Is It Better to Have a Will or a Trust?

Having a plan in place for what will happen to your assets after you’re gone can help ease the burden on your family during a period of stress and grief.  

Both wills and trusts can be an effective way to make sure your wishes are carried out, depending on your situation. But how can you tell if a will or a trust is a better option for you? And just what are the differences between a will and a trust? Here’s what you need to know about these two important elements to estate planning.  

How does a will work? 

A last will and testament details how you want your property (both your possessions and your financial assets) to be dispersed upon your death. It also spells out whom you want to serve as guardian to any children who are still minors.  

Although you will likely draft your will with the help of an estate planning attorney, after your death your will must still go through probate, a legal proceeding that authenticates the will and begins the process of distributing your estate. The probate process takes place in the courts and is therefore a matter of public record, and it can be both time consuming and costly. If you own property in different states, you may also be required to go through probate in each state, further extending the process and legal fees. 

A will also does not override whom you name as beneficiaries for your financial accounts, including life insurance policies and retirement accounts. So if there is a discrepancy between what’s listed in your financial account versus what’s in your will, the information in your financial account will be considered final.  

How does a trust work? 

A trust is similar to a will in that it provides a roadmap for how you would like your financial matters carried out after your death. But when you set up a trust, you’re establishing a legal relationship with a trustee who will carry out your wishes for your assets on behalf of a beneficiary. You can be the trustee while you’re alive, but upon your death or incapacitation, another trustee you appoint will be responsible for handling the investments and distributing your money as directed. 

Unlike a will, a trust is private so it doesn’t have to go through probate, helping you avoid delays or the possibility that your plan for your finances could be contested (although any assets you don’t specifically cover in the trust will still have to go through probate). 

Another key difference is that a trust only addresses the financial management of your assets. So while it can provide direction for how your children will be taken care of financially, it doesn’t address other elements of their care, such as appointing a guardian who will care for their day-to-day. 

A trust also offers more timing flexibility than a will, which distributes all your assets immediately once it’s through probate. This could leave your children with a large inheritance they may not be ready to handle. In a trust you can choose to distribute an inheritance at certain milestones, such as when they graduate from college, get married or have their first child, and set standards that must be met in order to receive the money. 

Given its complexities, a trust is typically more involved and expensive to set up than a will, but it provides more oversight and control.  

Is a trust or a will better? 

Your personal situation will dictate whether a will or trust is the better option. But often, it may make sense to include both a will and a trust in your estate plan because of the different benefits they provide.  

For instance, if you have minor children, you can appoint a guardian for them through your will but outline the details of their financial care in a trust. It’s smart to seek professional advice to consider the financial and legal consequences, and don’t forget to review both documents annually to ensure they still reflect your wishes.