Pros and Cons of Wills and Trusts - Werner Law Firm

Weighing the Pros and Cons of Wills and Trusts

Among estate planning tools, the two most common are wills and trusts. Both accomplish similar things, yet serve entirely different purposes, and can even be used in conjunction with one another. A simplified approach to the topic might lead you to believe that wills are easy and cheap, and trusts are more complex and expensive – but there is a broader picture to consider.

Both last wills and trusts are designed to leave behind instructions that can be clearly interpreted as your own, allowing a designated individual to organize the distribution of your remaining wealth after you have passed on. But there are things a will can do that a trust cannot, and things a trust can do that a will cannot.

Wills and Trusts, Explained

A last will and testament is a document that details how you wish your estate to be distributed after you pass away. A will has certain limits, but it can be best described as a set of instructions.

A last will and testament will often list one or more executors – these are administrators who are tasked with overseeing the resolution/execution of the will. A chosen executor can refuse the job, at which point another may be chosen. If a person is listed as executor but found incompetent by a probate court, they may assign someone else instead.

Probate is one of the biggest differences between wills and trusts. The probate process begins once a loved one or an attorney presents the death certificate of the decedent to the local probate courts.

Once probate begins, the courts will determine the legitimacy of the will (and provide an opportunity for others to come forward with any evidence to challenge the will) and assign an executor to go through with fulfilling the will’s instructions. If no will exists, or if the only existing will is found to be fraudulent/invalid, then the decedent will have died ‘intestate’, at which point the state’s intestate laws decide how any remaining property and assets will be distributed.

A trust is different from a will. A trust is a separate entity that holds property ‘in trust’, as per a legal agreement called a trust document. Trusts involve three parties – the grantor (you), the successor trustee (the administrator of the trust), and the beneficiaries.

A person can have several trusts, but only one valid will. Unlike a will, a trust can be used to exercise much greater control over how property is distributed when you die, and anything funded into a trust also automatically bypasses probate. However, because trusts are a little more complex and usually involve more complex instructions, they are more expensive to manage.

Advantages and Disadvantages in Trusts

There are a variety of advantages to having a trust. They include:

    • No probate. The probate process requires that the contents of a will be admitted into the public record, which can be considered invasive.
    • Trusts can be funded with property anywhere in the country. Although more complex, you can also fund foreign property into a trust (through a foreign lawyer). On the other hand, having property in other states go through the probate process can be quite complex.
    • Trusts are managed by you until you either pass away or become mentally incapacitated (unable to manage your own affairs), at which point a trustee will take over.
    • Trusts can be built to serve a large variety of purposes, from providing for pets, to creating a life-long fund for a special needs child, to giving to charity, and more.
    • Irrevocable trusts can help you protect important assets from potential creditors.

There are disadvantages to having a trust, as well:

    • Trusts can be expensive and complicated to set up. It takes a lot of legwork to fund assets into a trust.
    • Creating a trust does not exempt you from making a will. It may be a simpler will, but without a will, you cannot control how assets that are not funded into your trust may be distributed.
    • Not everything can be placed in a trust, although this is true for wills as well. Accounts that can be assigned beneficiaries do not need to be included in a trust.

Advantages and Disadvantages in Wills

While wills are simpler, there are things they can do that trusts cannot:

    • Wills avoid intestacy. You do not need to be specific about what you are distributing in a will, whereas a trust must be funded, and everything funded into said trust must be specified (otherwise, it goes through probate). As such, wills can be used to ensure that anything you own that is not in a trust goes into a testamentary trust.
    • Wills allow you name a guardian for your children. This cannot be done in a trust.
    • Wills are simple to set up, although it is still recommended to have one tailored for you, rather than using a DIY template.

There are disadvantages, as well:

    • Wills are limited and cannot be as flexible as trusts.
    • Wills can be used to make notes about how you would like to be buried, but these details do not need to be followed. It is better to leave behind a formal letter making these requests, separate from your will.
    • Wills do not avoid the probate process. This is no problem for smaller estates, where the probate process is often much smoother.
    • Because a will becomes part of the probate process, it becomes a matter of public record. As such, it is not private.

Estate Planning Is a Symphony

Every estate plan should be built with only the estate in mind. Estate plans should be tailored to the individual, rather than being built off of simplistic templates and generalized do-it-yourself forms.

Much like a symphony, this can be a large-scale work, meant to address a variety of issues such as properties across multiple estates, an estate total that exceeds the federal estate tax limit, specific healthcare considerations that call for an estate plan that can go into effect upon mental incapacity rather than death, timeshares and other complex ownership issues, and more.

Sometimes, estates are small and simple, and easily resolved. Other times, they require an estate plan that matches their complexity. Rather than simply choosing between a will and an estate, consider a consultation with an estate planning professional to better understand what kind of plan best matches your circumstances.

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