Will or Trust: Navigating Estate Planning Needs

Estate planning is crucial for ensuring your wishes are carried out after you're gone. Two common tools – wills and trusts – serve this purpose, but they function differently. Understanding their distinctions helps you decide which best suits your unique situation.

The Will: A Blueprint for Distribution

A will is a legal document outlining how you want your property and other assets distributed upon your death. It names an executor- the responsible party for managing your estate and carrying out your wishes. Wills allow you to:

• Designate beneficiaries- Specify who inherits your property, including real estate, possessions, and financial accounts. 
• Name guardians for minor children- Appoint someone to care for your children if you die before they reach adulthood.
• Express final wishes- Provide instructions for your funeral and burial arrangements.

Drawbacks of a Will:

• Probate- Assets distributed through a will go through probate, which is a court process that can be time-consuming and costly.  Probate is also a public process, so the transfer of your assets is not done privately.
• Beneficiary Designation- Any accounts with beneficiary designation- think IRA/401k beneficiaries, payable-on-death (PODs) bank accounts, or a transfer on death deed on your house- will supersede the will and transfer to those individuals, rather than whomever is stipulated in the will. A regular beneficiary review is necessary to ensure your asset disposition wishes are followed.
• Limited control: Wills don't offer much control over how assets are managed after your death.

The Revocable Trust: A Comprehensive Management Tool

A revocable trust is a legal entity that holds assets on your behalf for the benefit of beneficiaries. You, as the grantor, transfer ownership of assets to the trust, naming a trustee to manage them according to your instructions. You can name yourself as the initial trustee and retain control over the assets; the trust becomes irrevocable upon your disability or death, and the successor trustee takes over.

Benefits of a Trust:

• Avoids probate: Assets held in a trust generally bypass probate, saving time and money for your beneficiaries.
• Management control: You can dictate how assets are managed and distributed, including setting conditions for beneficiaries to receive them.

Drawbacks of a Trust:

• Complexity: Setting up a trust can be more complex and expensive than creating a will.
• Maintenance: Trusts may require ongoing management and may incur administrative fees.

Choosing Between a Will and a Trust

The decision depends on your specific needs and estate complexity. Wills are relatively straightforward documents compared to trusts, though still need to be in place even if you make use of a trust. Regardless of which option you choose, you’ll need to utilize an attorney. 

Here are a few considerations:

• Choose a Will If: Your estate is relatively simple, you regularly review beneficiaries on accounts, you have minor children, and avoiding probate isn't a major concern (or can be avoided through beneficiary designations).
• Add a Trust If: You have a more complex estate with significant assets, you want to avoid probate, or if you need strategic estate planning. Estate planning strategies become key as the estate tax exemption amount ($13.61 million for an individual or $27.22 million for a married couple in 2024). For insight into strategies surround the estate tax exemption, see our article here: Potential Tax Changes Looming in 2026.  

Conclusion

A comprehensive estate plan includes documents outside of wills and trusts which can include advanced medical directives to outline medical care preferences and financial and medical powers of attorney. All these documents work in conjunction to ensure your wishes are followed according to a pre-determined plan, rather than leaving the burden of major decisions on your loved ones. 

Knowing which type of estate planning tool is best suited for your situation allows you to make informed decisions about your legacy and can help ensure your wishes are carried out and loved ones are taken care of. Contact us today to discuss how estate planning fits into your overall financial planning needs. 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.