Trust vs Will: Which Is Right For Me?

Wills can be enough when you have a simple estate, but when the estate is complex or you have more specific needs for how assets should be distributed a trust is often the better option. A will also means the estate goes through the probate process whereas a trust is administered outside of the courts in privacy.

Comparing Will vs Trust

Wills and trusts are both forms of estate planning that outline what to do with property after a death, but they do so through different mechanisms. Wills go through the public legal process of probate, and trusts through the private process of trust administration.

Key Features of Wills

A will is a legal document that describes how a person wants their property distributed at their death. These decisions are enforced through the probate process.

A will usually starts with a statement identifying who the sill is about, who their immediate family members are, and nominated a personal representative and back ups. The most important part of the will is the section on gifts. This section names the people or organizations that property is left to. This could be as someone giving all their property to their spouse, to their kids, or to a long list of beneficiaries. A will can also state the testator’s wishes regarding funeral arrangements and burial, and might nominate a guardian for the testator’s minor children.

Probate is the public legal process of accounting for and distributing a person’s belongings after they die. Most probates resolve peacefully, with the decedent’s property all being distributed according to their wishes. However, probates can become messy when a decedent has overwhelming outstanding debts, or when heirs raise arguments about the decedent’s wishes.

Pros and Cons of Wills

Whatever process you choose, there will be pros and cons:

Pros

Less up-front cost: Wills are shorter documents than trusts and are usually cheaper to draft and execute.
Simplicity: A well-drafted will should be easy for anyone to read and understand, whereas a trust might have more complex legal language and provisions.
Make your wishes known: Having a will is almost always better than not having a will, for the simple fact that it announces your wishes to your family members. Everyone involved can sleep easier knowing they won’t have to guess about what you would have wanted.

Cons

Probate: A will is a document that requires a probate to be enforced. As outlined above, probate is a lengthy process that could be costly.
Publicity: Probate is a public process. Opening a probate is like ringing the dinner bell; it requires contacting all your possible heirs and notifying all your creditors that now is the time to file claims against your estate.

Key Features of Trusts

A trust is a legal entity created to convey the deceased person’s assets to their heirs in a controlled manner that avoids probate. A trust exists in the signed trust document and in the relationship between three parties: settlor, trustee, and beneficiary.

The settlor is the person who creates and puts assets into the trust. If you work with a law firm to create a trust for your estate plan, you are the settlor. Often married couples are co-settlors of their trust.

The trustee is the person who controls and administers the trust. The trustee must abide by the rules set forth in the trust document. Once the settlor has died, the trustee is responsible for carrying out the settlor’s instructions as described in the trust document. In a revocable trust, the trustee is the settlor while they continue to live.

The beneficiaries are the people or organizations who receive distributions or entitlements from the trust. Sometimes, these are referred to as heirs. Beneficiaries might receive property directly, or they might be entitled to the profits from certain invested trust assets, or they might gain a right to use certain property of the trust, or gain some other benefit.

Pros

Avoiding probate: The greatest benefit of a trust is that it can save your family the time and cost of probate.
Privacy: By avoiding the public probate process, a trust is more private. Only the people directly involved need to know about it. This avoids fights with estranged family members, public challenges to an inheritance, and government red-tape or interference.
Flexibility: A trust is a flexible document that can be written to account for numerous contingencies, special cases, and exceptions.
Protecting investments: Some settlors use a trust to keep valuable assets out of the hands of fiscally irresponsible or immature beneficiaries.
Providing for minor beneficiaries: A trust provides a safe and sure way to provide for beneficiaries under the age of 18. The trustee can hold the assets and use them to pay for the children’s needs and distribute the rest once they are of age.

Cons

Complexity: Trust documents are often 15-20 pages in length, and can be much longer if the settlor’s estate is large or their distribution plan is complicated. Make sure you choose a trustee who is capable of understanding and familiarizing themselves with all the terms of the trust.
Up-front expense: Since a trust is a robust and complicated document, they are usually more expensive to draft and execute than a will. However, a trust often saves money in the long run by avoiding probate costs.

Key Factors to Picking a Will or a Trust

When choosing between a will or a trust, there are key factors to consider such as:

The complexity of the distribution
If your beneficiaries have specific needs
The size of your estate
If you have plans for specific assets

Ask yourself the following questions to decide whether you need a trust or a will. If you answer yes to any of the following, a trust is likely the better solution.

Do I have a complicated distribution plan or many beneficiaries?

Rather than putting your wishes in a will and leaving it for the court and your many beneficiaries to sort out, consider creating a trust. That way, you can hand it all over to a single trustee or two co-trustees to be in charge, and they can use their judgment to choose the best ways of contacting and involving the various beneficiaries in managing and distributing your assets.

By setting up a trust plan now, you are not relying on unknown future humans and third parties to ensure compliance with your wishes. Trusts help “lock in” your desires, by avoiding court involvement through the probate process.

Are any of my beneficiaries receiving disability benefits, fiscally irresponsible, or minor children?

These are all reasons to pick a trust instead of a will, because the trustee can make sure the trust assets are distributed in the best interests of the beneficiary, and potentially over a long period of time. If your minor child inherits from a will, the court will appoint a “guardian of the estate” to take care of their share until they turn 18.

Do I want to spare my family the time, money, effort, and publicity of a probate?

This is often a key deciding factor between a will and a trust. Many people find the probate process to be frustrating and the last thing they want to worry about after having just lost a loved one. A trust is the most sure-fire way to avoid probate.

Do I have a large estate that I want to benefit my family for generations?

A trust is the perfect method to establish lasting support for your family after your death. If however the opposite is true and the estate is worth less than $50,000 then your family can use Wisconsin’s “transfer by affidavit” rule to distribute your assets without needing to go through the entire probate process. While this method can avoid a full probate, it offers none of the other benefits of a trust.

Do I have a house I want to stay in the family or let a specific person live in?

A trust is an appropriate method of keeping real estate in the family without giving control or ownership to specific people. Additionally, some settlors use a trust to ensure that a loved one gets to keep living in their home until that person should die or move away. This can also be accomplished without a trust using something called a life estate, but a trust provides for more flexibility and customization.

When to Get Both a Will and a Trust

Usually, the main conveyance method of your estate plan is either a will or a trust. However, wills and trusts sometimes work together in an estate plan.

In most cases, it doesn’t make sense to have a trust that disposes of some assets, and a will that disposes of others. If you have the trust anyway, you should generally use the trust to take all of your assets and save your family the headache of opening a probate.

Usually, an estate plan that includes a trust will also include a pour over will. This is a will that gives anything you own at your death to the trust. Your estate should not need to use the will if the trust was properly funded during your lifetime, but it acts as a failsafe in case you didn’t have the chance to move an asset into the trust. Therefore, most people who have an estate planning trust will also have a pour over will.

Your will might also set up a testamentary trust, which is a trust that will only be created upon some contingency after your death. For example, your will might direct that, if you die with minor children, a trust should be created to hold their inheritances until they reach age 25. Testamentary trusts within Wills don’t exist now, but may be created in the future by your executor if the contingencies are triggered.

If you are already satisfied with your will, and don’t mind a probate, then you probably do not need a trust. If you do decide to create a trust afterward, for any of the good reasons there are to have a trust, then you should make sure your trust and your will align: you cannot dispose of assets in your will if they are owned by your trust, and conflicting statements in will and trust might confuse your beneficiaries or muddle your intentions. In this case, it would be advisable to revoke the will and replace it with a pour over will.