Trust vs. Will

Updated: January 22, 2024

Both trusts and wills (Last Will and Testament) are estate planning techniques which can be used alone or together to pass on your assets to your beneficiaries. To determine whether a trust is preferable to a will for passing along your estate it is helpful to be aware of the differences between them.

  • The comparison is between a living trust and a will since your both are created while you are alive.
  • A testamentary trust is created after your death which can be done with either a living trust or a will.
  • There are things a trust cannot do, like designate a guardian for a minor child, that will require a will in addition to any trusts.
  • While a living trust can name a successor trustee to manage your estate if you become. incapacitated, a will cannot. If you have a will you need appoint a power of attorney for this.
  • A will can include funeral and burial instructions, while a trust is only concerned with your estate. You can use something formal like a Letter of Instruction or Final Instructions document and include it in your Advance Directives/Living Will, or a letter to your family.

The living will and a living trust are very different. A living trust is an estate planning technique, while a living will/advance directive outlines your choices about medical procedures you want or don’t want if your health becomes critical and you cannot make decisions and does not address your estate.

Characteristics of Living Trusts vs. Last Will and Testament

Characteristic Living Trust Will
Effort to create Can be time consuming and very expensive
Usually need an expert
Most are simple and inexpensive
May be made by you
Upkeep Update with life changes and ongoing management of trust Update with life changes and review every 3 years
Names beneficiaries Yes Yes
Allows revisions and revocation Revocable – Yes
Irrevocable – No
Avoids probate court Yes No
Protects assets from estate taxes Revocable – No
Irrevocable – Yes in most states
Protects assets from creditors Yes, if irrevocable or you are not the trustee No
Requires a notary Yes No, but better if you do
Requires witnesses  No Yes
When it takes effect Immediately After your death
Provisions if you are incapacitated Yes No
Names guardians for children No Yes
Can be contested by heirs Yes – Although less likely, can be done up to 5 years after your death Yes – Usually limited to 30-120 days after your death
Can distribute your assets to your beneficiaries both before and after your death Yes No, only after your death
Automatically revokes spouse’s right to inherit or act as fiduciary after a divorce No Yes, in most states

A trust contains inheritance instructions like a will, but it is more detailed and complicated.

Advantages of a Trust Over a Will​

  • The ability to distribute your assets to beneficiaries both before your death if you become incapacitated as well as after your death.
  • Gives you more flexibility in the distribution of your assets. You can distribute assets immediately upon your death or at specific times in the future and even have some control about how they are used.
  • A trust can be made the beneficiary of a life insurance policy or retirement account, allowing you to dictate how the money can be used by your beneficiaries.
  • Assets will be protected from creditors if you are not the trustee/owner of the trust.
  • Disputes can be managed without probate court proceedings
  • Since the court is not involved, the trust settlement does not become part of the Public Record.
  • Avoiding the cost of a second-state probate proceeding where there is out-of-state property,  if under the monetary threshold of that state.
  • A trust is usually more detailed than a will and less likely to be successfully contested, especially since the amount each beneficiary inherits is confidential.
  • Although a living trust is more expensive to create and maintain than a will, it may be less expensive in the long run for larger estates by avoiding probate process and the reduction of some estate taxes.

Major Drawbacks of a Trust

  • The large amount of effort to set up and maintain the trust. This makes a trust impractical in states having an expedited or simplified probate process for estates under a certain dollar threshold (the amount varies by state).
  • While a will is useful when it is created, a trust is not useful until it is funded, including any assignment of successor trustee. Although there is no lower limit to the funded amount, it is of little use to your heirs without significant assets and the trust will likely fail.
  • You must have possessions/property, such as your house and cars, appraised and obtain new deeds making the trust the owner. Other assets, such as bank accounts, stocks, and investments, will require  legal ownership to be transferred to the trust for the trust to control those assets.
  • While you are the trustee you are legally the owner of the assets and they are not protected from creditors.
  • If your assets have not been transferred or if you die without funding the trust, your estate will be subject to probate and your assets will be subject to higher estate tax and available to creditors. The same would be true of any assets that have changed ownership or otherwise changed after you added them.

It is important to know that to designate guardians for minor children and other dependents you need to add a pour-over will or have a Designation of Guardian for Minor Children form legal in some states. Like a last will and testament, failure to do so will result in the probate court assigning a guardian.

Once you understand the differences between a will and trusts, your decision should be made based on the nature and value of your assets, the age and capabilities of your heirs, tax planning considerations, your location, and the complexity of your bequests. A professional estate planner can help you with your decision.

When the Will and Living Trust Conflict

As with joint ownership assets and other methods to preserve your estate, it is important to avoid any discrepancies between your living trusts and your will. If there is conflict between them that is discovered after your death it is the trust that usually supersedes the will for a number of reasons.

  • A living trust is a separate legal entity from you, so any assets in a trust are no longer yours and therefore are unavailable for the executor to distribute.
  • The living trust does not go through the probate process and is usually the first of the two executed, usually soon after after your death. In other words, these assets have already been transferred to your beneficiaries long before the will clears the probate process.
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