Most people understand that having some sort of an estate plan is a good idea. But many of us never take that first step because the differences between a will, a trust, and doing nothing feel murky and complicated.
Let's clear that up. Here is what will generally happen in each scenario — assuming you have two children but no spouse.
Dying Without a Will or Trust (Intestate)
If you die intestate — without a will or trust — your accounts and property will go through probate, and the entire world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances owed at the time of your death.
Because your death has been published to alert valid creditors, it is not uncommon for predators — fake creditors — to come forward and demand payment even if they are owed nothing.
After that, state law decides who gets what and when:
- If your only heirs are your two children and you left no instructions, state law will divide the estate equally between them.
- Your older child will receive their share immediately if they have reached adulthood (18 or 21 years, depending on state law).
- The court will appoint a guardian to manage your minor child's share until they become an adult — and that guardian can be a total stranger who charges significant fees for their services.
- If you die without a valid will, the court — not you — will decide who raises your minor child.
Dying intestate allows state law and the court to make every decision on your behalf — regardless of what your wishes may have been. Publicity is guaranteed.
Dying With a Will
If you die with a valid will, your accounts and property will still go through probate. However, after creditors have been paid, what remains will go to the people you named.
If you want to leave money to your children and name a guardian for the minor, the court will generally abide by your wishes. The same is true if you wanted to give money to a charity, your Aunt Betty, or your neighbor.
Keep in mind that predatory creditors remain an issue — your death has still been publicized. Even with a will, probate is a public process.
While a court still oversees the process, having a will allows you to tell the court exactly how you want your affairs handled. But a public probate is still guaranteed.
Dying With a Revocable Living Trust
If you have created a trust, you have taken real control of your estate. Accounts and property owned by the trust are not subject to probate, and one of the most important benefits is privacy — the details of transferring your assets to your chosen beneficiaries remain completely private.
In the trust, you will have named a trusted individual (your trustee) to manage your affairs with specific instructions on how and when your accounts and property should be distributed.
One important caution: a trust must be properly funded in order to bypass probate. Funding means that ownership of your accounts and property has been changed from your name individually to the name of your trust.
Think of your trust as a bushel basket. You must put the apples into the basket — just like you must put your accounts and property into the trust — for either to have real value.
You will still need a will (called a pour-over will) to capture any accounts or property inadvertently left out of your trust, and to name guardians for a minor child.
A trust allows you to maintain control through your chosen trustee, avoid probate entirely, protect your privacy, and leave specific instructions so your children are cared for — without receiving a lump sum of money at an age where they may be more vulnerable to losing it.
Don't let the will versus trust question slow you down. Every family's situation is different, and the right answer depends on your goals, your assets, and the people you're trying to protect.