Wills vs Trusts: Which do I need?

What Is the Main Difference Between a Will and a Trust?

The biggest difference is when the documents operate and what property they control.

A will directs the disposition of property that passes through the person's probate estate after death. It can nominate an executor to administer the estate and can also nominate guardians for minor children.

A lifetime trust is created during life. Property transferred to the trust is held and administered by a trustee according to the trust's terms. Depending on the type of trust, it can provide for management of assets during the creator's lifetime, during incapacity, and after death.

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A trust therefore does not simply replace a will. The two documents perform different functions.

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Does a Trust Avoid Probate in New York?

A properly structured and funded lifetime trust can allow assets held by the trust to pass and be administered outside the probate of a will. The word funded is critical. Signing a trust agreement does not automatically transfer everything you own into the trust. Assets that are intended to be governed by the trust generally need to be properly transferred or titled to it. New York law specifically provides that a lifetime trust is valid as to assets to the extent those assets have been transferred to the trust. For assets capable of registration—such as real estate, bank accounts, brokerage accounts, stocks, and bonds—the appropriate ownership or registration generally must be completed.

As a result, having a trust document sitting in a file does not by itself mean that every asset will avoid probate.

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Does Having a Will Avoid Probate?

No.

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A common misconception is that having a will means your family will not have to deal with probate.

A will is actually the document presented to the Surrogate's Court in a probate proceeding. Probate is the legal process through which the court determines whether the will should be admitted and, when appropriate, gives the nominated executor authority to administer the probate estate. A will can make your wishes clear and identify whom you want to administer your estate, but probate avoidance is not one of the functions of the will itself.

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Do You Still Need a Will If You Have a Trust?

Often, yes.

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Someone using a revocable living trust may also have a pour-over will. The will can direct certain assets remaining in the person's probate estate at death into the trust.

The will may also perform functions the trust does not, including nominating guardians for minor children.

However, a pour-over will should not be confused with proper trust funding. If an asset remains outside the trust and must pass through the will before reaching the trust, probate may still be necessary for that asset.

For that reason, a trust-based estate plan often includes both a trust and a will, with each document performing a different function.

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When Might a Will Be Enough?

A will-centered estate plan may be appropriate when someone's circumstances and objectives are relatively straightforward and there is no particular need for a lifetime trust.

Factors might include:

• A relatively straightforward estate

• Limited concern about probate

• No need for ongoing lifetime management through a trust

• Assets that already pass appropriately through beneficiary designations or other arrangements

• No real property or other assets creating a particular probate concern

• A preference for a simpler estate-planning structure

But the value of a trust should not be determined by net worth alone.

A person with a relatively modest estate may have circumstances that make a trust useful, while someone with substantial assets may have an estate plan using several different techniques.

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When Might a Trust Make Sense?

A lifetime trust may be worth considering when one or more specific planning objectives make continued ownership and management through a trust useful.

Examples can include:

• Avoiding probate for particular assets

• Providing for management of assets during incapacity

• Maintaining greater privacy in the administration of certain assets

• Owning real property in more than one state

• Controlling how and when beneficiaries receive an inheritance

• Providing long-term management for beneficiaries

• Planning for a beneficiary with special needs

• Addressing long-term-care or Medicaid planning

• Implementing particular tax or asset-protection strategies

Different objectives require different types of trusts. A revocable living trust designed primarily for probate and incapacity planning is very different from an irrevocable trust created for Medicaid, tax, special-needs, or asset-protection purposes.

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Which Is Better for Parents With Minor Children?

Parents with minor children should generally consider having a will even if they also establish a trust.

A will can nominate the person or persons the parent would want considered to serve as guardian of a minor child.

But the guardian question is only one part of the planning.

Parents should also decide who will manage the child's inheritance and under what terms.

Those responsibilities do not necessarily have to be given to the same person. A parent might nominate one person to care for a child while naming a trustee to manage assets for the child's benefit.

A trust can also specify when and under what circumstances the child eventually receives control of inherited property rather than providing for an outright distribution at a particular age.

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Which Is Better for Incapacity Planning?

A will does not provide a mechanism for managing property during the will-maker's incapacity because a will takes effect at death. A properly structured revocable living trust can address management of assets held in the trust during incapacity. For example, the trust can provide for a successor trustee to assume management responsibilities under circumstances described in the trust. That does not mean a trust replaces all other incapacity-planning documents.

A comprehensive plan may also include a power of attorney, health care proxy, and other advance directives because those documents address powers and decisions that may extend beyond property held in a trust.

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Are Trusts Only for Wealthy Families?

No. 

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Trusts are frequently associated with wealthy families because sophisticated trusts are used in estate and tax planning. But wealth is not the only reason to establish one. A trust may be useful because someone owns real estate, wants to avoid probate, has minor beneficiaries, has a family member with a disability, wants assets managed over time, owns property in multiple states, or wants a mechanism for managing trust property during incapacity.

At the same time, not everyone needs a trust. Creating a trust simply because trusts sound more sophisticated can add unnecessary expense and administration without solving a meaningful planning problem.

The starting question should be: What do you need the trust to accomplish?

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Does a Revocable Living Trust Protect Your Assets?

A revocable living trust generally should not be viewed as a creditor-protection device for the person who creates it.

With a typical revocable trust, the creator retains substantial control and beneficial access to the trust property. Moving property from individual ownership into such a trust does not, by itself, make the creator's assets unavailable to creditors.

Certain irrevocable trusts can be used as part of asset-protection, Medicaid, tax, or other planning strategies, but their effectiveness depends on the type of trust, its terms, timing, applicable law, and the rights retained by the person creating it. So the comparison should not be:

Will = no asset protection
Trust = asset protection

The correct answer depends on what kind of trust is being considered and why it was created.

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Is a Revocable Trust Better for Estate Taxes?

Not simply because it is a trust.

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Transferring assets to a standard revocable living trust does not, by itself, create estate-tax savings.

Both wills and trusts can be components of more sophisticated estate and tax planning, and different types of irrevocable trusts may be used for particular tax objectives. The tax question therefore should be analyzed separately from the basic decision between a will-centered plan and a revocable-living-trust-centered plan.

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Which Costs More: A Will or a Trust?

A trust-centered estate plan generally involves more initial planning and administration than simply creating a will because the trust must be drafted appropriately and the intended assets must be coordinated with or transferred to it.

But initial cost alone does not determine which approach is appropriate.

The relevant comparison includes:

• Initial planning and document preparation

• Work required to fund and maintain the trust

• Probate that may otherwise be required

• Complexity of the assets

• Property owned in multiple jurisdictions

• Beneficiary needs

• Incapacity-planning objectives

• Administration after death

A simpler plan is not automatically better, and a more complicated trust structure is not automatically better. The appropriate level of complexity should be driven by the planning objective.

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Is a Trust More Private Than a Will?

There can be an important privacy difference.

When a will is offered for probate, it is filed with the Surrogate's Court as part of the estate proceeding.

A lifetime trust generally does not have to be admitted to probate merely because the person who created it dies. This can allow the terms governing properly funded trust assets to remain outside the probate filing process.

That does not mean trust information can never be disclosed. Trustees can have duties to beneficiaries, and litigation or other legal circumstances may require disclosure. Nevertheless, privacy can be a legitimate consideration when comparing a will-centered plan with a properly funded lifetime trust.

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What About Assets With Beneficiary Designations?

Neither a will nor a trust should be considered in isolation from the way assets are owned.

Life insurance, retirement accounts, payable-on-death accounts, transfer-on-death arrangements, jointly owned property, and other assets may pass according to beneficiary designations or ownership arrangements rather than under a will. Trusts can sometimes be named as beneficiaries where appropriate, but doing so can have important tax, distribution, and administrative consequences depending on the asset. A complete estate plan therefore coordinates:

the will + trusts + beneficiary designations + ownership of property + incapacity documents.

This coordination is often more important than simply deciding whether a will or trust is “better.”

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So, Do You Need a Will, a Trust, or Both?

There is no universal answer.

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A will may be sufficient when your estate and objectives are straightforward and you do not have a particular reason to use a lifetime trust. A trust may be useful when you want particular assets managed during life, want properly funded assets to avoid probate, have incapacity-planning concerns, own property in multiple states, or want greater control over how property is managed for beneficiaries. You may need both when a trust is an important part of your estate plan but a will is still needed to nominate guardians, address property outside the trust, or serve as a backstop to the trust-based plan. The better question is not: “Is a will better than a trust?”It is: “What do I want my estate plan to accomplish, and which legal tools accomplish those objectives most effectively?” That answer depends on your property, family, beneficiaries, planning goals, and the amount of control and flexibility you want during your lifetime.

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For more information specifically on Wills, visit our Wills page or Wills FAQ page. 

For more information specifically on Trusts, visit our Trusts page or Trusts FAQ page.

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Sources & Legal References

New York Estates, Powers and Trusts Law § 3-2.1 — Execution and Attestation of Wills

New York's statutory requirements for the execution and witnessing of wills.

New York Estates, Powers and Trusts Law, Article 7 — Trusts

New York statutory provisions governing trusts, including lifetime trusts.

New York Estates, Powers and Trusts Law § 7-1.16 — Revocation of Lifetime Trust by Will

Includes New York's rule that a lifetime trust is irrevocable unless it expressly provides that it is revocable.

New York Estates, Powers and Trusts Law § 7-1.17 — Execution, Amendment and Revocation of Lifetime Trusts

Addresses execution and certain amendment and revocation requirements for lifetime trusts.

New York Estates, Powers and Trusts Law § 7-1.18 — Funding of Lifetime Trust

Addresses the transfer of assets into a lifetime trust and is particularly relevant to understanding trust funding.

New York State Unified Court System — Probate and Last Will and Testament Resources

Provides information concerning wills, probate proceedings, executors, and estate administration in New York.