Will vs. Trust: Choosing the Best Option for You
By Taylor Kenck
This post is Part Five of the Series “Estate Planning Basics”
With so many estate planning options, it can be difficult to know what is best for you! At Crestview Law, PLLC, clients most often choose between a will or trust-based estate plan. This post compares and contrasts a will and trust.
Introduction
Wills and trusts are the two most common vehicles for estate planning. Often, they are used jointly, with wills often supporting or even creating trusts. Occasionally, however, estate planning clients will have to pick between a will-based approach or a trust-based approach.
The differences between a will and a trust are significant. Understanding these differences can empower you to choose the option that supports your situation best. For that reason, I thought it would be useful to write a post comparing and contrasting wills and trusts in estate planning.
“Who gets what?”
In their most common forms, both a will and a trust help individuals pass assets on to their loved ones; they answer the basic estate planning question “who gets what when I pass away?”
However, the mechanisms each uses to accomplish that goal are very different. This is because wills and trusts are very different things at their core. The easiest way to differentiate the two is recognizing that a will is a legal document used in probate proceedings, and a trust is a legal relationship between a trustee and assets that are funded into the trust.
We have discussed these ideas in the past, but if you want a refresher, now is a great time to review previous posts on “What is a will?” and “What is a trust?”
Point-by-Point Comparison
Will:
Helps individuals transfer their assets to others after they pass away.
Struggles to place restrictions on how beneficiaries use the assets.
Requires probate court to be effective.
No privacy: wills admitted to probate are subject to public record.
Cannot protect assets from creditors or be used for advanced estate tax planning.
Does NOT require funding or significant work after they have been properly signed.
Trust:
Helps individuals transfer their assets to others before and after they pass away.
Allows many types of conditions or restrictions on how the beneficiaries use the assets.
Only some forms require probate court, and most will avoid probate.
Extra privacy protections: since trusts typically are not admitted to court, they aren’t subject to public record.
Can protect assets from creditors and be used for advanced tax planning.
DOES require funding and additional legwork to become valid.
Limitations on “when, how, and why” of a will
Because a will only becomes active when a person passes and when a probate court has admitted the will, it is naturally tied to the probate process–it does nothing until it has been admitted to probate. That creates some natural limitations to a will.
While a will may provide flexibility to answer the question “who gets what,” a will often struggles to place extra conditions on these transfers. Those extra conditions can include how assets are transferred, when assets are transferred, and why, or for what purpose, assets may be transferred.
For example, if a person wanted to create limitations on what their assets could be used for (the “why” condition described above), a will would struggle to do this. Wills can create conditional gifts, like, “I leave $30,000 to George, provided he obtains a bachelor’s degree.” However, this does not and cannot mandate how George would use money; it only creates the conditions needed to receive the gift. So, if the same individual from before wanted to leave “George $30,000 for college expenses,” then setting up a trust is a much better option for that goal.
These types of conditions are difficult for a will to control because of the nature of probate. The probate court is not able or willing to supervise asset transfers that take many years. Thus, probate is set up to facilitate a quick and efficient transfer of assets from the person that passed to their beneficiaries.
Wills Lack Privacy Protections
Because a will must be admitted to probate court, it naturally becomes part of the public record. That means that technically, the will is a public record, and records are available for the public. For individuals passing on significant or special assets, this can be a dealbreaker because the beneficiaries are theoretically known to the public.
I use the words “technically” and “theoretically” above because while these records are public, accessing them is not as easy as a Google search. Many online court databases require active accounts, and for folks searching for curiosity sake, the barriers are likely too much to pursue. However, dedicated investigators can gain access to the probate records.
Problem of Unfunded Trusts
Unlike a will, which is valid when properly signed, a trust requires much more legwork to become effective. As discussed previously, when a trust names assets that are not subsequently transferred into the trust, the trust is “unfunded.” Unfunded trusts create substantial problems, and often they are virtually worthless to the people that made the trust and the beneficiaries that were intended to benefit from the trust.
For that reason, trusts require much more work to create. This is reflected in the fees that attorneys charge, but clients should also expect to do more work on their end as well to establish a trust-based estate plan.
Conclusion
It is crucial to understand the difference between trusts and wills when making your estate plan. Both are excellent vehicles for transferring assets to others after your death. But they both go about this process in very different ways.
For these reasons, at Crestview Law, the goal is to help clients identify their estate planning needs and goals, and then describe how either a will-based plan or trust-based plan could meet them.
Please contact Crestview Law to schedule a free initial consultation to find out more.
Crestview Law has physical offices in Wenatchee, but we can serve clients throughout the state with our many virtual tools.
