Wills vs. Trusts

As I meet with clients and we discuss estate plan, I get questions that often are like “Should I have a trust. I have read that a trust is better than a will to avoid estate costs”. If you’ve spent any time reading about estate planning, you’ve probably come across strong opinions on trusts — often framed as a magic bullet that avoids probate, taxes, and headaches. The reality is more nuanced and understanding the difference between a will and a trust can help you make a more informed decision with your attorney and advisor. Below are some thoughts that I often share.

You Almost Always Need a Will — Even With a Trust

Many people believe that if you set up a trust, you no longer need a will. In practice, most estate attorneys will tell you to have both. Trusts rarely capture every single asset — a forgotten account, a car, a small miscellaneous item — and a will acts as a catch-all for anything that didn’t make it into the trust.

A will also serves another important function: it closes your estate. When an estate goes through probate, a formal notice period gives creditors and other potential claimants a window to come forward with claims. Without going through this process, your estate can technically remain open indefinitely, leaving your heirs exposed to claims down the road.

Probate Isn’t Always the Villain It’s Made Out to Be

Probate has a bad reputation, but the actual cost and complexity depends heavily on two things: who administers the estate, and how the attorney bills.

• Family executors vs. corporate executors: Executors are legally entitled to a fee (often up to a percentage of the estate), but most family members who serve as executors — and who are also heirs — waive that fee. Why? Because an executor fee is taxable income, while an inheritance generally isn’t. Corporate or professional executors, by contrast, do charge, and their fees can meaningfully increase the cost of settling an estate.

• Billing structure matters: Ask whether your attorney charges based on a percentage of the estate or on time and materials. A percentage-based fee on a large estate can be expensive regardless of complexity. Time-and-materials billing tends to reflect the actual work involved — and for many estates, that’s a modest, fixed-ish cost rather than a percentage of total assets.

In short: it’s often complexity, not size, that drives probate costs. A well-organized estate with a trusted family executor and a fair billing arrangement can settle for a fraction of what alarmist articles suggest.

When a Trust Actually Makes Sense

A helpful way to think about trusts: you need one when there’s something about a beneficiary or a situation you don’t fully “trust” to work out on its own. Common scenarios include:

• Minor or dependent beneficiaries who legally can’t manage an inheritance themselves.
• A beneficiary with special needs, where a trustee needs to manage funds separately from the beneficiary.
• Spendthrift heirs, where you want distributions controlled over time rather than given as a lump sum.
• Privacy concerns — wills become public record once probated; trusts generally do not.
• Blended families or estranged relationships, where you want more control over exactly how and to whom assets flow, and more protection against potential claims.
• Very large estates — trusts can offer meaningful tax planning advantages, but this typically becomes relevant well above current federal estate tax exemption thresholds (in the tens of millions per individual), not for the average household.

A Common Misconception: Trusts and State Inheritance Tax

One of the biggest misunderstandings is that a trust helps you avoid state inheritance tax. In many states, a revocable trust — the most common type — does not shield assets from inheritance tax, because you still legally control the assets during your lifetime. Only an irrevocable trust, where you permanently give the assets away, removes them from your taxable estate — and that comes with real tradeoffs, including higher trust tax rates on income and less flexibility.

The Bottom Line

Trusts aren’t inherently better or worse than wills — they solve different problems. For most people, a properly drafted will, paired with a trusted family executor and a fair-fee attorney, accomplishes what they need. Trusts become valuable when there’s a specific concern to plan around: a vulnerable beneficiary, a complicated family situation, or privacy.

The best next step is a conversation with your advisor and estate attorney about what you’re actually trying to protect against — because that answer determines whether a will alone is sufficient or whether a trust adds real value.

This post is for general educational purposes and isn’t a substitute for personalized legal or tax advice. Estate laws vary by state — consult a qualified attorney for guidance specific to your situation.

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