Living trust vs. will: which do I need?

After you die, both wills and trusts help your loved ones receive the assets they're entitled to from your estate. There are pros and cons to using both.

Zack Sigel

Zack Sigel

Published December 7, 2018

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Trust and wills are ways for you to make sure your loved ones are taken care of after you die. Both are legal arrangements that manage the assets in your estate by assigning beneficiaries to the assets and the rules by which your beneficiaries can access them.

A will is a contract that not only distributes assets to your loved ones but also gives instructions about who should manage your estate and who should become the guardian of your minor children if your spouse is no longer alive. A trust only deals with the distribution of your assets.

In general, it costs less to draw up a will than it does to establish a living trust. That’s because a trust must be managed over the lifetime of the trust, while a will is simply a set of terms to be executed after your death.

Trusts may offer more control over the assets in your estate because, unlike a will, these assets almost never go through probate, the process by which the terms of a will are proved and the assets divided up according to those terms.

But wills and trusts work hand in hand. You can create a trust using a will, or you can use a will to direct that assets in an estate be moved into a trust that already exists. Whether you need a will, a trust, or both, depends on your financial circumstances.

Do I need a will?

Not everyone needs a will. If you have no assets, then you don’t need a will. You also don’t need a will if you don’t care how the assets you do have are distributed to your loved ones after you die.

But if you want to make sure that your family, close friends, or organizations you care about receive the property you wish to give them, then a will is one of the most cost-effective ways to do that.

Pros of having a will

Wills are inexpensive to establish compared to trusts, and you may even be able to draw one up for free. However, hiring a good lawyer to look over your will could make it ironclad.

If you don’t have a complex estate, a will is definitely enough for you. Most people just want to make sure their home and high-value personal effects are willed to their loved ones.

If you live in certain states, probate is very affordable. That means that one big fear of using a will, that probate lawyers will drain your assets, doesn’t apply in many places.

Wills encompass your entire estate and help direct the probate of the estate. Trusts only involve the assets in the trust.

Wills can also help distribute life insurance proceeds when the beneficiaries on the policy have died before you. In fact, as with other payable-on-death accounts, such as a savings account, checking account, or retirement account, the proceeds become part of your estate and are probated by the will.

Cons of having a will

Although probate could be inexpensive, it can be very time-consuming. It’s not uncommon for beneficiaries to wait years for probate to be resolved, and even then they may be disappointed.

Some states allow your lawyer to take a cut of the estate value, which increases your probate costs.

Probate goes into the public record. Read more about how probate works.

Should I create a trust?

Having both a trust and a will is not mutually exclusive. Since a living trust is its own legal entity, the rules for distribution of its assets to your beneficiaries are essentially set in stone. That means many people opt to “pour over” their property and funds into a trust by using a will to create a new trust that will own the new assets. Such an arrangement is called a testamentary trust.

Pros of having a trust

Trusts are one of the best ways for a large estate to distribute its assets since their rules are enforced by the trust itself, and not, for the most part, by a probate lawyer or court. They also shield the assets you put in the trust from liability claims.

Trusts generally don’t go through probate, which means that a trust’s rules are binding. While certain terms of a will can be interpreted by a court in a way you didn’t intend while alive, you have much more control over how the terms of a trust are enforced. Not going through probate also means the assets are distributed faster after your death.

Trusts allow your loved ones to avoid paying estate taxes, since the assets in the trust belong to the trust, not the estate, and are transferred to the beneficiary.

Trusts protect the wishes of the grantor, the person who establishes the trust and funds it with his or her assets. Whereas the assets distributed through a will may be intercepted by less-than-scrupulous relatives, the assets in the trust belong to the trust until the beneficiary is eligible to receive them.

Cons of having a trust

Trusts are expensive to establish and maintain. It may cost several thousand dollars to establish one and thousands more to maintain the trust.

While trusts exist to enforce your desires, they are not immune from legal challenges. Namely, if you mistakenly list a beneficiary for a trust asset but also separately name a different beneficiary for the same asset, distribution will of the asset will have to be determined by the courts. This can happen with payable-on-death accounts as well as life insurance death benefits.

Only the assets specifically placed in the trust are subject to its terms. If you leave anything out, a will should capture the rest. If you don’t have a will, the assets not in the trust will have to be probated.


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How to create a trust or a will

Both trusts and wills can be made online in about 15 minutes. However, if you have a more complex estate, you should also seek the advice of a lawyer or financial planner, but their fees could be considerably higher.

Additionally, you may be able to draw up a will or a trust document entirely on your own, although, if you’re not versed in the law, you could end up with a meaningless piece of paper by writing it up yourself. If you do decide to create a do-it-yourself trust, make sure you name the trust as the beneficiary of any assets you want to be in the trust, or else those assets won’t be part of the trust no matter how valid the document is.

In all cases, you need two witnesses and a notary to sign the will or trust.

With a living trust, you need to appoint a trustee. This can be anyone, including yourself, but you’ll need to nominate a successor trustee to take over after you die. You can also choose a lawyer or financial institution. The trustee administers the trust whether it’s a revocable trust (when you’re still alive) or an irrevocable trust.

With a will, you’ll need to select an executor of your estate. The executor doesn’t become the executor until you die and the will’s terms are read, and she or he may decline the role.

Neither the will nor trust need to be filed anywhere. Just make sure the documents can be easily accessed by your heirs. If you used a lawyer or financial institution, they should have a copy of the documents as well.

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