A Look at Common Misconceptions about Wills and Trusts

Estate planning can feel daunting, overly legalistic, or relevant only to people with significant wealth. In reality, having a basic plan in place is one of the most practical ways to protect your family, your assets, and your wishes.

Two of the most common estate planning tools are wills and trusts. They serve different purposes, and a misunderstanding in how they work can lead to unnecessary stress for your loved ones later. 

A will is a legal document that outlines what should happen to your assets after you pass away. It may also name the guardians of your minor children and designate an executor to carry out your wishes. Wills are relatively simple and often form the foundation of an estate plan.

A trust is a legal arrangement that holds assets for your beneficiaries. A living trust, created during your lifetime, can manage your assets while you are alive and distribute them after your death. Trusts are often used to avoid probate, provide more control over how and when your assets are distributed, and offer additional privacy.

Both tools can play a role in a well-rounded plan. Confusion arises when people assume that they are interchangeable.

Do Only Wealthy People Need a Will or Trust?

Estate planning is not just for high-net-worth families. Almost anyone with assets, children, or particular wishes should have at least a basic will.

If you have young children, a will allows you to name a guardian. Without one, the court will decide who raises your children. If you own a home, savings, or even just personal belongings you want distributed in a certain way, a will ensures that those decisions are made by you rather than by default state laws.

The focus should not be on the size of your estate, but on the clarity you provide for the people you care about.

Do A Will and a Trust Do the Same Thing?

Although some people may think that wills and trusts are interchangeable, they serve different purposes. A will goes into effect after one’s death and typically goes through probate, the court-supervised process of settling an estate. This process can take time and becomes part of the public record.

A trust can be active during your lifetime. Assets placed in a living trust can be managed if you become incapacitated and transferred to beneficiaries without probate. Trusts can also include specific instructions, such as distributing funds over time rather than all at once.

For example, a parent might use a trust to release funds gradually for their children’s education and living expenses instead of providing a lump sum at age 18 or age 21. Many people use both tools together to cover different needs.

Does A Living Trust Eliminates All Taxes?

A living trust does not automatically reduce or eliminate estate taxes. While certain trust structures can be part of more advanced tax planning strategies, a basic living trust is primarily about control, continuity of management, and avoiding probate, and does not provide any tax savings.

Tax outcomes depend on the size of the estate, current tax laws, and the plan's overall structure. For many families, estate taxes are not triggered due to high federal exemption thresholds, but taxes can still be part of the broader planning conversation, especially if there are significant assets held in tax deferred IRAs or 401ks at the decedent’s death.

This is where professional guidance can help. A financial advisor or estate planning attorney can clarify whether tax planning is relevant to your situation and which tools, such as ROTH conversions while you are alive, actually address that goal.

Once You Create a Will, You’re Done

Estate planning is not a one-and-done task. Your documents should evolve as your life changes. Marriage, divorce, the birth of a child, a move to a new state, or major financial changes all warrant a review.  Also, a durable financial power of attorney, and a health care power of attorney document are advisable in almost all situations—even for people with little to no assets.

If you created a will before having children, it may not reflect your current wishes for guardianship. If you move to a different state, its laws may affect how your documents are interpreted.

A good rule of thumb is to review your estate plan every few years or after major life events to ensure that it still reflects your plans.

Online Templates Are Not Sufficient for Everyone

Online tools can be helpful for very straightforward situations, but they are not designed for complex family dynamics, blended families, business ownership, or special needs planning.

Financial advisors and estate planning attorneys bring context to the process. They can ensure that your beneficiary designations align with your broader goals, that your assets are titled correctly, and that your plan aligns with your overall financial strategy. Even a short conversation can uncover gaps you might not notice on your own.

How to Choose Between a Will and a Trust

Deciding whether you need a will, trust, or both, depends on your goals, and the complexity of your estate. Ask yourself a few questions.

·        Do you want to avoid probate and keep your affairs private? 

·        Do you need a plan to manage your assets if you become incapacitated? 

·        Are you concerned about when your beneficiaries receive the money?

·        Do you have assets in more than one state, or country?

For many people, a will is a solid starting point. For others, especially those with young children, property in multiple states, or more complex assets, a trust can add valuable structure. 

While there is no single right answer, understanding your options will lead to more confident decisions.

Bringing It All Together

Wills and trusts and power of attorney documents are not just legal documents. They are tools that reduce uncertainty, offer peace of mind to loved ones, and ensure that your wishes are carried out.

If you have been putting this off, consider this your nudge to take the first step. Whether that means creating a simple will or speaking with a financial professional about setting up a trust, developing a plan now can make a meaningful difference later.