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Understanding differences between an estate plan based on a Will and one based on a Trust?

Let me start with one basic statement, and whether you choose a Trust or Will, there is likely a place in your plan for the other as well. When attorneys outline a client’s options, the basic question is whether a client is comfortable with, and has reason to, transfer most of their assets into a trust while still living. If the answer to these questions is yes, a Living Trust is called for, but if you are more comfortable retaining full title on those assets and only implementing trusts in specific circumstances after your death a Will-based plan is more appropriate.


Wills and Trusts are both estate planning tools that can help ensure your assets are protected and bequeathed to your beneficiaries. A Will is a written document expressing your testamentary wishes. The Will may include naming guardians for your minor children, bequeathing specific objects, assets, or cash proceeds to specific individuals or institutions. A Will may also establish one or more Trusts to deal with a specific asset or beneficiary issues. The Will becomes effective only upon your death and has no legal consequences regarding ownership of assets until that event.


A Trust is effective the day you create it. The assets placed in the trust are no longer your assets, but assets of the Trust. The Trust may distribute income or assets before or after your death consistent with the Trust’s terms. As the name implies, an Irrevocable Trust is irrevocable, and you cannot alter it after its creation and funding. The assets placed in that Trust are valued when they are placed in the Trust for gift and estate tax purposes. On the other hand, a Living Trust can be altered by the Grantor during their lifetime, and the value of the Trust is included in the estate’s value for tax purposes. The advantage of a Living Trust is that assets do not have to go through probate after your death, the assets continue to be managed consistent with the Trust's provisions, and all this is done privately.


Either estate solution likely requires some aspects of the other solution as well. If you put a Trust in place, you need a Will and the associated powers of attorney to address issues that may be impossible or impractical to deal with in the Trust. For example, you will require a "pour-over Will" to address assets that were not put in the trust, such as some personal property items. Also, while a trust allows an alternate trustee to step in and manage your assets on your behalf if you have current income from government benefits or other retirements. Those payments are your personal property and not Trust property until they are deposited into a Trust account. The Trust itself may not be sufficient to permit the trustee to interact with those payors on any administrative issues. The trustee may require a financial power of attorney to satisfy the institution’s requirements.

Conversely, with a Will, you may need to implement Trusts to oversee assets left to beneficiaries unable to manage them independently. The prototypical examples are trusts for minor children or special needs beneficiaries. Another common situation involves trusts of family assets left to benefit multiple persons. For example, a family vacation home may be placed in a real estate trust to permit descendants access to the property consistent with your desires.


Summary of Key Differences

​Will

Trust

When Do the Provisions Become Effective?

At Your Death

Once Signed and Funded

Can It Provide Protection During Incapacity?

NO (Requires separate Healthcare and Financial Powers of Attorney)

YES

Does it Require probate?

YES

NO (For those assets in the Trust)

Is the Privacy of the Testator/Grantor Preserved?

NO

YES

Can Provide for Guardianship of Minor Children?

YES

NO

Can It be Contested?

YES

YES (But much less likely to be successfully contested than a Will)

Are There Tax Advantages?

NO

Revocable Trust – NO Irrevocable Trust – YES

Are Assets Protected from Creditors?

NO

Revocable Trust – NO Irrevocable Trust – YES


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