Living Trust vs Will: What’s the Difference and Which One Do You Need?

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When it comes to estate planning, two of the most common tools are living trusts and wills. Both help ensure your assets reach the right people after you’re gone, but they work differently and serve different purposes. Choosing between them depends on your specific situation, family needs, and financial goals.

Understanding the key differences can help you make the right decision for your estate planning needs and give you peace of mind about your family’s future, especially if you have minor children or want to pass down generational wealth. 

What Is a Will?

A will is a legal document that outlines how you want your assets distributed after you die. Think of it as your final instructions to your loved ones and the courts about what should happen to everything you own.

Here’s how a will works:

• Names who receives your assets after you die: You can specify exactly which family members, friends or organizations get which specific assets. 
• Lets you choose a guardian for minor children: This is crucial for parents who want to ensure their kids are cared for by someone they trust. You can also choose “back-up” guardians in case your first choice is unable to take the children for any reason. 
• Only goes into effect after death: Unlike some other estate planning tools, a will doesn’t impact your assets while you’re alive.
• Must go through probate court: After you pass away, the court reviews your will and oversees the distribution of your assets.

A will gives you control over your legacy and helps prevent family disputes by clearly stating your wishes. Without one, state laws determine how your assets are divided, which might not match what you would have wanted.

What Is a Living Trust?

A living trust is a legal arrangement where you transfer ownership of your assets to a trust while you’re still alive. You typically serve as the trustee, maintaining full control over your assets, and name a successor trustee to take over when you die or become incapacitated.

Here’s how a living trust works:

• Holds your assets while you’re alive: You transfer ownership of property, investments and other assets into the trust.
• Lets someone manage your assets if you become sick or disabled: Your successor trustee can step in to handle your affairs if you’re unable to do so.
• Skips probate court when you die: Assets in the trust transfer directly to beneficiaries without court involvement, preventing the need to go through probate.
• Usually more private than a will: Trust documents aren’t public records, keeping your financial affairs private.

Living trusts are particularly useful for people who want to avoid the time, cost and public nature of probate court proceedings. You can add restrictions to the trust to determine how assets are managed, and you can name multiple beneficiaries. 

Key Differences Between a Will and Living Trust

Wills and living trusts serve two distinct purposes, so they have a key essential differences in how they function. Here’s a quick breakdown: 

When Do You Need a Will?

A will makes sense in several specific situations:

• You want to name a guardian for your kids: Only a will can legally designate who should care for your minor children if something happens to you.
• You have a simple estate: If you don’t own a lot of property or complex investments, a will might be all you need. 
• You don’t mind going through probate: Some people are comfortable with the probate process, especially if their estate is straightforward and their beneficiaries can afford to wait for assets to go through the process.
• You want to leave personal items or messages: Wills let you include personal wishes, distribute sentimental items and even leave messages for loved ones.

For many families, especially those with modest assets and young children, a will provides sufficient protection at an affordable cost. Wills also give you the opportunity to distribute assets that you don’t want to put in a living trust. 

When Should You Consider a Living Trust?

Using a living trust (often in addition to a will) is a good choice in the following circumstances: 

• You own property in multiple states: This can make probate more complicated and expensive, as you might need to go through the process in each state.
• You want to avoid probate: If you value speed and privacy in asset distribution, a trust lets your beneficiaries receive assets more quickly.
• You want someone to manage things if you become sick: Unlike a will, a trust provides protection if you become incapacitated and can’t manage your affairs.
• You prefer privacy over court involvement: Trust documents remain private, while wills become public record during probate, so you can use a living trust to maintain privacy over your assets and their distribution. 

Living trusts are particularly valuable for older adults, those with significant assets, or people who own complex investments.

Can You Have Both a Will and a Living Trust?

Yes! Many people use both:

• A living trust manages most of your assets.
• A “pour-over” will acts as a safety net, covering any assets not in the trust.
• A will is also necessary to name guardians for your minor children.

Pros and Cons of Each Option

There are both pros and cons of both wills and living trusts (which is why having both benefits some families). Let’s review the advantages and disadvantages of each. 

Pros for Having a Will

• Easy and cheap to create
• Names of guardians
• Good for small estates or those with simple asset distribution

Cons for Having a Will

• Goes through probate, which can take anywhere from several months to several years
• The will is public record, leaving you no privacy
• There’s protection for your assets while you’re alive

Pros for Having a Living Trust

• Avoids probate entirely, keeping your affairs private
• It’s much more difficult to contest a living trust than it is to contest a will, potentially giving you more protection to assure your wishes are carried out
• Can help if you become disabled, as trusted managers can help oversee your assets if you’re unable to

Cons of Having a Living Trust

• Costs more to set up, sometimes several thousand dollars more
• It’s more work to manage, which can be frustrating for some people
• Doesn’t name guardians, which means you still need a will in place if you have minor children or want to allocate specific assets that aren’t included in the trust

How to Decide Which One Is Right for You

Still not sure whether a living trust or a will is right for you? 

Choosing between a will and a living trust depends on your unique circumstances. Consider doing the following: 

• Assess your age, health and estate size: Younger people with simple estates often start with a will, while older adults with more assets may benefit from a trust.
• Think about your privacy and family needs: If you value privacy or have concerns about family conflicts, a trust might be better.
• Talk to an estate planning attorney: They can help you understand the pros and cons based on your specific situation.

A simple will may be fine for many families. Don’t feel pressured into a complex trust if your needs are straightforward.

A trust helps if you want control and to avoid court: For those who want to minimize court involvement and keep affairs private.

Remember, you can always start with a will and create a trust later as your financial situation becomes more complex. You also have the option to create both. 

How to Set Up a Will or Living Trust

Getting started with estate planning doesn’t have to be overwhelming. Start with these steps: 

• Make a list of your assets: Include your home, investments, bank accounts, personal property and any debts
• Choose your beneficiaries: Decide who should receive what, and consider backup options in case your first choices can’t inherit
• Pick a trusted executor or trustee: This person will handle your affairs, so choose someone responsible and willing to take on the role
• Decide on guardianship (for wills): If you have minor children, carefully consider who would be the best guardian for them
• Use a legal service or estate planning attorney: While online tools exist, complex estates often benefit from professional guidance
• Keep documents in a safe place and update as needed: Store your documents securely and review them after major life events like marriages, divorces, or births

If you still feel overwhelmed, remember: The most important step is getting started. Even a basic will is better than no estate planning at all.

Living Trust vs Will — Which One Fits Your Life?

Both a will and a living trust help you protect your loved ones and manage your assets, but they serve different purposes.

If you’re looking for a simple, budget-friendly option and need to name a guardian, a will may be the right choice. But if you want to avoid probate, maintain privacy or plan for incapacity, a living trust could offer more benefits.

No matter what, start by making a plan today. Your family will thank you for it later.

Want to learn more about estate planning? Check out our guide here.

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