Wills and trusts are often viewed as the foundation of an estate plan—but they serve different purposes. While a will is essential, it has limitations, such as requiring assets to go through probate. A trust, on the other hand, can keep details private, allow you to specify how and when assets are managed or distributed, and make the transfer of assets more efficient. Trusts can be especially valuable for families with complex assets, property in several states, or charitable interests. Recognizing these benefits can help you decide if a trust belongs in your estate plan.

Wills vs. trusts: what’s the difference?

When thinking about the hierarchy of estate planning documents, wills and trusts typically rise to the top.

A will is a foundational document. It outlines who will receive your assets at death and may name guardians if you have minor children. For many families, a will is the starting point—but it’s rarely the whole plan.

A trust is a legal arrangement that lets you set detailed guidelines for holding and distributing assets on behalf of beneficiaries. Because trusts can be used while you are alive, after your death, or both, they give you more flexibility and control over how assets are handled, in contrast to a will.

The key question isn’t whether a will or a trust is better, but whether a trust’s added privacy, control, and efficiency will help your estate plan fit your specific goals.

Four reasons a trust may make sense

1. Privacy

If you rely solely on a will, some portion of your estate will likely go through probate—the legal process of administering your estate after death. Probate can be time-consuming and costly. It’s also public.

That means details about your assets may become part of the public record, accessible to anyone who visits the courthouse.

Assets placed in a properly structured trust generally don’t go through probate, so your family’s financial details can remain private. Trusts also allow for smoother, faster asset transfers compared to those subject to the public probate process. If a significant portion of your wealth would otherwise require court involvement, a trust can help provide privacy, save time, and reduce legal fees.

Understanding Probate

2. Owning property in multiple states

If you own real estate in more than one state—such as a primary residence, a vacation home, or recreational land—estate administration can become more complex.

Without a trust, your estate may be subject to probate proceedings in every state where you own property. Probate in multiple states—called ancillary probate—can increase costs, delay inheritance, and create extra paperwork for your heirs. A trust can centralize ownership and streamline the transfer process, reducing these hassles.

Placing out-of-state real estate into a trust may help streamline the transfer process and reduce the need for multiple probate proceedings.

3. Greater control over how and when assets are used

A trust empowers you to decide exactly how and when beneficiaries receive assets. This can range from controlling distributions for specific purposes, like education or health care, to setting age or milestone markers for inheritance, providing ongoing management beyond what a will allows.

For example, you may choose to:

·         Specify that trust assets be used for certain purposes, such as education, health care, or purchasing a home

·         Distribute assets at specific ages or life milestones

·         Provide oversight through a trustee to help manage assets responsibly

These structures can be especially useful when beneficiaries are young, financially inexperienced, or navigating complex life circumstances. Thoughtful trust design can help ensure your wealth is used in a way that reflects your intentions.

Understanding the 3 Primary Classes of Trusts

4. Philanthropic goals

If charitable giving is an important part of your legacy, establishing a trust can enable you to support charities efficiently. Certain trusts can provide you or your family with income and create tax advantages, while ensuring your chosen organizations receive future gifts exactly as you intend.

One example is a charitable remainder trust (CRT). A CRT is typically funded during your lifetime and may provide you—or another beneficiary—with an income stream for a set period of time. At the end of that term, the remaining assets are distributed to one or more charitable organizations. For more info read about charitable remainder trusts from IRS.gov.

This type of structure can allow you to:

·         Receive a charitable income tax deduction

·         Generate income during your lifetime

·         Leave a lasting philanthropic legacy

Advanced Charitable Giving Strategies for Smart Investors

Balancing benefits and complexity

Trusts typically require a higher initial setup cost and ongoing management than wills, but with added benefits. These benefits can include greater privacy, control over asset distribution, and more efficient handling of complex or multi-state estates. Not every family needs a trust, but some may find the advantages significant.

If privacy, multi-state property ownership, flexible control over assets, or charitable giving are priorities for your family, the benefits of a trust—such as privacy, streamlined asset transfer, and tailored asset management—may justify the additional setup and maintenance costs.

How we help you decide

At Wealth Enhancement, your advisor works with our Roundtable™ of estate planning, tax, and trust specialists to help evaluate whether a trust fits into your broader financial picture.

We help integrate your estate plan with your goals, family, and overall strategy, so your plan reflects what matters to you.

This article was originally published on July 24, 2016, in the Brainerd Dispatch.

Frequently Asked Questions (FAQ)

What is the main difference between a will and a trust?

A will outlines how your assets are distributed after your death and may name guardians for minor children. A trust holds assets on behalf of beneficiaries and can provide greater privacy, control, and efficiency—both during your lifetime and after your death.

Do I need a trust if I already have a will?

Not everyone needs a trust. However, a trust may be beneficial if you want to avoid probate, maintain privacy, manage assets for beneficiaries over time, own property in multiple states, or support charitable causes in a tax-efficient manner.

Does a trust help avoid probate?

Assets held in a properly structured trust generally avoid probate. This can reduce delays, costs, and public disclosure associated with the probate process.

Are trusts only for high-net-worth families?

No. While trusts are often associated with higher net worth, they can also be valuable for families with specific planning goals—such as caring for young beneficiaries, managing multi-state property, or coordinating charitable giving.

What types of trusts are commonly used in estate planning?

Common trust types include revocable living trusts, irrevocable trusts, charitable trusts, and special needs trusts. Each serves a different purpose and should be considered within the context of your overall financial plan.

Can I change or revoke a trust?

Some trusts, such as revocable living trusts, can typically be changed or revoked during your lifetime. Irrevocable trusts typically cannot be modified once they are established. The flexibility depends on how the trust is structured.

How do I know if a trust makes sense for me?

Determining whether a trust fits into your estate plan depends on your goals, assets, family dynamics, and tax considerations. Working with an advisor and estate planning professionals can help you evaluate whether the benefits outweigh the costs.

This article originally appeared on July 24, 2016 in the Brainerd Dispatch. You may view the article here. 

Content in this material is for general information only and is not intended to provide individualized tax or legal advice. Discuss your specific situation with a qualified tax or legal professional.

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