Learn the key differences between wills and trusts, including benefits, types, and when each is most appropriate for estate planning in PA.

Many people are uncertain about the differences between a will and a trust when it comes to estate planning. While both serve to manage and distribute your assets after you pass away, they function differently and are suited to different situations.

Wills vs. Revocable Trusts: The Basics

A will is a legal document that outlines how you want your assets distributed after your death. It also allows you to name an executor who will carry out your wishes and guardians for your minor children if applicable. In Pennsylvania, the process of administering assets in accordance with your will is called probate.  This process is typically straightforward and not overly expensive, which simplifies the decision for most people. 

A revocable trust is a legal arrangement where you transfer your assets to a trustee (typically the same person who is creating the trust) who manages them for the benefit of your beneficiaries. Revocable trusts act as a Will substitute that avoids the need to open probate for the assets that are held in trust. 

Which one is right for you? While it offers certain benefits, many people in Pennsylvania find a will more practical unless they have specific reasons to avoid probate.

A Simple Will

A will is commonly referred to as your last will and testament. It identifies your assets, beneficiaries, and the executor you want to manage your estate. A simple will is sufficient for most people to ensure your assets are passed on according to your wishes. However, for families with minor children, beneficiaries with special needs, complex family dynamics or comprehensive financial situations, a more detailed estate plan may be needed, such as a will that includes testamentary trusts.

Types of Trusts

The three most common trusts are::

1. Revocable Trust: The most common trust is known as a revocable trust. It acts as a substitute for a will and enables you to bypass the probate process altogether. However, this convenience comes at the cost of more upfront work. You must establish the trust and retitle all your assets into it, complicating day-to-day financial management. 
2. Testamentary Trust: These are created within a will and only come into effect if certain conditions are met, such as if both parents of minor children pass away. In this case, the assets would be held in trust for the children, with a trustee managing the funds for their benefit until they reach a certain age—often 25 or 30. The trustee can use the funds for education, housing, or other needs, but the money is not given directly to the children until they’re deemed responsible enough to handle it. The attorneys at Lope Casker utilize testamentary trusts in connection with Will preparation.
3. Irrevocable Trusts: As the name suggests, an irrevocable trust cannot be changed or revoked once it is created. This type of trust is often used for Medicaid and estate tax planning, as it removes the assets from the ownership/control of the person who set up the trust. However, once the assets are transferred into the trust, they are no longer accessible to the original owner, which can lead to complications down the road if the individual later needs access to those assets.

Wills vs Living Wills

There’s one final important distinction: the difference between a will and a living will. Many people confuse a living will with a last will and testament. A living will is a separate document dealing with end-of-life medical decisions. It outlines your wishes if you are in a vegetative state or otherwise unable to make medical decisions for yourself, such as whether you would want life-sustaining treatment. This is different from a last will that focuses on the distribution of your assets after your death.

Wills and trusts both play important roles in estate planning, but the right choice depends on your circumstances. A simple will often meets most people’s needs in Pennsylvania, while trusts can be more beneficial in specific cases. Reach out to us to review or get started on your estate planning today.