Wills and living trusts share many similarities: both are far better than having no plan at all, both let you direct what happens to your assets after you die, and both require confronting your own mortality — which few people find enjoyable.
For many people, a simple will is sufficient. A living trust, however, provides additional advantages: it can manage your assets while you are still alive, offer protection if you become incapacitated, and avoid the public probate process. The downside is that living trusts are more complex than wills and generally cost more to create and maintain.
Because estate laws vary by state, it’s wise to consult both a financial advisor and an estate attorney. This article explains the main differences between wills and living trusts, and outlines key considerations to help you decide which option best fits your estate planning needs.
What’s the Difference Between Wills and Living Trusts?
A will is a legal document you sign and have witnessed that directs how your property should be distributed after your death. You can amend or revoke a will at any time while you’re alive, and a will allows you to name a guardian for minor children.
A living trust, by contrast, manages assets both during your lifetime and after your death. You can serve as your own trustee and name a successor trustee who steps in if you become incapacitated. Trusts are useful for disability planning and have the major advantage of often avoiding probate, which keeps your financial affairs out of public court records.
Trusts must be actively funded and managed: they control only the assets that have been transferred into them. If you create a trust but die before transferring assets into it, the trust may offer little benefit and your heirs could lose out on key advantages, such as certain estate-tax planning benefits.
Plan Before Making a Decision
Before choosing a will or living trust, assess your current financial situation and clarify your goals. The American Endowment Foundation recommends a structured planning process that includes these steps:
- Define your estate planning goals: Decide how you want assets distributed, who should handle distribution, and what your priorities are regarding privacy, family harmony, and potential estate taxes.
- Gather and organize financial data: Collect account statements and documents, calculate your net worth, identify how title is held on property, and review beneficiary designations on bank, brokerage, and insurance accounts.
- Analyze and discuss: Consult your financial advisor or probate attorney and map out the current structure of your estate plan to identify gaps or conflicts.
- Develop strategies: Use your analysis to determine whether a will or a living trust better accomplishes your objectives.
- Implement your estate plan: Prepare the necessary documents, decide where originals will be stored, and ensure the people you appoint understand your wishes and know the documents’ locations.
- Monitor progress: Review your plan at least annually and after major life events (marriage, divorce, births, deaths, significant changes in assets) to keep it aligned with your goals.
Situations That Favor a Will
While every situation is different, a simple will is often the right choice for people whose estates fall below state thresholds that allow streamlined probate procedures, or in states where probate is relatively straightforward. For many individuals who expect their family circumstances to remain stable and want a simpler, one-time estate planning solution, a will can be sufficient. Wills require less ongoing administration than living trusts, though they should still be reviewed periodically.
Can’t Find a Trustworthy Trustee? Choose a Will
Trusts rely heavily on the person you name as trustee. Because trusts are designed to avoid probate, legal recourse for heirs can be more limited than in probate proceedings, so you must have confidence in your trustee’s honesty and competence. Many people appoint a spouse or adult child as trustee, which often works well for simple trusts. The ideal trustee should be organized, responsible, honest, and willing to engage qualified advisors to handle financial and legal matters as needed. Consider whether the person you choose will be able to act effectively if they are also coping with caregiving responsibilities or grief.
Where You Store a Will Matters
Most states require the original will to begin probate, so choosing a secure, accessible storage location is critical. Poor storage choices can cause delay, extra expense, and added stress for your executor and heirs. Common storage options include a safe-deposit box, an attorney’s office, a fireproof and waterproof home safe, or, where permitted, filing the original with the county clerk. Whichever option you choose, make sure your executor knows where the original will is kept.
What Happens in Probate?
Wills typically go through probate, the court-supervised process that settles debts and distributes remaining assets to heirs. A clear, well-drafted will and open communication with your executor make probate simpler. After your death, the executor files the will with the court, notifies heirs and creditors, inventories estate property, and may obtain appraisals for non-cash assets. Estate and funeral expenses, debts, and taxes are paid from estate funds first, and then the remaining assets are distributed according to probate laws and the will’s directives.
Parents with Minor Children Should Consider Living Trusts
A will lets you name a guardian for minor children, but a living trust can give you greater control over how and when children receive inherited assets. A revocable living trust can permit a trustee to manage funds for children until they reach specified ages or milestones, and allow you to set conditions on distributions and define how funds should be used. Trust provisions are particularly helpful when planning for a child with special needs or when you want to delay full access to inherited assets until a defined level of maturity or responsibility is reached.
Subject to Estate Tax? A Trust May Help
Estate tax rules and exemption amounts change over time. Although most estates fall below current federal thresholds, if your estate is likely to exceed the applicable exemption when you die, specific trust structures and tax planning strategies can help reduce estate-tax exposure. Moving assets into certain kinds of trusts may remove them from your taxable estate, but the right approach depends on your situation and current tax law, so consult an estate planning attorney or tax advisor before acting.
Living Trusts Can Reduce Family Disputes
If you expect your heirs to accept your wishes without dispute, a will may suffice. But if you anticipate disagreements, a living trust can provide greater clarity and specificity, and it is generally more difficult to contest than a will because it avoids probate. When choosing a trustee, naming a single, capable trustee often works better than appointing multiple co-trustees, which can slow decision-making. Consider factors that commonly trigger disputes, such as unequal gifts given during life, large income disparities among heirs, or a late-in-life marriage; these circumstances can increase the likelihood of challenges in probate.
Added Protection: the Pour-Over Will
Trusts only govern assets that are properly transferred into them. Items acquired after the trust’s creation or assets inadvertently left out can fall outside the trust and be distributed according to state intestacy rules unless you provide otherwise. A pour-over will names your trust as beneficiary for any remaining assets so that those assets “pour over” into the trust on your death. Although a pour-over will is generally still subject to probate, it simplifies administration by consolidating assets into the trust. Talk with an attorney to confirm the best approach and to ensure there are no unintended tax consequences in your state.