“A will answers, ‘How do you give your assets to someone when you die?’ ” said certified financial planner Bryson Roof of Fort Pitt Capital Group of Pennsylvania and Florida. “A trust can be used in the same fashion, but tends to be used for more complex situations or when someone wants to retain a level of control. To me, trust equals control.”
What’s the Difference Between a Trust and a Will?
Wills and trusts may seem similar, but they are means to accomplish different goals. Here’s how they differ. A trust is a way to transfer your assets but can serve various functions, depending on the trust type and what the attorney includes. The uses of a trust can include:
Minimizing estate taxesProtecting beneficiaries from creditorsPreserving assets for minors until they’re adults or reach specific agesBenefiting a charityManaging property in multiple statesProviding for a special needs child
As an example, Roof said parents often use a trust if a young adult is involved. “If you have a kid in college, do you really want them to inherit a million dollars and blow it on cars, gas, and motorcycles?” Roof said. A trust can stipulate that the money is given out in chunks at ages 18, 25, and 35. Or you can insert rules stating that funds must be used for health, maintenance, education and support, he said.
When It Takes Effect
A will becomes effective at death. If you’re incapacitated through mental or physical disability, the will won’t yet be accessible or effective in court. In contrast, a trust can be set up so it takes effect even while you’re alive. For example, you can set up a trust so money, property, and other assets can be managed by someone else if you’re sick or incapacitated. A trust can also kick in after you have passed away or lost mental capacity. Trusts are far more flexible with regard to when they take effect.
Probate Court
A will must almost always go through probate court to ensure the will’s validity. The probate process will be publicly available information. Probate court can be expensive and take longer. Assets in each state must go through probate in that state.
Costs To Create
A will is simpler and less expensive to create and administer compared to a trust. Some firms may charge $395 to around $1,000 to create a will for a single person. Pricing depends on your situation and if your will package contains items such as a health care or financial power of attorney. A trust requires more of an attorney’s time to discuss options that apply to your situation, then draft a document. The typical estimated cost to create a trust could vary widely depending on your situation and what you want the trust to accomplish. Expect to see pricing anywhere between $850 and $3,050 for a single person. Of course, you can also use online will and trust sites to create the documents for $0 to $200, although there is controversy about DIY wills and how valid these documents may be. “You can elect to have a family member such as your mother or daughter to manage your trust, and they may not charge a fee,” Roof said. “We often see this with aging parents in nursing homes, and a son or daughter will manage the trust on behalf of their parents without charging a fee.”
Special Considerations
Some assets may not need to go through probate, even if you only have a will. For example:
Joint bank accounts and jointly held property Bank, retirement, life insurance, and other accounts where the deceased named someone as a beneficiary Some property, depending on how it’s titled
Which Is Right for Me?
Each person’s circumstances are different and there is no set formula for deciding which route you should take. However, there are some questions you can ask yourself, and those answers can guide you into choosing between a will or a trust. A simple will may be right for you if you:
Want to choose who handles your affairs after deathHave children and want to decide on their future guardiansWant to direct where your assets go after death versus the state (if you have no will)Don’t have many or complicated assets
Some type of trust may be right for you if you:
Want to appoint a trustee to manage your assets, even while you’re aliveHave assets in multiple statesAre concerned about privacyWant more control over how and when assets are distributedAre concerned about an adult child’s spendingHave a loved one who is special needs, or not a U.S. citizenHope to provide your beneficiaries with easier, faster access to your assets
A Best-of-Both Worlds Option
Many people could benefit from having both a will and a trust. The right vehicle(s) for you depends on your situation, state law, and what you hope to achieve after your death. In fact, you can establish a trust within a will, and name your trustee for those trusts. Even if you set up a revocable trust—which can be seen as similar to a will—you’ll likely still set up what’s called a “pour over” will to address any assets you didn’t address and to establish a guardian for your minor child. Most attorneys have a package deal for estate planning, Roof said. This includes:
Last will and testament and a trust, if necessaryMedical power of attorneyAdvanced medical directiveFinancial power of attorney
The Bottom Line
A trust can be a powerful tool to manage your financial legacy in this lifetime and after you die. A will is a more straightforward tool to distribute your assets and request a specific person for guardianship of a minor child. Depending on your situation, you may choose one or both—but it’s wise to consult on an appropriate approach. Without a will or trust, your state’s courts may be making all the big decisions. “Typically, the way the state deems your assets to be distributed is not the way you intended,” Roof said. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
