Who Needs a Trust Instead of a Will?

Wills have been the cornerstone of estate planning for centuries as the primary vehicle for dictating how assets are distributed after death.

However, while wills serve a vital purpose for most people, they can be somewhat limiting for those moving up the wealth ladder. For them, a trust can be a much more advantageous and comprehensive estate planning tool.

In this article, we examine the circumstances where establishing a trust would be more beneficial than relying solely on a will.

If you are wondering if a trust is right for you, call ARQ Wealth at (480) 214-9572 or use our contact form.

Understanding the Fundamental Difference: Control and Process

The advantages of a trust over a will become apparent when you understand the differences between the two.

A will is a legal document you create, declaring your wishes for how your assets will be distributed after your death. However, it doesn’t become legally binding until after you pass away. At that point, a will must go through a legal process called probate.

During the probate process, the court validates the will, appoints an executor, identifies and values assets, and orders the payment of debts, taxes, and other legitimate claims. Only then can the remaining assets be distributed to listed beneficiaries. It can be a time-consuming, costly, and public process. 

Conversely, a trust is a binding legal arrangement in which the grantor transfers ownership of their assets to a trustee, who manages them for the benefit of designated beneficiaries. 

Unlike a will, a trust is established and becomes effective during your lifetime. This is a critical difference in timing and control, making trusts the ideal solution for specific individuals and circumstances. 

When a Trust is Better Than a Will 

Anyone can set up a trust. However, they are particularly advantageous in certain life circumstances and financial situations.

Individuals Seeking to Avoid Probate 

The most common reason for establishing a trust is to avoid probate court. 

Probate is a public process in which all information about your estate, including your assets and beneficiaries, becomes part of the public record. This can be a problem if you have privacy concerns.    

Additionally, the probate process can be lengthy and costly. Finalizing a proceeding can take months or even years, while legal fees, executor fees, and court costs accumulate, impacting the amount of assets that can be distributed to beneficiaries. 

Why a Trust is Better: Assets held within a revocable living trust are exempt from probate. Upon the grantor’s death or incapacitation, a successor trustee can immediately step in and manage or distribute the assets according to the trust’s instructions without the need for probate court intervention. 

This saves time, reduces administrative costs, ensures privacy, and allows beneficiaries to receive their inheritance more quickly and efficiently.

Individuals with Complex Estate Plans 

If you have intricate asset holdings, including multiple properties, business interests, or diverse investments, a will may not adequately address the complexities of your estate. 

Likewise, if you have complex beneficiary arrangements, such as providing for children from a blended family or individuals with special needs, you may need a more detailed arrangement than a standard will can provide. 

Why a Trust is Better: With a living trust, you can create a more customizable framework for managing and distributing complex assets. You can incorporate detailed instructions, establish timelines to distribute assets, and create sub-trusts to address the unique needs of your beneficiaries. 

For example, you can establish a trust within a larger trust to provide for a special-needs beneficiary without jeopardizing their eligibility for government benefits. If you have business interests, a trust can facilitate the smooth transfer of ownership, ensuring the continuity of the business.   

Individuals Concerned About Incapacity 

A will only becomes effective after death. It offers no protection or guidance if you become incapacitated due to illness or injury. 

Without proper planning, a court may be forced to appoint a conservator or guardian to manage your financial affairs, which can be costly, time-consuming, and emotionally draining for your family.  

Why a Trust is Better: With a revocable living trust, you, the grantor, can include provisions for managing your assets in the event of incapacity. You can name yourself as the initial trustee and designate a successor trustee to take over management if you can no longer fulfill this role. It creates a seamless transition that avoids court intervention and ensures that your financial affairs are handled according to your pre-determined wishes by someone you trust. 

Individuals with Minor Children 

While you can nominate a guardian for your minor children in your will, it doesn’t provide a mechanism for managing the inheritance until they reach the age of majority (typically 18 in most states). 

The inherited funds would typically be subject to probate court supervision, and the guardian would need to petition the court for permission to use the funds for the children’s needs.  

Why a Trust is Better: A living trust allows parents to establish specific guidelines for how and when their minor children will receive their inheritance. You can appoint a trustee to manage the funds and make distributions specifically for your children’s education, healthcare, and living expenses according to your wishes.

The trust can specify the age at which the minor children will receive the remaining assets, potentially delaying full distribution until they are more financially responsible. This level of control and protection a trust provides for minor children is far superior to the limited provisions of a will.  

Individuals Seeking Greater Control Over Asset Distribution

A will can only provide for a lump-sum distribution of assets to beneficiaries. This may not be ideal if you want to control when and how your beneficiaries receive their inheritance. 

For example, they might want to provide for a beneficiary over time, prevent them from receiving a hefty sum at an early age, or incentivize certain behaviors, such as completing education.   

Why a Trust is Better: A trust can provide significant flexibility in controlling the timing and conditions of asset distribution. With a trust, you can specify that your beneficiaries receive distributions at certain ages, upon achieving specific milestones, or in regular installments. 

This allows you to exert your influence over your assets even after your passing, providing greater security and potentially preventing mismanagement of inherited funds.  

Individuals with Beneficiaries Who May Have Creditor Issues or Marital Instability

When assets are inherited directly through a will, they become the property of the beneficiaries, which exposes them to their creditors’ claims. They also become potentially divisible in the event of a divorce. 

This can be a problem if you’re concerned about protecting your legacy from financial or marital difficulties that your beneficiaries may face.

Why a Trust is Better: A properly drafted trust can offer significant protection against creditors and divorce. For example, assets held within a spendthrift trust are generally protected from the beneficiary’s creditors. 

Additionally, assets held in a trust may be considered separate property, thereby protecting them from division in the event of a divorce. This can ensure that your intended beneficiaries ultimately receive the benefits of your estate. 

Individuals Concerned About Estate Taxes 

The federal estate tax exemption for married couples in 2025 is $13,990,000. However, if Congress doesn’t act to preserve it, the estate tax exemption is currently scheduled to be reduced by half in 2026, which could be devastating for large estates. 

Regardless of whether the exemption is decreased or increased, a trust is a valuable tool for tax planning for individuals with substantial estates.

Why a Trust is Better: Certain types of irrevocable trusts, such as an Irrevocable Life Insurance Trust (ILIT) or Qualified Personal Residence Trust (QPRT), can reduce or eliminate estate taxes. These trusts are designed to remove specific assets from your taxable estate, potentially saving your beneficiaries a significant amount in taxes. 

Trusts can offer sophisticated tax mitigation strategies that are not available through a simple will, but they require careful planning and the guidance of legal counsel. 

Individuals Anticipating Future Challenges to Their Estate Plan 

Wills are more susceptible to legal challenges than trusts. Disgruntled heirs or other interested parties can contest the validity of a will based on various grounds, such as lack of testamentary capacity or undue influence. Litigation can be costly, time-consuming, and emotionally taxing for the beneficiaries. 

Why a Trust is Better: While trusts can also be challenged, they can be more difficult to contest than wills, particularly if they were established and funded well in advance of the grantor’s death. The fact that the grantor actively managed the trust assets during their lifetime can provide more substantial evidence of their intent and capacity. Additionally, you can include specific trust provisions, such as “no-contest” clauses, to discourage frivolous lawsuits.

If I Have a Trust, Do I Need a Will? The Pour-Over Will 

Even with a comprehensive trust in place, it is often advisable to have a pour-over will. 

This type of will acts as a safety net, ensuring that any assets not transferred into the trust during your lifetime will still be directed into the trust upon your death. The will does go through probate, but since the primary assets are already in the trust, the probate process is typically more straightforward and less costly. 

The assets “pour over” into the trust and are then distributed according to the trust’s terms. 

Tailoring Estate Planning to Your Needs 

While a will remains a fundamental estate planning document for many, it’s crucial to recognize its limitations and understand when a trust offers a far more beneficial alternative. 

Individuals with complex estates, concerns about probate, a desire for greater control and privacy, or a need to provide for specific circumstances such as minor children or beneficiaries with unique needs will find that a trust offers a level of flexibility, protection, and peace of mind that a will simply cannot match.   

It’s essential to note that these are only general guidelines for determining if you should consider a trust. 

Choosing between a will and a trust is a significant decision that should be made in consultation with an experienced estate planning professional who can work with you to evaluate your circumstances, assets, and goals to determine whether a trust is the right tool to ensure your wishes are fulfilled, your loved ones are protected, and your legacy is preserved for generations to come. 

Moving beyond the traditional will and embracing the power of a trust can be a crucial step in securing your financial future and providing lasting security for those you care about most. 

At ARQ Wealth, our expert team of fee-only financial advisors has years of experience guiding our clients through the estate planning process. We invite you to schedule a free consultation to discuss your estate planning goals by calling (480) 214-9572 or using our contact form.