Estate Planning: Why Do I Need a Will If I Have a Trust?


If you've spent any time talking about estate planning, you've probably wondered why you would need a will if you have a trust. This is a common question. Before we explore the answer, let's go over some basic differences between the two.

Most people are familiar with a will (or "Last Will and Testament" to be fully formal), but many don't really know what a "trust" is. Think of a trust as a special box that you put your assets in (bank accounts, stocks, your house, rental properties, etc.) The person you appoint to take care of the box is called the "Fiduciary". This person is NOT the "executor". An executor is appointed by a will, approved by a court, and does not have authority until after your death. A trustee usually doesn't need court approval and can handle things while you are alive. and after your death. This is why it is sometimes called a "living" trust.

There are many differences between a will and a trust, but the most basic differences are:

  • A will does not take effect until you die, but a trust can be operational during your lifetime and after your death.
  • Property given to a person under a will must be distributed to them unconditionally. Property donated under a trust can be transferred outright, or it can remain in the trust and be supervised by the trustee. It is possible to configure a Trust through a will, but the result is always a trust.
  • There are more possibilities to reduce your estate taxes if you use a trust rather than a will.
  • A trust allows you to better protect your heirs against creditors, divorce, and other relatives (or in-laws).
  • Assets donated under a will must go through the Probate Court. This process is very expensive in California, time consuming, and very public. A trust does not have to go through probate court, can remain a private matter, probate fees can be avoided, and the final affairs of the deceased can be dealt with quickly.

For most people, having a trust is well worth the expense of setting one up – a cost that, by the way, is usually much cheaper than a probate. It is common (but not mandatory) to appoint the same person as trustee and executor, so that control over trust and non-trust assets is centralized in one person.

So why do you need both? Having a will, even if you have a trust, is like having a safety net. It is very common for people to accidentally leave something outside of their trust. The family home is a good example. People buy a new home, or refinance the existing one, and forget to return the property to their trust when they're done. When the person dies, the house is not part of the trust, so "who gets it" is decided by the will. Ideally, the will states that all assets pass to the trust. In this way, the final distribution of assets always follows the plan established in the trust. Without a will, the state will decide who gets the assets that are not in the Trust. These may or may not be the people you want to have this property.

A good estate plan will always include a will, even if it has a trust. Whether you decide to have one or both, you should always get the help of a lawyer. In the long run, do it yourself estate planning usually comes with more expense and unintended consequences.

Comments are closed.