Living trust vs. will: which do you need?

Estate Planning

Mar 31

Wills vs Trusts Vision Retirement financial planning investment management RIA fiduciary CFP financial advisor Ridgewood NJ New Jersey Poughkeepsie NY Bergen County NJ

One key component of financial planning is leaving a legacy, ensuring assets are smoothly transferred to heirs upon your death and/or mental incapacitation. Various tools can help you accomplish this, two of which we’ll review here today: wills and trusts. Let's dive in…

What is a will?

A will, also known as a last will and testament, is simply a legal document that outlines your wishes regarding the distribution of assets upon your death or incapacitation. This typically includes the appointment of an executor responsible for carrying out the wishes specified in the document (if you don't name an executor, the court will assign one for you). You can also use your will to designate a guardian for minor children and provide instructions on how and when named beneficiaries will receive their assets.

What is a trust?

A trust, meanwhile, is an arrangement in which a trustee (an individual or entity such as a bank or trust company) is appointed to manage and distribute assets to beneficiaries upon your passing. While many types of trusts exist, all fall within two categories: living and testamentary.

Living trusts are classified as either revocable or irrevocable. While the former is established while trustors are still alive and can be modified during their lifetime (as they retain ownership of property or assets), the latter is not easily changed; once established, the trustor relinquishes control of assets to the trust itself, which then assumes ownership. One typically only creates an irrevocable trust to decrease the value of an estate, qualify for Medicaid or similar income-restricted programs, and/or minimize estate taxes. Both types of living trusts become effective on the day they're signed.

In contrast, a testamentary trust—also known as a “will trust” or “trust under will”—is created by an estate executor as part of your last will and testament and goes into effect only after the will is probated (the legal process through which courts verify will validity) and the executor has settled the estate. These actions take place only after the trustor's death.

Will vs trust: key differences

One of the biggest differences between a will and a trust is the probate process. Wills must go through probate, but if you have a will at the time of your death, the probate process is generally more streamlined than when someone dies intestate (without a will). In contrast, living trusts do not require your assets go through probate—saving your heirs both time and money.

Another key difference between the two documents is that a will can be contested in court whereas trusts generally cannot. For example, wills are often challenged when a family member, friend, or business partner believes he/she was wrongfully disinherited or disagrees with the distribution of the estate. The person contesting the will, however, must have legal standing to do so: perhaps claiming the testator (the person who made the will) was not mentally competent, laws were broken during the creation of the will, or that a more recent version of the will exists.

A trust can indeed help avoid many complications that arise from will contests. A revocable living trust, for example, allows you to designate a trustee who will manage your assets: ensuring your estate is protected in the event you become incapacitated and cannot handle your affairs. This level of protection is not available with a will alone and requires a durable power of attorney, a legal document authorizing a person of your choice to make legal decisions on your behalf should you become incapacitated or unable to act for yourself.

If you’re concerned about keeping your estate affairs private, a living trust is beneficial as it won’t become a public document after your death (unlike a will). Furthermore, a living trust can also continue to operate after your passing as you can direct your trustee to hold assets until a beneficiary reaches a specific age or attains a specific milestone or life-changing event (e.g., a marriage). Conversely, assets are typically distributed soon after your death if you have a will.

A final differentiating point is the associated price tag. While you can easily create a basic will for under a few hundred dollars, trusts often cost at least $1,000 if you decide to enlist the help of an estate planning attorney.

Will vs. trust: how to choose

First and foremost, you should have a will if you have assets worth more than your state’s probate threshold or have minor children—in order to expedite the probate process. Several scenarios call for you to consider adding a trust to your estate plan, such as when leaving assets to minor children (typically defined as those under the age of 18, though the exact age may vary by state). Once your child reaches adulthood, he/she will generally receive the inheritance in a single lump sum with a will. A trust, however, provides additional flexibility in that you can specify and dictate certain conditions are met before any children receive their inheritance (e.g., outlining the age at which they can access portions or specific events that trigger fund distribution, such as college graduation).

When discussing children, it's important to note you can establish a trust to protect their inheritance from any potential divorce issues. Inherited money/property is generally regarded as separate property and not subject to division during a divorce unless it becomes “commingled.” Commingling occurs when inherited assets are placed in a joint bank account both spouses use or when both spouses invest in inherited property. In setting up a trust, you can help ensure inherited assets remain separate and don't become marital property.

If you have a child with special needs or a disability, meanwhile, a well-structured special needs trust can help them utilize assets—such as money and property—within a trust without jeopardizing their eligibility for government benefits. This is a better option than leaving assets directly to your child in many cases.

If you're at high risk for incapacity, a revocable living trust can help manage your assets in a responsible manner while you're alive.

Establishing a trust is also often advantageous for individuals with larger estates as it can help avoid federal or state estate taxes. As of 2025, the federal estate tax applies to assets exceeding $13,999,000 while many state estate taxes are triggered by amounts as low as $1 million.

Finally, and as mentioned earlier, a trust generally cannot be contested in court (providing a level of security) and also offers more privacy than a will as it does not become a public document; if these two features are important to you, creating a trust is a worthwhile option to consider.

Other considerations regarding wills and trusts

It’s helpful to know that having a trust shouldn’t preclude you from creating a will as a will does things a trust cannot (e.g., naming a guardian for minor children). A living trust also never includes all of your assets. For example, it’s often recommended to not include qualified retirement accounts (e.g., 401k or IRA funds) in a trust account as such an activity is considered a complete withdrawal of those funds and thus subject to tax.

In sum: deciding if a will or trust is best for you

So, which is better: a will or trust? The answer will always depend on your own personal situation. Almost everyone should have a will, but if your net worth is greater than $100,000, you have minor children, and you want to spare your heirs the hassle of probate and/or keep estate details private, consider adding a trust to the mix. Either which way, consider seeking guidance from a professional—such as a financial advisor—who can help guide you through the process.

Still wondering whether a will or trust is right for you? Schedule a FREE discovery call with one of our CFP® professionals to get your questions answered.

About the author
The content in this post was developed by our team of writers and reviewed by our team of CFP® professionals here at Vision Retirement.