Wills vs. Trusts

What are Wills?

Wills tends to be more simple documents where you can name guardians for minor children and dictate which assets should go to which beneficiaries. A will becomes active only after the testator’s (will writer’s) death, and must pass through probate court.

What are Trusts?

Trusts (specifically, living trusts) are usually more complex than wills, holding assets so that they can later be distributed to beneficiaries. Assets cannot simply be named in a trust—assets must fund the trust, meaning their ownership has to be transferred to the trust. Trusts don’t pass through probate court and become active when the trustor signs the agreement.

Let’s break this down further:

Testamentary Wills

• Can name guardians of minor children
• Can be challenged in court
• Go to probate court
• Can include limited inheritance rules
• Become active after death
• Are in the public record
• Don’t require property transfer
• Can be revised

Revocable Living Trusts

• Can name guardians of minor children
• Usually cannot be challenged in court
• Don’t go to probate court
• Can include inheritance rules
• Become active upon signing
• Are not in the public record
• Require property transfer
• Can be revised

Do I need both a will and a trust?

A will is an important estate planning tool for most adults to have, and you’ll likely want to have one if you have minor children. But, not everyone necessarily needs a trust. Ultimately, deciding between a will and a trust—or deciding to have both in place—depends on your exact situation and hoped-for outcome.

Is a will or a trust better?

Neither a will nor a trust is inherently better than the other. Here are a few considerations:

• Minor children: In many states, guardians of minor children must be named in a will. Some states allow for guardians of minor children to be named in either a will or a revocable living trust. An attorney in your state can help you understand the rules that govern guardianship matters in your state.
• Probate: Trusts avoid probate, but any assets outside the trust may be subject to probate. Wills are subject to probate, though some states allow for small willed estates to either bypass probate or utilize a simplified probate process. (What qualifies as a “small” estate varies by state.)
• Estate size: While trusts are not only reserved for those with large estates, having a large estate does mean that you should likely have a trust in place. What qualifies as a “large” estate depends on your state’s rules around probate.
• Cost: Many factors go into whether a will or a trust is ultimately cheaper. Wills are typically cheaper to set up than trusts, but legal fees during probate can add to the overall cost of a will. Meanwhile, trusts may require various property transfer fees. It’s best to look at your individual situation rather than assuming a will or a trust is going to be cheaper at the end of the day.
• Ease of set-up: Wills tend to be easier to set up than trusts. Trusts require funding, which means you have to transfer ownership of assets to the trust—this process can be long and complicated.

Does a will override a living trust?

A will and a living trust are two separate legal documents, ideally working together to create a streamlined and clear estate plan. But if an issue arises between the two documents, a living trust will generally override a will.

Is a will or a trust more expensive?

Whether a will or a trust is more expensive in the long run depends on where you live, the size of your estate, and what assets are in your estate. Drafting a simple will may be cheaper than drafting a complex living trust. But the probate process for your will may be costly depending on the size of your estate and if any disputes arise. There might be fees associated with certain property transfers, or taxes that increase costs.

It’s impossible to say whether a will or a trust is cheaper from inception to property dissemination without knowing the specifics of a person’s circumstances. At Law on Call, we can talk through your situation and help figure out what estate planning option best for you.

What is probate?

Probate is the process through which a will is deemed valid and a deceased person’s assets are distributed. Depending on the circumstances of the estate—such as if a will is disputed or if the estate is substantial—the probate process can be lengthy and expensive.

But, probate can be useful. If you die with a lot of debt, probate limits how long creditors have to try and reclaim what they’re owed. Probate court can also determine how much each creditor gets if there aren’t enough assets to go around.

Probate can also be helpful if disputes arise over the will. While such disputes can lengthen the probate process and add expenditures to it, probate leaves the burden of validating the will and distributing assets to the court. When family dynamics are tense, probate can absorb some of that tension.

Not all states require wills to pass through probate. Washington, for example, requires that wills be filed with the court, but the probate process itself is optional.

Why is probate expensive?

The probate process is not inherently expensive. But costs usually rise because of legal fees. If a large and complex estate goes through probate, the fees associated therein will likely be higher than they would be for smaller and simpler estates.

Some states, like California, allow probate lawyers to charge a percentage of the estate. For the first $100,000 of a probate estate in California, lawyers can charge 4%.

How can I avoid probate?

There are a few ways to keep your estate (or at least a portion of it) out of probate. All but the first of these options are valid even if you only have a will in place. Rules vary by state, but here are a few ways to avoid probate:

• Create a Revocable Living Trust
  The most reliable way to skip probate is to put your assets in a revocable living trust. Property that’s placed in this kind of trust avoids the probate process and these assets pass directly to your beneficiaries.
• Name Beneficiaries on Accounts
  One way to avoid probate (at least for certain property) with only a will in place is to name a beneficiary on bank accounts and retirement accounts. You’ll need to fill out some “payable upon death” forms to do this. Once a beneficiary is named, these accounts won’t have to go through probate upon your death, as they’ll pass directly to the named beneficiary.
• Own Property with Another
  If only your name is on your real property titles, and your estate plan contains only a will, your property will need to pass through probate. But, if someone else’s name is on the title (such as a spouse), the property will usually pass directly to them upon your death.
• Calculate Estate Size
  Many states allow estates under a certain size to use a simplified probate process or to avoid probate completely, even if the estate plan contains only a will. When calculating estate size, only include property that passes through the will, and subtract jointly-owned property and accounts that name beneficiaries from the total.

If I have both a will and a trust, are my assets subject to probate?

If you have both a will and a living trust, the only assets subject to probate will be those that aren’t held by the trust. If assets are held in the trust, they will not go to probate.

For example, if your house funds your trust, it will pass directly to your beneficiaries without going through probate. But if your bank account doesn’t fund your trust, and your name is the only one on the account, then that account will need to go through probate before being passed to your beneficiaries.

If there is a discrepancy between what a living trust says and what a will says, the trust usually prevails.