Do I Need a Will or a Trust—What’s the Difference?

Beginning the process of estate planning is one of the most important steps you can take to safeguard your family’s long-term future. For families in San Mateo and the Bay Area, the fundamental question isn’t “which is better, a will or trust?”, but rather which document provides the most efficient, private, and cost-effective way to transfer your assets.

In the state of California, probate is the lengthy, public, and notoriously costly process of distributing assets. Therefore, the strategic choice between a will and a trust is about how your assets will be managed both now and in the future. 

At The Law Office of Vidhya Babu, we empower our clients to make informed estate planning decisions in their family’s best interests. Today, we’ll discuss the fundamental differences between these two common estate planning tools to help you make the best decision for your family’s future. 

Understanding the Basics: Probate vs. Non-Probate Assets

Your estate is the sum total of everything that you own, meaning virtually everyone has one. 

The assets that make up your estate fall into two distinct categories:

1. Non-Probate Assets: These assets are paid directly to a named beneficiary or co-owner, bypassing the probate process entirely. Non-probate assets include:
   • Life insurance policies and retirement accounts (401ks, IRAs)
   • Bank accounts with a Payable-on-Death (POD) or Transfer-on-Death (TOD) designation
   • Assets that are held in the name of a revocable living trust (RLT).
2. Probate Assets: These are assets that are held directly in your name without a beneficiary or joint owner. These assets must pass through the probate process before they can be transferred to your heirs.

The goal of virtually every estate plan is to minimize your probate assets, thereby saving your family time, money, and privacy.

Tool 1: The Last Will and Testament

A Last Will and Testament is a legal document that provides instructions for three key functions that occur after your death.

The Key Functions of a Will

By creating a will, you can:

• Distribute Probate Assets: A will specifies how your probate assets, including properties, bank accounts, and possessions will be distributed amongst your heirs (those legally entitled to inherit from an estate) and beneficiaries (those you specifically designate to receive an asset).
• Name Guardianship of Minors: Crucially, a will is the only type of estate planning document that can legally designate a guardian for minor children should both parents pass away.
• Appoint an Executor: A will names an executor of your estate, the individual responsible for managing your estate through the legal process of probate.

For the majority of people, a will is sufficient to form the backbone of a solid estate plan. Wills are fairly straightforward, and cost-effective to set up. They can be changed at any point during your lifetime, allowing you to add beneficiaries or remove them altogether. An important caveat, however, is that a will only takes effect upon your death.

The Drawbacks of a Will

The major drawback of relying solely on a will is the requirement for probate if your probate assets exceed the current statutory minimum of $184,500 in California.

In California, probate means:

• High Costs: Mandatory legal and executor fees are set by state statute, and calculated based on the estate’s gross value. This often means that your beneficiaries inheritances are reduced by thousands simply by undergoing probate.
• Lengthy Process: Probate can take anywhere from several months for a small estate, to a year or longer for more complex estates. Until probate is settled, no assets can be distributed, meaning your family has to wait to receive their inheritance.
• Public Process: Probate is a matter of public record. This means your financial details, asset inventory, and distribution all become publicly available information.
• Vulnerability: The probate process opens the will up to challenges, including the validity of the will itself, and the distribution of assets.

Tool 2: The Revocable Living Trust (RLT)

A revocable living trust is a legal mechanism that you create during your lifetime for the purpose of holding title to your assets. It allows you, as the grantor, to transfer the legal title of assets to the trustee (who is usually you), allowing you to retain full control and beneficial ownership during your lifetime, while bypassing the need for probate when you pass away. This is the key advantage of a trust.

The Key Advantages of a Revocable Living Trust

These are the main advantages of a Trust:

• Avoids Probate: The biggest advantage to creating a trust is bypassing the lengthy, costly, and public process of probate. Instead of waiting months or even years, your named successor trustee distributes inheritances immediately and privately, without a public court process.
• Incapacity Protection: Unlike a will, a trust is effective immediately. Should you become incapacitated and unable to manage your finances, your successor trustee can instantly step in to manage your affairs without court intervention.
• Conditional Distribution: Both a will and a living trust allow you to place conditions on inheritances, such as requiring heirs to reach a certain age. However, a living trust makes this process significantly easier, more private, and ultimately cheaper because it bypasses probate.

The Critical Drawbacks of a Revocable Living Trust

A revocable trust requires maintenance that a will does not, and offers little asset protection during your lifetime.

1. Ongoing Maintenance is Mandatory
   Without being properly funded, a trust is useless. As the grantor, you are responsible for:
   • Initial Funding: During the initial setup, the grantor must legally transfer or re-title assets into the trust, a process called funding.
     Depending on the number of assets transferred, this can require significant paperwork.
   • Ongoing Funding: Many times new assets are acquired during your lifetime, and these must be added to the trust in order to avoid being considered probate assets.

   Any asset that is not specifically re-titled into the trust still remains part of your probate estate. This includes investments and additional real properties, unless they are specifically transferred into the trust.

   For this reason, nearly all trust grantors also have a special form of will known as a pour-over will. This specific type of will essentially guarantees that any assets you forget to transfer into the trust are “poured over” into the trust upon your death. This ensures that all your assets will be distributed pursuant to the trust.

2. No Creditor Protection
   A revocable living trust does not protect assets from personal creditors during your lifetime. Because you retain the power to revoke (terminate) the trust, these assets are not protected from creditors who seek to satisfy any debts. If asset protection is a primary goal, rather than probate avoidance, an irrevocable trust may be more appropriate.

Is a Trust Better Than a Will? Understanding Your Family’s Needs

Understanding which is better, a trust or a will, for your family’s needs likely depends upon the size of your estate, but you don’t have to be the Monopoly man to benefit from a trust.

In reality, any San Mateo or Bay Area resident whose total financial and non-real estate assets exceed the California probate minimum of $184,500 will benefit greatly from a trust. While certain limited procedures now exist for avoiding probate on personal residences up to a value of $750,000, a trust remains the single most effective way to ensure all your assets are distributed privately and efficiently.

Compared to the very low cost of drafting a will (typically $300-600), the initial setup cost of a trust can seem high. Establishing a trust ranges from $2,000-$5,000 or more depending on the size and complexity of your estate. 

However the trust will save your family several times that amount in the cost of probate. Add to that the privacy and speed benefit of distributing these assets to your family, making forming a trust a far more beneficial option than going through probate court. 

In most cases, it can be wise to have both a will and a trust. If you have a significant estate, as well as minor children, then you could benefit from having both a will and a trust. That is because a will is the most common way to name guardians for your minor children. 

Ultimately, is a trust better than a will? For some, a will offers enough estate planning to satisfy their needs and fairly distribute their assets. But for those who own their own home and/or have significant assets and wealth, a trust is almost always the superior option.

Additional Estate Planning FAQs

1. What kind of lawyer do I need for wills and trusts?

   Estate planning requires special training and skill beyond that of a general practice lawyer. Set your sights on a will and trust attorney or estate planning attorney to ensure that you receive qualified advice about wills, trusts, and probate specific to your family situation. 

2. How much does it cost to set up a trust in California?

   The cost to set up a trust depends largely on the size and complexity of your estate. Establishing a revocable living trust for a family that owns a home and several investments can require an initial setup cost of $2,000-5,000 or more. However, consider the money saved versus the mandated statutory fees of California probate—easily multiple times the cost of setting up a trust. In many ways, establishing a trust is like pre-paying the legal costs of wealth transfer, saving your family thousands in their inheritances. 

3. What happens when a will and a revocable trust conflict?

   In the majority of cases, a trust will take precedence over a will with regards to any asset that has been transferred to the trust. That is because the trust legally owns these assets the moment they are transferred from your name to the trust. Since the trustee now holds title to the assets, a will has no authority to bestow property that now belongs to the trust. Working alongside a will and trust attorney is key to prevent any conflicts and confusion in how these documents are structured.

4. Does a trust need maintenance?

   Yes, while a will largely only needs to be amended when you wish to make a change during your lifetime, a trust does require ongoing maintenance. Any newly acquired assets that you wish to include in the trust must be re-titled so that they are no longer part of your probate estate.

5. Do I need a trust if all my accounts have named beneficiaries?

   While it is true that setting your life insurance and retirement plans as Payable on Death (POD) or Transfer on Death (TOD) allows those assets to bypass probate, it does not replace the need for a will or trust. A trust or will is still required to transfer real estate, (with a trust being the better option if you have multiple properties and other assets) without a court proceeding. A trust is also the only way to plan for incapacity during your lifetime.. 

If you’re still wondering “do i need a trust or a will?”, contact The Law Offices of Vidhya Babu and let us help you determine the best solution for your family’s needs. 

The Law Office of Vidhya Babu: Will and Trust Attorney for San Mateo and Bay Area Families

Estate planning doesn’t have to be a frightening experience. By receiving help from a trusted will and trust attorney like The Law Office of Vidhya Babu, you can get the guidance needed to create an effective estate plan that is tailored to your assets, goals, and family dynamics. 

Contact the Law Offices of Vidhya Babu today for a personal consultation, and let us help you determine if a trust or a will is the best option to secure your family’s future. 

**DISCLAIMER**
This blog post is for informational purposes only and does not constitute legal advice. Please consult with an attorney to discuss your specific circumstances.