Wills and Trusts 

1. Wills

Thinking about what happens to your money, property, and possessions after you’re gone isn’t exactly fun, but it’s one of the most important things you can do for your loved ones. Estate planning ensures that your wishes are honored, and your family isn’t left dealing with confusion, delays, and unexpected legal battles.

At the heart of estate planning are two powerful tools: wills and trusts. These legal documents ensure that your assets go where you want them to go, that the right person manages your affairs, and that your minor children are cared for by someone you trust.

You’ve already learned a little about wills and trusts in a previous lesson, but let’s dig a bit deeper into how each of these estate planning elements works.

A will is a legal document that takes effect after you die. It names:

• Who inherits your assets
• Who manages your affairs (your executor)
• Who will be the guardian for your minor children (if applicable)

 Pros of a Will 

• Is simple to create
• Provides legally binding instructions for asset distribution
• Allows you to name guardians for minor children

Cons of a Will

• Must go through probate, which can be time consuming and costly
• Becomes public record
• Doesn’t provide tax benefits or protect against estate challenges

What Typically Goes in a Will?

When creating a will, you’ll want to include key details to ensure your wishes are clearly stated and legally enforceable. Here’s a list of nine of the most important things to include:

1. Personal Information

• Full legal name
• Date of birth
• Address
• A statement declaring that this is your last will and testament

2. Executor (Personal Representative)

• Name of the person who will handle your estate after you pass
• A backup executor (in case the first choice is unable or unwilling to serve)
• Contact information for the executor

3. Beneficiaries (Who Will Inherit Your Assets)

• Full names of individuals or organizations (such as charities)
• Specific assets each beneficiary will receive (e.g., cash, property, and heirlooms)
• How assets should be distributed if a beneficiary passes before you

4. Guardianship for Minor Children (If Applicable)

• Name of the guardian(s) who will raise your children
• A backup guardian in case your first choice cannot serve
• Instructions on financial support for your children

5. Asset Distribution

• Real estate (e.g., home, land, and vacation property)
• Bank accounts (checking, savings, and investment accounts)
• Retirement accounts and life insurance (if not already designated to a beneficiary)
• Personal property (cars, jewelry, family heirlooms, collectibles, furniture, etc.)
• Business ownership or shares
• Digital assets (email, social media, cryptocurrency, and online accounts)

6. Debts and Expenses

• Instructions for paying off debts (mortgages, loans, and credit cards)
• Allocation of funds for funeral and burial expenses

7. Special Requests

• Personal messages or instructions to family members
• Requests for specific heirlooms or sentimental items
• Instructions for pets (who will care for them and funds for their care)
• Charitable donations

8. Funeral and Burial Wishes (Optional but Helpful)

• Preference for burial, cremation, or another option
• Location of burial or where ashes should be scattered
• Details for memorial services (if any)

9. Signatures and Witnesses

• Your signature (as the testator)
• Signatures of at least two witnesses (not beneficiaries)
• A notarization (required in some states)

Bonus: Consider a Letter of Instruction

While not legally binding, a letter of instruction can provide extra details, such as these:

• Passwords for online accounts
• Contact information for attorneys, financial advisors, or family members
• Personal messages to loved ones

Once your will is drafted, review it regularly and update it after major life changes (marriage, divorce, birth of children, acquisition of new assets, etc.). Keep it in a safe place and ensure your executor knows where to find it.

try it

Creating a will is one of the most important things you can do to ensure your wishes are carried out after you’re gone. If you don’t have one, now is the time to start. Take a few minutes to outline the six key details below—this will help you get a head start on drafting a will with an attorney or using a reputable online service.

Step 1: Identify Your Beneficiaries

Whom do you want to inherit your assets? Make a list of people or organizations (such as charities) you want to include. Be as specific as possible.

EXAMPLE

“I want my daughter, Mia, to receive my house. My sister, Carla, should inherit my car and personal belongings. I’d like 10% of my savings to go to an animal rescue organization.”

Step 2: Choose an Executor

This is the person who will manage your estate and ensure your wishes are followed. Choose someone responsible and trustworthy.

EXAMPLE

“I appoint my brother, David, as the executor of my will. If he is unable or unwilling to serve, I appoint my friend, Angela.”

Step 3: Name a Guardian for Minor Children (If Applicable)

If you have children under 18, name a guardian who will raise them in your absence.

EXAMPLE

“If I pass away before my children turn 18, I designate my cousin, Rachel, as their legal guardian.”

Step 4: Specify How Your Assets Should Be Distributed

Outline who gets what. Be specific about major assets like your house, car, savings, and valuable possessions.

EXAMPLE

House: Goes to my spouse

Savings account: Split equally between my two children

Jewelry collection: Given to my niece, Emily

Furniture and household items: Donated to charity

Step 5: Include Any Special Requests or Instructions

Do you have personal items with sentimental value? Do you want a specific kind of funeral or burial? Add those details here.

EXAMPLE

“I want my ashes to be scattered at Lake Tahoe. My vinyl record collection should be given to my best friend, Marcus.”

Step 6: Sign and Witness

A will must be signed and typically witnessed by two people who are not beneficiaries. Check your state’s laws to ensure your will is legally valid.

EXAMPLE

“I will sign my will in the presence of my two witnesses, Emma and Michael, who will also sign to confirm its validity.”

Now, It’s Your Turn!

Grab a piece of paper or open a document and jot down your answers. Even a rough draft is a great first step toward protecting your loved ones and making sure your wishes are honored.

What Happens If You Die Without a Will?

If you pass away without a will, you are legally considered to have died intestate. This means the state takes control of your estate and decides how your money, property, and possessions are distributed according to intestate succession laws.

Here’s why that’s a problem:

• You lose control over who inherits your assets. The state follows a strict order—typically starting with your spouse and children, then parents, siblings, and other relatives. Unmarried partners, stepchildren, and close friends usually inherit nothing.
• Your family may go through a lengthy and costly probate process. Probate is a court-supervised legal process that determines how assets are distributed. Without a will, this process can take months or even years and cost thousands in legal fees.
• A judge—not you—decides who raises your minor children. If you have children under 18 and haven’t named a guardian in a will, the court will decide who raises them, and it may not be the person you would have chosen.

EXAMPLE

Malik was a 42-year-old entrepreneur with a successful business, a home, and a longtime girlfriend, Nina. They had been together for 15 years, built a life together, and always assumed everything would automatically pass to the other if something happened.

But when Malik unexpectedly passed away, the state stepped in. Under intestate laws, his parents were legally entitled to his assets—not Nina. She had no legal claim to his house, business, or savings because they were not married, and Malik hadn’t written a will. Despite being his life partner, she was left with nothing, forced to move out of their shared home.

If you don’t have a will, the law decides who gets your money and property—and it may not be the people you intended.

Both wills and trusts help you control who gets your assets, but they have key differences in how they function.

Feature	Will	Trust
Requires probate?	Yes	No
Becomes public record?	Yes	No
Controls distribution timing?	No	Yes
Protects against legal challenges?	No	Yes
Effective during life?	No	Yes

Before we discuss trusts, let’s look at the process of dispersing assets after death—it’s called probate.

terms to know

Letter of Instruction

A non-legally binding document providing guidance on managing an estate or assets after death.

Intestate

Dying without a valid will, causing assets to be distributed according to state laws.

Probate

The legal process of validating a will and distributing assets after death.

1a. Probate

Probate is the legal process that oversees the distribution of a deceased person’s assets, as well as settling debts and ensuring that any remaining property is given to the rightful heirs. If the person had a will, probate is more straightforward—the court follows their instructions, making sure the assets go to the named beneficiaries.

However, when someone dies without a will (intestate), probate becomes much more complicated. The state takes control of the process, determining who receives the assets based on intestacy laws rather than personal wishes. This can lead to delays, costly legal fees, and family disputes.

When a person passes away intestate, the probate process generally follows these five steps:

1. A Judge Appoints an Administrator

Since no executor was named in a will, the court appoints an administrator to manage the estate. This is typically a surviving spouse, adult child, or another close relative, but if no family members step forward, the court may appoint a lawyer or professional administrator instead.

• The administrator has the same responsibilities as an executor, including gathering assets, paying debts, and distributing what remains.
• The court oversees this process, adding additional legal steps and expenses.
  
  

2. Creditors Are Notified

The administrator must notify creditors (such as mortgage lenders, credit card companies, and medical bill collectors) that the estate owner has died.

• Creditors can file claims against the estate for unpaid debts.
• If the estate does not have enough funds to cover the debts, some assets may need to be sold to satisfy outstanding balances.
  
  

3. Identifying and Locating Heirs

Without a will, the court must identify and locate all legal heirs according to intestacy laws. This process can be quick if the deceased had a clear family structure (e.g., a spouse and children). However, if distant relatives must be tracked down—such as half-siblings, cousins, or children from previous relationships—this can add months or even years to the process.

• If multiple heirs exist, the court determines how assets are divided based on state laws.
• If no family members can be found, the state may seize the estate, meaning no one inherits anything.
  
  

4. Assets Are Valued and Debts Are Paid

The administrator must inventory and appraise all assets in the estate, including:

• Real estate (homes, land, and rental properties)
• Bank accounts and investments
• Vehicles and personal property
• Business interests

Once the total value is determined, the administrator must use estate funds to pay off debts, taxes, and legal fees before distributing anything to heirs. If debts exceed the estate’s value, some assets may have to be sold, leaving heirs with little or nothing.

5. Remaining Assets Are Distributed According to State Law

Only after all debts and taxes are settled can the remaining assets be distributed to heirs. Since there is no will, the court follows intestate succession laws, which vary by state.

• If a person was married, their spouse typically receives a portion or all of the estate.
• If they had children, assets are usually divided among them.
• If there is no spouse or children, parents or siblings may inherit.

This one-size-fits-all approach often results in assets going to people the deceased may not have chosen, and it can create disputes among family members.

How Much Does Probate Cost?

Probate can be expensive, especially without a will. The typical costs are as follows:

• Attorney fees: Lawyers charge hourly rates or a percentage of the estate’s value.
• Court fees: Costs vary by state but can reach thousands of dollars.
• Executor or administrator fees: If a professional administrator is appointed, they take a percentage of the estate as payment.
• Appraisal and valuation fees: Real estate and valuable property must be professionally appraised.

The total cost of probate is usually between 3% and 10% of the estate’s value. If disputes arise—such as heirs contesting who gets what—legal battles can drain even more from the estate and delay distribution for years.

Who Gets What Without a Will?

Each state has intestacy laws that determine how assets are divided when someone dies without a will. While laws vary, most states distribute assets in the following order:

1. If you’re married with children: Your spouse and children split your assets (exact percentages vary by state).
2. If you’re married with no children: Your spouse inherits everything.
3. If you have children but no spouse: Your children inherit everything, divided equally.
4. If you have no spouse or children: Your parents inherit everything.
5. If no parents are alive: Your siblings inherit.
6. If no immediate family exists: More distant relatives (cousins, aunts, or uncles) inherit.
7. If no relatives can be found: The state takes everything.

One of the biggest problems with intestate laws is that unmarried partners, stepchildren, and close friends receive nothing, no matter how long they were in your life.

EXAMPLE

Jay had three children—two from a previous relationship and one with his current partner, Alexis. He assumed everything would naturally go to Alexis and their child if he passed. But when he died without a will, the state split his assets equally among his three children.

Alexis received nothing, even though she had financially depended on Jay for years. She had to move out of their home and struggle to support herself and their child. If Jay had created a will, he could have ensured that Alexis received financial support and a place to live.

To prevent the delays, costs, and stress of probate, consider these options:

1. Create a Will: A legally binding will ensures your assets are distributed according to your wishes, rather than state law.
2. Set Up a Trust: A living trust allows your assets to bypass probate altogether and be distributed directly to beneficiaries.
3. Name Beneficiaries on Accounts: Many financial accounts, including life insurance, 401(k)s, and IRAs, allow you to name direct beneficiaries, ensuring they receive the funds immediately after your death.
4. Consider Joint Ownership: Owning property with a spouse or co-owner with “rights of survivorship” allows assets to pass directly to them without probate.

Estate planning does not have to be complicated; taking the time to create a will or trust can save your family from the overwhelming burden of a long, expensive probate process. Planning ahead ensures that your loved ones are taken care of exactly as you intend.

term to know

Intestacy Laws

State laws that determine how assets are distributed if someone dies without a will.

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2. Trusts

A trust is a legal arrangement that allows a third party, known as a trustee, to hold and manage assets on behalf of one or more beneficiaries. Trusts are powerful tools for estate planning because they offer more control, privacy, and flexibility than a will alone.

Unlike a will, which only takes effect after you pass away and must go through probate (a court process that can be expensive and time consuming), a trust can take effect while you are still alive and allow your assets to pass directly to your beneficiaries without the delays of probate.

A trust involves three key roles:

1. Grantor (Settlor): The person who creates the trust and transfers assets into it
2. Trustee: The person or institution responsible for managing the trust according to the grantor’s wishes
3. Beneficiaries: The people or organizations who receive the assets from the trust

EXAMPLE

Samantha wants to leave her estate to her two children but does not want them to receive a lump sum at age 18. Instead, she creates a trust that allows them to receive portions of their inheritance at ages 25, 30, and 35. She names her trusted friend, Mike, as the trustee to oversee the distributions and ensure her wishes are followed.

There are several types of trusts, each designed for different purposes.

Revocable Living Trust (Most Common)

• It is created while you are alive and can be changed or revoked at any time.
• It helps avoid probate, making it easier for beneficiaries to inherit assets quickly.
• It allows you to control assets during your lifetime and specify how they are managed after your passing.

It is best suited for people who want to maintain control while alive and avoid probate after death.

Irrevocable Trust

• It cannot be changed or revoked once established.
• It offers tax advantages and asset protection from creditors.
• It is often used for estate tax planning or protecting assets from lawsuits.

It is best suited for individuals with significant assets looking to minimize estate taxes or protect wealth.

Testamentary Trust

• It is created through a will and takes effect only after the grantor dies.
• It is useful for controlling how assets are distributed to children or dependents over time.

It is best for parents who want to ensure their children do not receive a lump sum inheritance at a young age.

Special Needs Trust

• It is designed for beneficiaries with disabilities to ensure they receive financial support without jeopardizing government benefits such as Medicaid or Social Security.

It is best for families who have a disabled child or loved one who relies on government assistance.

Charitable Trust

• It is created to donate assets to a charity while providing tax benefits to the grantor.
• It can provide income to beneficiaries before transferring remaining assets to the charity.

It is best for individuals who want to support a charitable cause while also receiving tax benefits.

Key Benefits of a Trust

• Avoids Probate: Unlike a will, a trust allows assets to transfer directly to beneficiaries without going through court. This saves time, money, and stress.
• Maintains Privacy: A will becomes a public record after death, but a trust remains private. This means no one outside your beneficiaries and trustee will know your financial details.
• Provides More Control: You can dictate how and when beneficiaries receive their inheritance. For example, you can prevent a young adult from spending irresponsibly by distributing assets gradually.
• Protects Assets: An irrevocable trust can shield assets from lawsuits, creditors, and divorce settlements.
• Reduces Estate Taxes: Certain trusts can minimize estate taxes, especially for those with significant wealth.

While trusts offer many advantages, they are not necessary for everyone. Here are some situations where a trust may be beneficial:

• You own real estate in multiple states and want to avoid probate in each state.
• You want to protect assets from creditors, lawsuits, or divorce.
• You have minor children and want to control when they inherit money.
• You want to avoid probate and make inheritance easier for your loved ones.
• You have a special needs child or dependent who relies on government benefits.

If your estate is relatively small and simple, a will may be sufficient. However, many people find that combining a will and a trust gives them the best of both worlds—a will to name guardians for children and handle personal matters and a trust to control and distribute assets efficiently.

A trust is one of the most powerful estate planning tools because it allows you to protect, control, and efficiently distribute your assets. While a will is essential for everyone, a trust can provide additional privacy, flexibility, and protection, especially if you have substantial assets, children, or unique financial needs.

If you are unsure whether a trust is right for you, consider speaking with an estate planning attorney to explore your options. Taking action now ensures your loved ones are taken care of according to your wishes.

terms to know

Grantor (Settlor)

The person who creates and funds a trust.

Trustee

The person or entity responsible for managing a trust’s assets according to its terms.

Revocable Living Trust

A trust that can be changed or canceled by the grantor during their lifetime.

Irrevocable Trust

A trust that cannot be altered or revoked once created.

Testamentary Trust

A trust created through a will and activated after death.

Special Needs Trust

A trust designed to provide for a disabled person without affecting government benefits.

Charitable Trust

A trust set up to donate assets to charities while possibly providing tax benefits.