Wills and Trusts: Which Is Right for Your Estate Plan?
Wills and trusts are legal documents that ensure your assets are passed on to the right people or groups after your death. Trusts can be used both during your lifetime and after your passing, whereas wills only take effect after your passing.
Let’s review these two different legal instruments and see which one works best for your estate plan.
What Is a Will?
A will is a legal document that dictates how a person’s assets will be distributed among their heirs after their death. This includes handling the estate, beneficiaries (and preventing any disputes regarding these), and specific key decisions after death, such as funeral arrangements, the appointment of an executor, and the designation of guardians for minors.If you die without a will, your estate is subject to intestacy laws. This means that the court is responsible for the distribution process, including evaluating and dividing the estate according to state law.
While not all wills require probate, many do. Probate can be a time-consuming and expensive process for the heirs. Not to mention, probate is a public process, so creditors can see what or how much each person is inheriting. This may be a concern if your family values privacy.
Smaller estates, jointly held assets, and payable-on-death (POD) or transfer-on-death (TOD) designations can help a will avoid probate, depending on your state and the specific situation.
What Is a Trust?
A trust is a legal document wherein a grantor transfers ownership of assets to a trust account or trustee/fiduciary. This trustee manages the assets for the beneficiaries according to the terms set by the grantor in the trust document.Trusts can take effect while the grantor is still alive (living trust) or after their death (testamentary trust). A living trust is created during the grantor’s lifetime and can bypass the probate process, leading to more control and quicker distribution of assets to the beneficiaries.
There are multiple types of trusts:
- Revocable Living Trust: A revocable trust is created during the grantor’s lifetime and can be altered, amended, or revoked at any time. Since the trust is revocable, the assets are considered part of the grantor’s estate and are subject to estate taxes. Revocable trusts do not provide protection against creditors.
- Irrevocable Trust: This type of trust cannot be altered or revoked once created. This provides asset protection from creditors since the grantor no longer controls the assets.
- Charitable Trust: This type of trust allows donors to support charities while receiving tax and estate benefits, like tax deductions and reduced estate taxes.
- Special Needs Trust: A special needs trust allows individuals with disabilities to receive financial support from the trust. It also preserves the beneficiary’s eligibility to receive public assistance programs like Medicaid and Supplemental Security Income.
Will vs. Trust: Which Is Better for Your Estate Plan?
Wills and trusts provide different benefits and drawbacks, so let’s break down the different key factors to consider:- Cost: You can handwrite one yourself (holographic will) or use an online will-making service. However, while cost-effective, holographic wills may be difficult if you have complex finances, assets, or end-of-life wishes. Additionally, not all states recognize them. Do-it-yourself wills often have errors, leaving them tied up in probate for a long time. Meanwhile, trusts are generally more expensive, depending on the size of the estate, types of assets, and other factors.
- Effective Date: Wills are effective only after the grantor dies. Trusts can take effect any time during the grantor’s lifetime (but will only take effect once signed and funded).
- Privacy: Wills are subject to probate, which is a public process. The contents of the will are typically made public once the probate process begins. Meanwhile, trusts bypass the probate process, offering more privacy for the assets and beneficiaries. However, if the trust is not set up properly, the assets may go into probate.
Can I Have Both a Will and a Trust?
Yes, you can have both a will and a trust — it depends on your circumstances. For example, wills are helpful if you have minor children or dependents.Trusts may be preferred by those who hope to avoid the probate process. They can also provide people greater peace of mind, especially if they have children who would require assistance in managing an inheritance.
Conclusion
Regardless of whether you decide to create a will or a trust, the important thing is to consult a wealth management professional and estate planning attorney. They help create the ideal plan to meet your specific needs and finances.This article was written by Codrin Arsene, who works as a Fractional Law Firm CMO at Digital Authority Partners.
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Posted - 07/07/2025
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