Do I Need a Trust if I Have a Will?

When planning for their family’s future, wills are an essential document to have. No matter who you are, what you do, or what you have, having a will provides some kind of direction and clarity for distributing what you have after you’ve passed. But once your will is in place, you might also consider whether it also makes sense to establish a trust, which can give you more options for your assets and privacy while you’re still alive. 

AMG Wealth Advisors has helped Austin residents with their estate planning needs for decades, so we are ready to help guide you through this critical decision. Here’s some factors to consider when deciding how to best prepare for your family’s financial future.

Trusts vs. Wills

While a will is a document that takes effect after you die, a trust is a legal arrangement where you transfer ownership of your assets to a trustee who manages them for the benefit of your chosen beneficiaries. A trust can kick in while you’re still alive, offering more control over how and when your assets are distributed. One of the biggest perks is that trusts typically bypass probate, saving time, money, and keeping your affairs private.

Who Might Benefit More from a Trust?

Here are some common situations where a trust is an ideal solution: 

• High Net Worth Individuals: If your estate is substantial, a trust can help minimize estate taxes while ensuring your wealth is distributed exactly as you intend. It’s a smart way to protect assets and keep Uncle Sam from taking a bigger bite than necessary.
• Parents of Minor Children: A trust allows you to distribute assets gradually, ensuring that young beneficiaries aren’t handed large sums they may not be ready to manage. You can also set terms for how and when funds are used—think college tuition or milestone birthdays.
• Blended Families: For those navigating the dynamics of a current spouse and children from previous relationships, a trust provides a way to balance everyone’s needs fairly. It can ensure your spouse is cared for while safeguarding inheritances for your children.
• Business Owners: Transferring ownership or assets from a business can be complicated, but a trust simplifies the process. It keeps your operations running smoothly and avoids potential disputes over leadership or ownership transitions.
• Privacy Preference: Unlike a will, which becomes part of the public record during probate, a trust keeps your estate matters confidential. If discretion is important to you, this is a significant advantage.
• Complex Assets: If you own property across multiple states or have a diverse investment portfolio, a trust can centralize management and avoid the logistical headaches of handling assets through probate in various jurisdictions.

Trusts offer unparalleled flexibility and control, making them the go-to solution for these unique situations.

Steps to Create a Trust

Step 1: Assess Your Assets

The first step in creating a trust is taking stock of what you own and what you want to protect. This is the same for wills and trusts alike, and while it may seem straightforward, this step can take more time and require more nuance than you may expect. This, of course, requires listing all of your assets—everything from real estate and investments to heirlooms and bank accounts. 

Step 2: Choose the Right Type of Trust

Next, decide on the kind of trust that fits your situation, as there are two main types that differ substantially in structure or resulting benefits. The first kind is a revocable trust. A revocable trust offers flexibility, allowing you to make changes or even dissolve it during your lifetime. 

The other type, an irrevocable trust, locks in your decisions, providing benefits like reduced estate taxes and asset protection. Beyond these two, there are also specialized trusts for charitable giving or tax savings—so choose wisely based on your goals, and consult a professional wealth advisor to learn more about the nuances as they pertain to your situation. 

Step 3: Select a Trustee

This is one of the most important decisions for the future of your trust, especially when planning beyond your lifetime. Your trustee will manage the trust, which requires a deal of responsibility with paperwork, managing distributions, and making tough decisions (if required). This person should be reliable, and being financially savvy and impartial are ideal characteristics. You can also opt for a professional trustee, like a financial institution, for added objectivity and expertise wherein you can direct them how to resolve types of disputes.

Step 4: Draft the Trust Document

Work with an experienced estate planning attorney to draft a trust document that meets your goals and complies with state laws.

Step 5: Fund the Trust

The final step to get your trust off the ground is to fund it with the assets you listed in step one. This means officially and legally transferring assets—like changing titles on property to place them into the trust. Make a habit of reviewing and updating the trust as life evolves, whether it’s a new property purchase, a growing family, or shifts in financial goals.

Estate Planning with AMG Wealth Advisors

Deciding between a trust and a will can be tricky, but with the right guidance, you can make the best choice for your unique situation. Contact us at AMG Wealth Advisors to get started on securing your legacy with estate planning that works for you.

Advisory Services offered through Waterloo Capital, L.P. d/b/a AMG Wealth Advisors, an SEC Registered Investment Advisor.  Registration with the SEC does not imply a certain level of skill or expertise.