In the USA, people use estate planning to manage, protect, and distribute their assets. They can plan for both their lifetime and after their death. Many people rely on two main tools in estate planning: wills and trusts.
A will is a legal document that tells others how a person wants to distribute their assets after death. In it, they name beneficiaries such as family, friends, charities, or other organizations. They also decide how to divide property, investments, and personal belongings.
A will can name guardians for minor children, set funeral arrangements, and appoint an executor. The executor manages the estate and follows the instructions in the will.
In most cases, the court reviews the will through a process called probate. The court confirms the will’s validity, settles disputes, and oversees asset distribution. Probate often takes time, costs money, and creates a public record.
A trust is a legal arrangement where the trustor, also called the grantor, transfers assets to a trustee. The trustee manages these assets for the beneficiaries under the terms in the trust document.
You can create a trust during your lifetime, called a living trust, or after your death, called a testamentary trust.
One popular choice is a revocable living trust. It allows the trustor to keep control of the assets while alive and serve as the initial trustee. After the trustor’s death, a successor trustee takes over and distributes the assets to the beneficiaries. This approach avoids probate, protects privacy, and often saves both time and money.
An irrevocable trust does not allow the trustor to change or cancel it after creation. People use these trusts to minimize estate taxes, protect assets from creditors, and support beneficiaries with special needs. They also use trusts to manage assets for minor children or for individuals who cannot handle their finances because of age, disability, or other reasons.
Wills and trusts give you control over how others handle your assets. A will directs the distribution of your property after you die. A trust can offer tax advantages and protect your estate from creditors.
Here’s why wills and trusts matter:
A will prevents costly disputes over your assets. It ensures your wishes guide the process and that your loved ones receive the support you intend.
A will also specifies how to divide property, investments, and personal possessions among your heirs.
An irrevocable trust can lower taxes and shield your estate from creditors. A revocable trust allows flexibility but usually does not offer those protections.
A will is a simple legal document that tells others how to distribute property to beneficiaries after death. A trust is a more complex legal contract that lets you transfer property to an account managed by another person.
To close any gaps in your estate plan, you can create both a living trust and a will.
A living trust works well for people with complex estates. This includes those who own multiple properties, hold investment accounts, or have sizable assets.
The two main trust types are revocable and irrevocable.
Revocable trusts let you make changes after creation and help you avoid probate.
Irrevocable trusts do not allow changes after creation.
Common trust options include:
Qualified Terminable Interest Property Trust (QTIP) – Provides for a surviving spouse while letting the grantor keep control after the spouse’s death.
Grantor Retained Annuity Trust (GRAT) – Pays an annuity for a set time, then transfers remaining assets to named beneficiaries.
Credit Shelter Trust – Reduces or eliminates federal estate taxes for estates above the exemption limit.
Charitable Remainder Trust – Provides income during retirement and benefits a charity.
Marital Trust – Passes assets to a surviving spouse or descendants.
Life Insurance Trust – Holds a life insurance policy, with absolute or discretionary control options
Wills and trusts are key tools in estate planning. They let you decide how to manage and distribute assets during life and after death. With the right plan, you can provide for loved ones, protect assets, and reach your legacy and financial goals. Learn more.
