Many people assume that estate planning requires choosing between a will and a trust. In reality, the most effective estate plans often use both. A will and one or more trusts can work together to better ensure that your assets are distributed according to your wishes and that your loved ones are protected after your passing.
A will remains an important foundation of most estate plans. It can address issues such as naming guardians for minor children and directing how certain assets should be distributed. However, assets that pass through a will generally must go through probate, which can be time-consuming, public and potentially expensive.
Trusts offer several advantages that wills cannot. Assets properly transferred into a trust typically avoid probate altogether. Trusts can also provide greater control over when and how beneficiaries receive property. For example, a trust may distribute assets over time rather than providing a large lump sum all at once.
Taking advantage of the benefits of each resource type
For many individuals, the most significant assets are often better suited for trust ownership. Real estate is a common example. Whether you own a primary residence, vacation property or multiple rental properties, placing those assets in a trust can simplify transfers and help avoid probate proceedings.
Investment portfolios are another asset category frequently placed into trusts. Stocks, bonds and brokerage accounts held in trust can often be managed and transferred more efficiently according to the instructions established by the trust document.
Business interests can also benefit from trust planning. Whether you own a closely held business, partnership interest or family company, a trust may help facilitate succession planning and ensure continuity after your death.
Retirement accounts and life insurance policies require special consideration. While these assets typically pass through beneficiary designations rather than probate, trusts can sometimes be named as beneficiaries when additional control, tax planning or asset protection objectives are involved. Careful coordination is important to avoid unintended consequences.
Every estate is different, and there is no one-size-fits-all solution. The best approach is often an informed, coordinated plan that uses both wills and trusts to address specific goals, family circumstances and asset types.