Estate Planning Decision Tree Chart for Will vs. Revocable Living Trust – 20 Issues

One of the most common dilemmas in estate planning is whether it is better to have a Will or a Revocable Living Trust (RLT). There are numerous types of trusts, but this article shall only address revocable living trusts since it is the most common type of trust. The decision tree chart below of this author could differ depending on the individual circumstances.

Decision Tree Chart:

Will vs. Revocable Living Trust (RLT)

Will

RTL

Less Expensive to Create

Advantage

Less Total Costs (Unless Many Real Estate Properties or Mineral Interests, Leases or other assets to be transferred into the trust) Will + Probate > RLT

Advantage

Privacy

Advantage

Guardianship for Minors

Advantage

Management of Assets During Lifetime

Advantage

Transfer of Professional Business (PLLC, MDPA)

Advantage

Transfer of Business Subject to Buy-Sell Agreement

Advantage

Taxes

Neutral

If One Spouse of Married Couple is receiving or will receive Medicaid

Advantage

Real Estate or Mineral Interests in More Than 1 State

Advantage

Numerous Beneficiaries (Notice Requirements)

Advantage

Quicker Distributions to Beneficiaries

Advantage

Retitling of Assets During Life

Advantage (not necessary)

Refinancing of Real Estate During Life

Advantage (no need to take from trust)

Employee Stock Option Plan Ownership

Advantage

Financial Institution Acting as Fiduciary

Advantage

Grantee of Ladybird Deed

Advantage

Harder to Contest

Slight Advantage

Less expensive to create – when you prepare a trust, other documents are needed in addition to funding (re-titling of assets) into the trust. Thus, the legal fees for creating a Will is generally less expensive.
Less total costs – although it is less expensive for Will creation, if you add costs of probate (including court costs in addition to legal fees for probate) in addition to legal fees for Will creation, total cost is generally less for a trust.
Privacy – when you probate a Will, the Will is a matter of public record – so anyone can see it. Furthermore, a filed inventory of the assets passing by probate are a matter of public record.
Guardianship for minors – if there is not a natural guardian (i.e., surviving parent), a court order would be needed which could be done at the same time the Will is approved for probate.
Management of assets during lifetime – a Will deals with transfer of assets after death. A trustee of a trust can manage your assets (even if you are disabled during your life) which would avoid guardianship over the assets held in the trust.
Court involvement – if assets are held in a trust, court involvement over transfer of the assets and payment of debts is not needed. If you have a Will, the Estates Code governs and sometimes court involvement is needed.
Transfer of Professional Business – many professionals have entities that can only be owned by those licensed in that profession. Thus, such business usually pass by Will.
Transfer of non-professional business – since there is no delay in getting court approval, normally a trust is better for more expedient transfer of ownership.
Transfer of business subject to a buy-sell agreement – Buy-Sell agreements are usually between different owners of a business setting the terms if an owner dies, becomes disabled, gets divorced, etc. Since a trust never dies or becomes disabled, it cannot be a party to a Buy-Sell agreement.
Taxes – planning for reduced taxes can be done with either a Will or a RLT. It should be mentioned that other types of trusts are used to reduce various taxes.
One spouse (survivor) on Medicaid – a special needs trust for assets to not be subject to Medicaid spend-down for the surviving spouse can only be done under a Will under Medicaid rules.
Real estate or mineral interests in more than one state – probate should be avoided for real estate and mineral interests if transferred into a RLT. A Will would require not only a court order for approval in the state of residence, but there would also need to be approval under the laws of the state where the out of state property is located.
Numerous beneficiaries – the Texas Estates Code requires a copy of the Will and inventory to all beneficiaries who are to receive $2,000 or more. This additional cost usually makes it more cost efficient to have a RLT.
Quicker distribution – since there is no delay of waiting for a court hearing, etc. as required for a Will that is probated, a RLT is generally advantageous for quicker distributions to beneficiaries.
Re-titling of assets – if you have numerous accounts or properties, the same would need to be re-titled into the trust (or have beneficiary designations) to avoid probate. There is no transfer of assets with a Will until after the Will is probated.
Refinancing of real estate – Lenders don’t like to lend to a trust. As a result, property (i.e., your homestead) would have to be transferred out of the trust if refinancing of real property.
Employee stock-option plans – employee stock option plans can only be transferred by a Will.
Professional fiduciary – banks are often unwilling to serve as an executor but are willing to serve as trustee of a trust.
Ladybird deeds in connection with Medicaid – since the state seeks reimbursement of Medicaid expenses if assets pass by probate, Ladybird (enhanced life estate) deeds are often used to protect real estate (typically the homestead since the real property would not pass by probate) which is generally a non-countable resource. Thus, the estate (i.e., if there is probate) should not be named as a grantee. A trust could give a multitude of protections.
Harder to contest – although a trust can be contested, anyone can just show up at a hearing for probate and say they are contesting and delay court approval. Probate is avoided with a trust.

If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.