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I'm setting up a will in the near future and trying to decide if a trust is the right way to go. I'm in my thirties, married, and have two small children. Our assets consist of our home (mortgaged), 401(k)'s, IRA's, some mutual funds, and shares in a privately-held start-up.

My father and father-in-law have both told me that a trust is the best way to pass wealth on to your children. However, my friend who is an attorney, and does this sort of thing for a living, told me that attorneys will often suggest this to their clients because it is lucrative for their practice, and that in many cases it's often not the right decision.

What do you think? I've read this question already, and it was very helpful. However, I'm still not sure how the specifics apply to my situation. I'm happy to consult a tax attorney, I just want to make sure that I have the facts before getting started.

P.S. I live in the United States (California), in case this has any impact on the answer.

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  • Hoping somebody answers this...
    – MrChrister
    May 17, 2011 at 17:06
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    I understand this to be a state-by-state decision. I live in Colorado and have similar assets and the attorney helping us out recommended a Will. He did comment that in California, probate laws are different and would require a different solution.
    – Alex B
    May 18, 2011 at 18:14

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Our lawyer, whom we trust, recommended a trust to us and that's what we went with. As I understand it, a will is executed when you die and that's that. A trust can act while you are still alive, and can continue to act after you die. So a will is like a point in time (though it takes time to actually follow through on it), while a trust exists and acts for as long as you specify.

For example, you can specify that if you die, the trust will spend money to help your children grow up, then give them 33% of the bulk of the trust when they turn 30, 33% when they turn 40, and the rest when they turn 50. In a will, you'd end up giving 100% to them at your death.

That's my non-lawyerly explanation.

Also, you don't necessarily need to title everything in the trust's name. You can change the beneficiaries on your bank accounts, 401Ks, and insurance and leave the ownership the same. In Virginia, the probate process for real estate is so quick that our lawyer recommended not titling our condo in the trust's name, but rather let it go through our wills to the trust. (Though we won't purposely leave anything else for the wills.)

Speaking of which, a trust does not eliminate the need for a will. You still need a will to catch things that -- by accident or on purpose -- aren't owned by the trust when you die.

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  • Any comment as to the lucrative nature of a trust vs a will to a lawyer?
    – MrChrister
    May 17, 2011 at 19:11
  • @MChrister: I believe that our lawyer charged about 50% more for the trust than the will. Can't remember the specifics, but it was significantly more, but not so much that we didn't want to do it. We went through 4 or 5 drafts of the trust before we were done, so it felt like they earned their money. (And of course, got a simple, pour-over will, medical directives, and durable powers of attorney thrown into the deal.)
    – Wayne
    May 17, 2011 at 19:18

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