Wills vs. Trusts: A Plain English Guide to Estate Planning
A common question that we are often asked is: Do I need a Will or a Trust or both? It can be confusing to hear the term and with all of the media promoting the DIY, the confusion can only be compounded. Wills and Trusts are distinctly separate and we would like to provide a simple overview to better educate you.
What is a Will?
A will is a written document that each state may require you to sign with specific formalities—such as having witnesses—for it to be considered valid. Think of it as your final instructions to the world - it's considered a "death document" because it only takes effect when you pass away.
What a Will Does:
- Distributes your assets: Specifies who gets what from your individually-owned property
- Names an executor: Designates the person you want to handle settling your estate (though the judge makes the final decision)
- Appoints guardians: Allows you to choose permanent guardians for your minor children
- Provides flexibility: Can be revoked or amended during your lifetime
- Lower upfront cost: Generally costs less to create than a trust initially
What a Will Cannot Do:
- Avoid probate: Your estate will go through court proceedings
- Control beneficiary assets: Cannot direct assets like life insurance or retirement benefits that already have named beneficiaries
- Manage incapacity: Provides no help if you become unable to manage your affairs while alive
- Guarantee privacy: Probate proceedings are public record
What is a Trust?
A trust (most people picture a living trust) acts as a legal entity that owns your assets during your lifetime, including periods of disability and after your death. We call it a “living” document because it takes effect immediately and you can change it during your lifetime.
What a Trust Does:
- Holds your assets: Designed to be "funded" with all your property (bank accounts, real estate, etc.)
- Avoids probate: When properly funded, a trust eliminates the need for court proceedings
- Manages incapacity: Allows your chosen successor trustee to manage your affairs if you become unable
- Provides privacy: Trust administration is generally private, not public record
- Offers flexibility: Can be revoked or amended during your lifetime
- Includes protections: Often incorporates protective measures for beneficiaries and tax planning strategies
- Continues seamlessly: Transitions smoothly from your management to your successors upon death or incapacity
Understanding Probate: The Key Difference
The term "probate" literally means "proving." It's the court-supervised process where:
- Your will is authenticated as valid
- Outstanding debts are identified and paid
- Assets are distributed to beneficiaries
- Creditor claims are resolved
The Downsides of Probate:
- Time-consuming: Can take months or even years to complete
- Expensive: Court fees, attorney fees, and administrative costs add up
- Public process: Anyone can access probate records to see who inherited what
- Court control: The judge oversees the process and makes final decisions
- Potential delays: Disputes or complications can significantly extend the timeline
The Limited Upsides of Probate:
- Creditor protection: Claims against the estate are typically cut off after a specified period
- Court oversight: Provides a structured process for resolving disputes
Wills vs. Trusts: A Direct Comparison
Factor | Will | Trust |
|---|---|---|
When it takes effect | Only after death | Immediately upon creation |
Probate requirement | Always required | Avoided if properly funded |
Privacy | Public court proceedings | Private administration |
Incapacity planning | No protection | Full protection |
Initial cost | Lower | Higher |
Total cost | Often higher due to probate | Often lower overall |
Time to settle | Months to years | Weeks to months |
Court involvement | Extensive | Minimal to none |
Flexibility | Can be changed anytime | Can be changed anytime |
Asset control | Limited to individually-owned assets | Comprehensive control of trust assets |
Making the Right Choice for Your Situation
A Will Might Be Right for You If:
- You have a simple estate with minimal assets
- Privacy isn't a major concern
- You don't mind your family dealing with probate
- Upfront cost savings are your primary concern
- You have no concerns about potential incapacity
A Trust Might Be Right for You If:
- You want to avoid probate for your family
- Privacy is important to you
- You want seamless management if you become incapacitated
- You have real estate in multiple states
- You want to include protective provisions for beneficiaries
- You prefer overall cost savings despite higher upfront expenses
The Bottom Line
Most people receive the greatest overall benefit from having a trust, primarily because it avoids the time, expense, and public nature of probate while providing comprehensive planning for both death and incapacity. However, every situation is unique, and factors like the size of your estate, your privacy concerns, your family dynamics, and your state's probate laws all play a role in determining the best approach.
The most important thing is to have some form of estate planning in place. Without any plan, you leave your family completely unprotected and subject to state laws that may not reflect your wishes. Whether you choose a will or a trust, having a plan is infinitely better than having no plan at all.
Consider working with a wealth manager who can identify the factors that align with your situation. Your wealth manager can then collaborate with you and your estate-planning attorney to tailor a plan to your specific needs. Together, they help you weigh the pros and cons of each approach and design a plan that supports your family’s unique goals.
Disclaimer: The information provided is for general informational purposes only and does not constitute legal, tax, or accounting advice. No attorney-client relationship is created by this article. Always seek current, personalized legal advice from a qualified professional before making any estate planning decisions.