensure that your loved ones are cared for according to your wishes.