Wills vs. Trusts: Which Is Right for You in 2025?
One of the first decisions in estate planning is choosing between just a will and both a will and a trust. Both are essential tools for ensuring your assets are distributed according to your wishes, but they serve different purposes and offer distinct advantages depending on your circumstances. Here’s a breakdown of what each option provides and how to decide which is right for you in 2025.
What Is a Will?
A will is a legal document that outlines your wishes for distributing your assets after your death. It also allows you to:
Name guardians for minor children.
Specify how debts and taxes should be paid.
Appoint an executor to manage the probate process.
Advantages of a Will:
Simplicity: Wills are relatively straightforward to create, making them a good choice for those with smaller estates or simpler needs.
Guardian Designation: Wills are essential for parents of minor children, as they allow you to name a guardian to care for them.
Cost-Effective: Wills typically cost less to draft compared to trusts.
Limitations of a Will:
Probate: A will must go through probate, a court-supervised process that can be time-consuming, expensive, and public.
Limited Control: A will only takes effect after your death, so it doesn’t help manage your assets if you become incapacitated.
What Is a Trust?
A trust is a legal entity that holds and manages your assets for the benefit of your beneficiaries. The most common type is a revocable living trust, which allows you to retain control over your assets during your lifetime and specify how they’ll be managed after your death or incapacitation.
Advantages of a Trust:
Avoids Probate: Assets in a trust bypass probate, allowing for faster, private, and less costly transfers to beneficiaries.
Incapacity Planning: A trust includes provisions for managing your assets if you’re unable to do so due to illness or injury.
Flexibility: Trusts allow you to set specific terms, such as distributing assets in stages or based on milestones (e.g., reaching a certain age or graduating college).
Tax Planning: Trusts can be used to reduce estate taxes or protect assets from creditors in certain situations.
Limitations of a Trust:
Upfront Costs: Setting up a trust requires more time and money initially compared to a will.
Ongoing Management: A trust requires proper funding (transferring assets into the trust) and regular updates to remain effective.
Which Option Is Right for You?
The choice between just a will and both a will and a trust depends on your goals, assets, and family dynamics.
When to Choose only a Will:
You have a smaller estate with minimal assets.
Your primary concern is naming guardians for minor children.
You’re looking for a straightforward, cost-effective solution.
When to Choose both a will and a Trust:
You want to avoid probate and keep your estate private.
You have significant assets, including real estate or a business.
You’re planning for incapacity or want to set specific conditions for asset distribution.
You live in a state like California, where probate can be costly and time-consuming.
For many, a combination of a will and a trust offers the best of both worlds. A will can cover guardianship, while a trust handles asset management and provides added benefits like probate avoidance and incapacity planning.
Still unsure which is best for you? Contact us today to schedule a consultation and create an estate plan tailored to your needs in 2025.