When you start thinking about how to protect your family and your property after you are gone, one of the first questions you may face is whether you need a will, a trust or both.
While both tools help manage and distribute your assets, they work in different ways and serve different purposes. Understanding those differences can help you make informed decisions about your estate plan.
What a will does
A will is a legal document that outlines how you want your property distributed after your death. It also lets you name an executor to manage your estate and a guardian for your minor children.
However, a will only takes effect after you die, and it must go through probate — a court process that validates the document and oversees the transfer of your assets.
Probate can take months or even years, leading to additional costs. It also becomes part of the public record, which could put your family’s privacy at risk.
Still, a will is an essential foundation for most estate plans because it ensures your wishes are legally recognized.
What a trust does
A trust is a separate legal entity that holds and manages your assets during your lifetime and after your death. When you create a trust, you transfer ownership of your property to it and name a trustee to manage it for your chosen beneficiaries.
Unlike a will, a trust can help your loved ones avoid probate, providing faster and more private asset distribution.
Under Pennsylvania’s Uniform Trust Act (20 Pa. C.S. § 7701 et seq.), trustees have legal duties to act in the best interests of beneficiaries, keep them informed and manage trust property prudently.
The law also allows certain protections, such as spendthrift provisions (§ 7742), which prevent most creditors from accessing trust assets meant for beneficiaries.
Trusts can also help manage your affairs if you become incapacitated, which a will cannot do. They are especially useful if you own property in multiple states, have significant assets or want to set specific conditions for when and how your beneficiaries receive their inheritance.
Common types of trusts
There are several types of trusts available, each designed to meet different needs and goals. The right one for you depends on how much control you want to keep, who your beneficiaries are and what level of protection you want for your assets:
- Revocable living trust: Lets you control your assets while alive and make changes as needed. After your death, it becomes irrevocable and distributes assets according to your terms.
- Irrevocable trust: Protects assets from creditors and reduces estate taxes but generally cannot be changed once created.
- Testamentary trust: Establishes asset management through your will and takes effect after your death, often to provide for minor children or dependents.
- Special needs trust: Allows you to provide for a loved one with disabilities without affecting their eligibility for government benefits.
Understanding how each trust works is only the first step. The next is deciding which combination of tools best secures your legacy and simplifies matters for your family.
Choosing what is right for you
Many people use both a will and a trust to create a comprehensive estate plan. But if you are unsure which option fits your needs, consider talking to an estate planning attorney who can tailor a strategy for your situation.