Will vs. trust: Key differences advisors need to explain to clients

Written in partnership with Vanilla.

During estate planning discussions, clients commonly ask their advisor, “Do I need a will or a trust?”

The confusion between wills and trusts often leads clients to make decisions that don’t fully address their specific needs. Without proper guidance, they might opt for the simplest solution without understanding the long-term implications for their families and estates.

This article equips advisors with clear explanations of the key differences between wills and trusts, their respective advantages and disadvantages, and a framework for helping clients determine which option or combination of options best suits their unique situation.

Estate planning basics: What is a will?

A will is a legal document expressing how someone wants their assets distributed after death. In straightforward terms, it’s their written instructions for what happens to property, possessions, and the care of minor children after they pass away. Unlike a trust, a will only takes effect after death.

Only 24% of U.S. adults have a will,¹ highlighting an opportunity for advisors to provide critical guidance that can prevent state law-directed asset distribution and court-appointed guardianship decisions.

What does a will include?

When discussing will components with clients, emphasize these key elements:

• Executor: This is the person your client appoints to carry out the instructions in their will. The executor is responsible for managing the estate through the probate process, paying debts and taxes, and ensuring assets are distributed according to the client’s wishes.
  
  
• Beneficiaries: These are the individuals or organizations who will receive your client’s assets.
  
  
• Guardian appointments: For clients with minor children or dependents, a will allows them to name guardians who will care for these dependents if both parents die.
  
  
• Instructions for asset distribution: The will clearly specifies who receives which assets. For instance, your client John might specify that his daughter receives his house, and his son receives the family business.

Advantages of a will

When counseling clients, especially those with straightforward financial situations, highlight these key benefits of wills:

• Affordability: Wills are generally inexpensive to set up, often requiring minimal upfront costs. Creating a simple will can cost as little as a few hundred dollars or even less with DIY services. This can be particularly appealing to younger clients or those just beginning their estate planning journey.
  
  
• Simplicity and ease of understanding: For clients who value straightforward solutions, explain that a will is generally easy to understand and execute. Wills are ideal for uncomplicated asset distribution plans (e.g., assets divided equally among children).
  
  
• Ability to appoint guardians for minor children: For clients with young families, stress that wills allow the explicit naming of guardians to care for minor children after the parents’ death, an essential function that trusts alone cannot provide.
  
  
• Ease of updating and modifying: For clients whose circumstances frequently change, highlight that wills can easily be updated or modified throughout their lifetime (after marriage, divorce, births, deaths).

Disadvantages of a will

To provide balanced guidance, you should also help clients understand these potential limitations of wills:

• Probate requirements: Clients need to understand that probate is a court-supervised process for validating a will and distributing assets. It’s often lengthy, costly, and public, and assets passing through a will generally must go through probate. Probate costs can consume between 3% and 8% of an estate’s value,² and the probate process can take between six months and several years to complete.
  
  
• Lack of privacy: For privacy-conscious clients, explain that wills, once filed in probate court, become public records accessible by anyone, exposing private financial details.
  
  
• Incapacity limitations: Clarify that wills provide no management or protection if the client becomes incapacitated; wills only take effect after death. Separate documents, like powers of attorney or trusts, are necessary for incapacity planning.
  
  
• Limited control after asset distribution: While wills can contain provisions to distribute assets in trust for a beneficiary, often they distribute assets outright, offering limited or no control over how the beneficiary manages assets after receiving them as long as the beneficiary is 18 years or older.

What is a trust?

A trust is a legal arrangement where assets are managed by a trustee on behalf of beneficiaries. Unlike a will, a trust takes effect during a client’s lifetime – typically upon signing and funding – and continues after death. This distinction is crucial for clients who need ongoing asset management.

Help clients understand the three main roles in a trust:

• Grantor (also called settlor or trustor): Your client who creates the trust and transfers assets into it.
  
  
• Trustee: The individual or institution responsible for managing the trust assets according to your client’s terms (typically also the grantor while they are alive and not incapacitated if it’s a revocable trust (more on this later).
  
  
• Beneficiary: The person(s) or organizations who receive the benefits of the trust assets.

Advantages of a trust

When discussing more comprehensive estate planning with wealthy clients, highlight these significant benefits of trusts:

• Faster asset transfer: For clients concerned about efficiency and minimizing delays, emphasize that a properly funded trust may bypass the probate process, allowing assets to quickly transfer to beneficiaries.
  
  
• Privacy: Unlike wills, trusts avoid public probate, meaning financial and personal details remain confidential.
  
  
• Incapacity management: Trusts ensure continuity if clients become incapacitated by allowing a successor trustee to step in seamlessly without court intervention.
  
  
• Control over asset distribution: For clients who want to influence how beneficiaries use their inheritance, trusts can outline detailed conditions or restrictions as to when and how trust assets are distributed, including age-based milestones and education funding, which can help ensure financial maturity before receiving significant amounts.

Disadvantages of a trust

It’s also important to help clients understand the potential limitations of trusts:

• Higher upfront cost and complexity: For budget-conscious clients, be transparent that setting up a trust usually involves greater initial expense and complexity compared to a simple will. While this can be done DIY, some clients prefer to enlist professional legal help depending on their situation. Establishing a basic revocable trust typically costs between $1,500 and $2,500,³ depending on complexity and location. This cost comparison is important context: While creating a simple will might cost a few hundred dollars, setting up a trust often involves legal fees amounting to several thousand dollars due to detailed paperwork and legal advice.
  
  
• Need to retitle (fund) assets and ongoing maintenance: The requirement to transfer (retitle) assets into the trust (“funding”) involves significant initial effort and ongoing diligence, typically involving banks, other financial institutions, and government offices.
  
  
• Does not designate guardians for minor children: For clients with young families, clarify that the legal designation of guardians for minors must be addressed separately through a will.
  
  
• May be overly complex for smaller estates: The complexity and costs of managing a trust may outweigh its benefits for clients with smaller, less complicated estates, such as a home and savings.

Types of trusts

There are various types of trusts for different client needs. Help clients determine which trust might best fit their specific goals.

Revocable living trusts are created during a person’s lifetime and can be modified or terminated at any time, as long as the grantor (creator) is mentally capable. If the grantor becomes incapacitated, the successor trustee manages the assets. This flexibility can be helpful in the event of life changes (e.g., marriage, divorce, birth of children). When properly funded, a revocable living trust ensures efficient, private distribution of assets after death without probate.

Irrevocable trusts are typically established for long-term planning considerations such as tax benefits, asset protection, and Medicaid eligibility. Unlike a revocable trust, an irrevocable trust generally cannot be modified or terminated without the beneficiary’s consent.

Testamentary trusts are established within a will, only coming into effect after the creator’s death. It’s commonly used for managing inheritance for minor children or setting conditions on inheritances.

Special needs trusts are specifically designed to financially support a beneficiary with disabilities without jeopardizing their eligibility for public assistance programs such as Medicaid or Supplemental Security Income (SSI). Special needs trusts have become increasingly important as medical advances help individuals with disabilities live longer, fuller lives.

Charitable trusts are used primarily to provide support to a charitable cause, organization, or foundation, often offering tax advantages. There are various types of charitable trusts, including charitable remainder trusts (CRTs) and charitable lead trusts (CLTs), which have reverse features: A CRT disperses income to the non-charitable beneficiaries, then allocates the remainder of the trust assets to one or more specified charities at the end of the trust term. Conversely, a CLT disperses income to one or more named charities and the non-charitable beneficiaries receive the remainder of the assets at the end of the term.

Consider your client’s circumstances

There are a number of factors that can influence a client’s decision between a will, trust, or both. Use this framework to help them consider their options:

What is the size and complexity of the client’s estate?
While small, straightforward estates often only require a simple will, larger, more complex estates (e.g., multiple properties, businesses, substantial investments) generally benefit from trusts to avoid probate complications.

What is the structure of the client’s family?
Families with minor children need at least a simple will to name guardians. Blended families or complicated family relationships may benefit from a trust to prevent disputes or clearly control inheritance distribution.

Is the client concerned about privacy?
The privacy differences between a will (public probate process) and a trust (no probate) are substantial. Clients who are concerned about privacy (e.g., sensitive family or financial situations) should consider a trust.

Do the benefits of having a trust justify the additional cost?
For smaller clients, a simple will may suffice; however, if their assets might incur significant probate fees later, investing in a trust upfront might ultimately save their beneficiaries money.

Is the client concerned about how beneficiaries will use their inheritance?
Wills may contain testamentary trust provisions but tend to distribute assets outright after probate. Trusts offer the flexibility to impose detailed conditions or timelines for inheritance (e.g., age requirements, usage conditions).

How a will and trust can work together

A complementary approach often provides the most comprehensive estate plan through the combined use of a revocable living trust with a “pour-over will.”

A revocable living trust manages most major assets (homes, investment accounts, or other valuable items), while avoiding probate, maintaining privacy, and applying detailed inheritance conditions.

A pour-over will acts as a safety net, catching any assets not placed into the trust by the time of death and transferring (“pouring over”) these assets into the trust to ensure they are distributed according to your client’s wishes. Be aware that any assets flowing through the pour-over will are subject to probate, so it is important to ensure the revocable trust is properly funded.

Using these documents together provides a complete plan: minor guardianship through a will and asset distribution through a trust, while ensuring no assets are missed.

Be your clients’ guide through critical estate planning decisions

Don’t let your clients leave their legacy to chance. Helping them understand the differences between trusts and wills and the implications of each for their circumstances differentiates you as an advisor who cares about the financial wellbeing of clients and their families.