Will vs. Trust: What’s the Difference, and Which Do You Need?
If you have started looking into estate planning, you have probably come to the same question most people do: Do I need a will or a trust?
There is no shortage of opinions. One person will tell you everyone needs a trust. Someone else will tell you trusts are unnecessary and a will is perfectly fine. Then you start reading about probate, living trusts, beneficiary designations and pour-over wills, and somehow you end up knowing considerably more words than you did when you started while feeling less certain about the answer.
I think there is a simpler way to approach the question.
Start by asking what happens to your family if one of you is suddenly not there. If something happens to you, will your spouse and children know what to do? If something happens to your husband, will you know where to start? Will you know where the money is, what insurance exists, what bills need to be paid, who has authority to handle things and what needs to happen next?
The will and the trust are tools. The real goal is to create a plan that your family can actually use when something happens.
What Is a Will?
A will gives instructions about what should happen to property after you die. It can identify who should receive your property, who should be responsible for handling your estate and, if you have minor children, whom you would want to care for them.
A will is an important estate-planning document, and even most of my clients who have a trust also have a will.
The limitation is that a will typically means your family is going to probate. Probate is the legal process your family may have to use after your death to get authority to deal with property that is still in your name. That does not mean your children are automatically headed for a two-year court battle. Many Utah probates are fairly routine. But someone still has to start the process, file the documents, follow the required procedures and eventually get the estate wrapped up. That takes time and usually costs money.
That is why having a will is important, but having a will is not necessarily the same thing as having a complete estate plan.
What Is a Trust?
A trust works differently. There are many different types of trusts, but when I am talking about using a trust as the foundation of an estate plan, I am generally talking about a revocable living trust.
With a revocable living trust, you transfer appropriate property into the trust while you are alive. You still control the property. You still live in the house. You still use the money. You are not handing your life over to a trustee somewhere. The important difference is that you have already created a structure for what happens if you can no longer manage things yourself or when you die.
When the trust is properly set up and maintained, the person you choose can step in and follow the instructions you already gave. Properly funded trust property can usually be managed and eventually distributed without going through probate. For many families, that is the biggest practical advantage of using a trust.
A trust can also give you more flexibility over what happens to your property after you die. Instead of simply saying that everything goes to your children outright, you can establish instructions for how and when they receive it.
Will vs. Trust: The Practical Differences
Before getting into the details, here is the short version:
| Will | Revocable Living Trust | |
|---|---|---|
| What does it do? | Will Gives instructions for what happens to your property after death | Revocable Living Trust Holds property and provides instructions for managing it during your life and after death |
| When does it take effect? | Will Generally after death | Revocable Living Trust During your lifetime and after death |
| Can it help with incapacity? | Will Generally no | Revocable Living Trust Yes, when assets are properly held in the trust |
| Can it avoid probate? | Will Generally no | Revocable Living Trust Often, for properly funded trust assets |
| Can it name guardians for minor children? | Will Yes | Revocable Living Trust No. This is generally handled through a will |
| Does it need to be funded? | Will No | Revocable Living Trust Yes |
| Can it control how beneficiaries receive an inheritance? | Will More limited | Revocable Living Trust Generally offers more flexibility |
| Complexity | Will Generally simpler | Revocable Living Trust Generally more involved |
When Do I Recommend a Trust?
I do not think every person needs a trust. But I generally recommend that a person or family seriously consider one if they own a home or have more than $100,000 in non-retirement assets that would otherwise have to go through probate.
That describes a lot of Utah families.
You do not need to consider yourself wealthy. You may have a house with a mortgage, some money in checking and savings, a few investments, retirement accounts, life insurance and a couple of vehicles.
That is not a Rockefeller estate, but it is enough that someone is going to have to deal with it when one of you dies.
The $100,000 figure is not some magic point where Utah law suddenly requires a trust. It is a practical guideline I use because Utah has a simplified small-estate procedure for certain estates below that amount and without a home or other real estate.
Once you own a home or have accumulated a meaningful amount of property that would otherwise have to go through probate, I think it makes sense to ask whether we can organize things now so your spouse or children have less to deal with later.
Think About the Person Who Is Left Behind
Consider a hypothetical couple we will call Mark and Jennifer. They are in their early fifties and have been married for almost thirty years. Their children are mostly grown. They own a home, Mark runs a small business, they have retirement accounts, some savings and investments, life insurance, two vehicles and the normal assortment of property people accumulate after building a life together for several decades. Mark has always handled most of the investments and insurance. Jennifer handles most of the household finances and keeps track of the family paperwork.
Then Mark dies unexpectedly.
Jennifer is grieving, but that does not stop the mortgage payment next month. She needs to know where the money is, what insurance exists, whom to call about Mark’s retirement account and which bills are being paid automatically. She may have to figure out what income just disappeared and what resources are available to replace it. If Mark owned something only in his name, she may also have to figure out how to get legal authority to deal with it.
Let’s assume now that Mark and Jennifer created a good estate plan several years earlier. Their house and appropriate financial assets were coordinated with their trust. Their beneficiary designations had been reviewed. Jennifer knew where the important information was and knew who their attorney and financial advisor were. She had some idea of where to start.
Mark is still gone. The estate plan cannot change that. But Jennifer is not also trying to reconstruct thirty years of their financial life from scratch while she is grieving. That is the difference I want estate planning to make.
The Same Problem Works in the Other Direction
In many of the families I meet the woman is the family organizer. They know where the birth certificates are, which insurance company covers the house, when the property taxes are due, where the Social Security cards are kept and which account pays the power bill.
Their husbands may know all of those things too. Or they may have a general sense that their wife knows where everything is and they can ask her when they need it.
That works perfectly well while she is there.
Estate planning forces us to ask what happens if she is not.
Would her husband know where everything is? Would he know which accounts exist and which bills need attention? Would the children know who is supposed to take charge? Would anyone know what she wanted done with the house, family property or other important assets?
A good plan works in both directions. It helps the surviving spouse take over when the first spouse dies, and it gives the children clear instructions when both parents are eventually gone.
Why I Prefer a Trust for Homeowners
For most families who own a home, I generally prefer a trust-centered plan.
The reason is not that a trust is more sophisticated or somehow more impressive. It is usually just more practical.
If your home is properly owned by your trust, the successor trustee can deal with it after your death without having to use probate simply to establish authority over the property. The trust can also help if you become incapacitated. If you are alive but unable to manage things yourself, the person you chose can step in and manage trust property according to the plan.
A trust also gives us more flexibility when we start thinking about what happens after both spouses are gone.
Maybe you want everything divided equally among three children. Maybe one child should receive an inheritance gradually instead of all at once.Maybe one child is in a difficult marriage and you would like to give that inheritance some additional protection.
Maybe one child is financially responsible, and another one could make $100,000 disappear by Thursday. Families are unique, and a trust gives us more room to deal with those differences.
Wondering Which Is Right for Your Family?
But a Trust Has to Be Maintained
There is an important catch.
You cannot create a trust, put the binder on a shelf for the next twenty years and assume everything is taken care of. The trust has to actually own the things we expect it to control.
If you buy a new house, we need to think about the trust. If you open a significant new account, we need to think about how that account fits the plan. Beneficiary designations need to coordinate with everything else. If your family or financial situation changes, we should look at whether the plan still makes sense.
A trust that owns nothing is an impressive collection of paper, but it is not much of an estate plan. That is one reason I think estate planning should be viewed as something we maintain over time rather than a transaction we complete once and forget.
If I Have a Trust, Do I Still Need a Will?
Usually, yes. This is why I do not particularly like thinking of the question as “will versus trust.” For most of my trust clients, it is not one or the other. The trust is the main part of the plan, and the will serves as a backup. The will also deals with certain things the trust does not, including identifying whom you would want to care for minor children.
So the better question is usually whether your estate plan should be built primarily around a will or around a trust. For a family that owns a home and has accumulated a reasonable amount of property, my answer is usually the trust.
When Is a Will-Based Plan Enough?
There are certainly situations where I would not push someone toward a trust. Suppose you do not own real estate, you have a relatively small amount of money outside your retirement accounts, your retirement accounts and life insurance already have appropriate beneficiaries, and your family situation is straightforward.
In that situation, a trust may not add enough benefit to justify the extra work. You still need a plan. A will, powers of attorney, healthcare documents and good beneficiary designations can all be important. But I am not interested in creating a trust for someone simply because trusts are what estate-planning attorneys sell. The tool should solve an actual problem.
What About the Cost?
A trust usually costs more to create than a simple will-based estate plan. That is one of the reasons some people hesitate. But I think it helps to look at the cost a little differently.
With a trust-based plan, you are generally paying more of the cost now. You are doing the work while you are alive, healthy, and able to make the decisions yourself. You are organizing the property, putting the right people in place, and trying to make the transfer as simple as possible when one of you dies.
With a will-based plan, you may spend less up front. But if your property has to go through probate, your spouse or children may end up paying attorney fees, court costs, and other expenses later to deal with the estate.
So in many cases, the question is not simply whether you are going to spend money on estate planning. The question is when the money gets spent and who has to deal with the process. I would generally rather have my clients spend the money while they are alive and able to make the decisions themselves than leave their spouse or children with a legal process and a bill after they die. That does not mean a trust is always the right choice, but the up-front price difference does not tell the whole story.
What About Retirement Accounts and Life Insurance?
Retirement accounts are an important part of the picture, but they usually work differently from the house or a regular investment account. Your IRA or 401(k) normally passes according to the beneficiary designation you completed with the financial institution rather than through your will. Life insurance works much the same way. That means those accounts need to be coordinated with the overall plan.
Creating a trust does not mean every asset should simply be transferred into it. We need to look at what you own, how it is titled, who the beneficiaries are and how all of those pieces fit together. This is one of the places where people sometimes get into trouble. They create a trust, sign the documents and assume the work is finished. But if the trust says one thing and the beneficiary designations say something completely different, we may not get the result you expected. Estate planning is less about collecting documents and more about making sure all of the pieces work together.
What About an Online Will or Trust?
You can certainly create estate-planning documents online. Producing the document is not usually the difficult part. The harder part is knowing what the document should say and making sure everything else works with it.
What happens if your husband dies first? Can you access what you need? What happens if you die first? What happens after both of you are gone? What happens to the house? What happens to the business? Who should actually be in charge? Those are the questions that matter. Once we know the answers, creating the legal documents is relatively straightforward.
So, Which Do You Need?
If you have a fairly small and straightforward estate, do not own real property, and most of your important assets already pass through beneficiary designations, a will-based estate plan may be enough.
If you own a home, have more than about $100,000 in non-retirement assets that would otherwise pass through probate, want to avoid probate, want a better plan for incapacity, or want more flexibility over what happens to your property after your death, I will generally recommend a trust-based plan.
You will probably still have a will as part of that plan. But I would not make the decision simply because somebody told you trusts are better than wills. Think about what happens to your family.
If something happens to your husband tomorrow, will you know where to start? If something happens to you, will he? And when both of you are eventually gone, will your children have a clear plan, or will they be left trying to reconstruct what Mom and Dad wanted while they are also dealing with losing you? The best estate plan is not necessarily the one with the most documents or the fanciest trust. It is the one that leaves the people you love with clear instructions, the right authority and as few unnecessary problems as we can reasonably leave behind.