What Is the Difference Between a Will and a Trust?
Wills and trusts are both important estate planning documents
on November 30, 2022
Updated on January 29, 2023
You might think that only wealthy individuals have an estate. But an estate simply consists of the property you own. Estate assets include real estate, personal property, bank accounts, stocks, retirement accounts, and life insurance policies.
So, if you own property, you have an estate. An estate plan prepares for end-of-life matters and what to do with your estate when you die.
While planning for what happens after death may be uncomfortable, it ultimately gives greater peace of mind to yourself and your loved ones.
Two key legal documents in an estate plan are the last will and testament and the trust. This article will introduce these two types of estate planning documents and their benefits and differences.
What Is a Will?
A fundamental estate planning document is the last will and testament (or “will”). It accomplishes several essential tasks, including:
- Makes your final wishes known
- Distributes your estate assets to beneficiaries (such as a surviving spouse or children)
- Appoints a personal representative (also called an executor) to represent your estate in probate court, oversee the distribution of your assets, and ensure that your final wishes are fulfilled
- Names a guardian for your minor children, if relevant
It’s worth noting that a will is not the same as a living will. A will (short for “last will and testament”) prepares for how your estate will be distributed when you die. A living will prepares for end-of-life matters, including health care decisions, in the event you become incapacitated.
Along with a durable power of attorney, a living will is a type of advance directive. Read this article to learn more about the difference between a will and a living will.
What Is a Trust?
Like a will, a trust (also called a living trust) distributes assets to beneficiaries when you die.
However, instead of an executor collecting and distributing assets after your death (as in a will), you put assets in a trust while you are still alive or designate assets to be transferred to a trust upon your death.
“A living trust is what’s known as a will substitute,” says Maryland estate planning attorney Jeremy D. Rachlin.
“The primary difference between a will and a trust is that because a trust continues to survive after the person who creates the trust passes away, assets that are titled in the trust or that are designated to go into the trust after death are not subject to the probate process,” says Rachlin.
In establishing a trust, you are called the “grantor.” As grantor, you:
- Put assets in the trust
- Make beneficiary designations for the trust assets
- Appoint a successor trustee
When you die, control of the trust will pass to the successor trustee, who then distributes the trust assets to your named beneficiaries.
There are different types of trust for different kinds of assets and situations. For example, there are marital trusts, life insurance trusts, charitable trusts, and personal residence trusts.
One of the main divisions in types of trust is between revocable and irrevocable trusts. The main difference between a revocable and irrevocable trust is the degree of control you have over the trust:
- In a revocable living trust, you maintain control of the trust during your lifetime, meaning you can make alterations to trust assets and beneficiaries
- In an irrevocable trust, you have limited control over the trust once you have created it
Is a Will Better Than a Trust?
Wills and trusts are both important estate planning documents. Instead of thinking of a will or a trust as necessarily better than the other, it’s more useful to think of them as complementary estate planning tools that accomplish different goals.
In general, you want to have a will in place. However, depending on your particular situation, having a trust may be suitable for some purposes.
For example, Rachlin says trusts “are probably more applicable to clients who have real estate in more than one state or who have second marriages and blended families.”
In any event, “trust vs. will” is not an either-or decision. Both tools can work together to complete your estate plan.
What is best in terms of an estate plan ultimately depends on your situation. Every person’s estate is different. This is where having an experienced estate planning lawyer can be a great help—to think through the best estate plan strategy.
Advantages and Disadvantages of a Trust
Some of the main advantages of a trust include the following:
- Trusts avoid the probate process. “Each jurisdiction has a probate court that supervises the distribution of assets that are being transferred by virtue of a will,” says Rachlin. Probate court “can be a time-consuming and costly process.” Like a will, “a trust provides for the post-death distribution of assets.” However, “the assets flowing to beneficiaries by virtue of a trust don’t need to go through probate,” he says, “and so many folks look to trusts as a vehicle to avoid that probate process.”
- Trusts keep your estate private. In probate court, your will becomes a public document and your estate a matter of public record. If you want to keep details about your estate private, putting assets in a trust is the way to go.
- Trusts can help with estate taxes. Several types of trusts can effectively reduce the size of your taxable estate if your estate is eligible for estate taxes under state or federal law.
The main disadvantage of a trust is that it can be more expensive to set up. “It’s an element of estate planning that’s often more expensive on the front end to implement and administer,” says Rachlin.
However, “on the back end, a trust can be less expensive and time-consuming for the family.” Because of the costs and tradeoffs involved in a trust, “it’s not a necessary option for all clients, but for some clients, it’s an important option to consider,” he says.
Beyond the specific advantages and disadvantages of a trust, some estate plan arrangements will suit your situation better than others. It’s best to speak with an estate planning attorney about your property and the best way to secure it.
Questions for an Estate Planning Attorney
Most estate planning lawyers provide free consultations for potential clients, letting you get legal advice about your estate without initial costs.
To get the most out of a consultation, ask informed questions such as:
- What are your attorney’s fees and billing options?
- What is the difference between a will and a living trust?
- What are the different types of trust?
- Should I consider setting up a trust, or is a will sufficient?
- Are there other estate planning documents I should consider?
- How do I avoid probate?
- Can trusts help with estate taxes?
Once you have met with a lawyer and gotten your questions answered, you can begin an attorney-client relationship.
Look for a lawyer who specializes in wills in the Super Lawyers directory for your estate planning needs.