Should You Have Both a Will and a Living Trust?

One of the most common questions estate planning attorneys hear is “Do I need a will, a living trust, or both?” Often, the question is asked by a new client who has been doing research on estate planning, or who has been advised by a friend or family member. We are always happy to hear this question, because it is a great way to begin exploring our clients’ needs. The response is usually a question in return: “What do you want your estate plan to do?”

The reality is that wills and trusts are tools. They accomplish many of the same things, but each offers advantages that the other does not. Your estate planning attorney’s first duty is to help you identify your goals for your estate plan. Then she can help you choose the best tools with which to achieve those goals.

What’s the Difference Between a Will and a Living Trust?

You can use both a will and a trust to distribute your assets to your loved ones after your death. However, they do so by different mechanisms.

Assets left to others in a will must go through probate. Probate is the court-supervised process of settling an estate. Depending on the size and complexity of the estate, an informal probate process may be available. Many people prefer to avoid probate, so they opt for a living trust—more on that in a moment. However, it is still important for most people to have a will, because there are things that a will can do that a trust cannot.

One important function of a will is to name a guardian for one’s children. If you have minor children, you must plan ahead for who would be responsible for their care in the event something happened to both parents. A guardian named in a will does not have legal authority until appointed by the probate court, but naming a guardian in your will can prevent unnecessary probate litigation between family members over who would care for your child. You can also name a conservator in a will to manage your child’s assets until your child becomes a legal adult. The guardian and conservator may be the same person or different people.

You can also use a will to disinherit certain people who might otherwise inherit from you, or to leave specific assets to particular people. Also, a will typically has a “residuary clause” that disposes of any of your property not specifically described in the will. So, if you have a will, you can be confident that all of your assets, no matter when you acquire them, will be distributed according to your will.

Now, let’s talk about living trusts. A living trust is a legal relationship created by a trust document. A grantor (also called a settlor or trustmaker) creates and funds the trust. (Unlike a will, you need to take additional steps to ensure that your assets will be disposed of by a trust.)The trustee manages trust assets for the benefit of a beneficiary or beneficiaries.

During your lifetime, you can act as grantor, trustee, and beneficiary of the trust assets. Essentially, you can use, enjoy, and transfer assets just as if they were in your sole name, not the trust’s. So why bother to make a trust at all?

When you create a trust, you name a successor trustee and remainder beneficiaries. The successor takes over managing the trust when you are no longer able to, and the remainder beneficiaries benefit from the trust after your death. There are multiple potential advantages to this setup.

One is that it protects your assets if you become incapacitated, such as due to Alzheimer’s disease or other dementia. Your successor trustee steps in to manage your assets for your benefit, and after your death, for your remainder beneficiaries.

Whether or not you need a trustee to take over during your lifetime, upon your death, assets in your trust do not need to go through probate. You can use a living trust to minimize the size of your probate estate or avoid probate altogether, if that is important to you.

Another important reason to consider a trust is if you have minor children, or young adult children whom you do not feel are mature enough to receive their inheritance all at once. If you have only a will, your children become entitled to their entire inheritance at the age of 18, regardless of how responsible they are. A living trust allows you to set the terms under which distributions will be made from the trust for your child’s benefit, and when they will be entitled to receive all of the assets in the trust. The successor trustee manages assets for your children, so there is no need to have a conservator appointed (though your children will still need a legal guardian if they are minors).

In addition to the advantages above, a trust offers privacy. If you have a will and your estate goes through probate, all of your heirs at law are entitled to a copy, even if they are disinherited. If you have a trust, your beneficiaries are entitled to certain information about the trust, but the trust document itself can be kept private.

Will vs. Trust, Trust vs. Will…or Should You Have Both?

Despite the increasing popularity of living trusts, not everybody needs one. For instance, if you have a relatively modest estate with only one or a few heirs, and your children (if any) are adults, you might decide you don’t need a living trust; you can use other tools, such as a durable power of attorney, to plan for incapacity.

However, for many people, a living trust provides greater peace of mind, especially if they want to avoid probate or have young children who may not be prepared to manage their inheritance wisely if they receive it in full as a young adult.

Often, it is a good idea to have both a will and a living trust. You can use the will to name a guardian for any minor children you have, something you cannot do with a trust. The trust will then ensure your children’s assets are managed by the trustee as you have directed.

You can also use a will to fund the trust with any assets you did not place in the trust before your death. A “pour-over”will leaves any assets in your estate that were outside the trust to the trust. Those assets are then managed by your successor trustee for the benefit of your beneficiaries.

We recognize that all of this is a lot to think about! The good news is that you don’t have to figure it out alone. Just schedule a consultation with your estate planning attorney and discuss what you’d like your estate plan to achieve. Together, you can decide whether your needs will be best served by a will, a trust, or both.