Questions about Wills and Trusts are common: Do I need a Living Trust if I have a Last Will? Do I need a Will if I have a Trust? Which is essential? Can I have one without the other? Are both enough, or is more needed?
Too Little, Too Late
Phyllis, a meticulous planner, had both a Will and a Trust, diligently following her attorney and advisors’ guidance. She believed her estate would be seamless for her children. After her death, her son and daughter were distressed to find her estate required probate, with significant income and estate taxes due. Despite her thoroughness, they wondered if her advisors had failed her.
Phyllis and her husband, both schoolteachers, lived modestly, saved diligently, paid off their home, and invested conservatively in annuities and life insurance. They educated their children and considered themselves of modest means. After her husband’s death, Phyllis’s pension covered her needs, and her lifelong saving habit continued, amassing millions through compound interest—wealth she couldn’t spend.
Their financial accounts named each other as beneficiaries, so Phyllis faced no issues during her life. However, without additional beneficiaries, these assets entered probate. Deferred income in annuities and retirement accounts became taxable at her death, and life insurance benefits pushed her estate over the tax exclusion. Her children, also over the tax threshold, were shocked by the outcome.
Why didn’t her Will and Trust prevent this?
The Last Will Probate Deception
Contrary to common belief, a Will does not avoid probate—it often ensures it. A Will provides the probate court with your wishes, but a judge must order their execution. Avoiding probate requires more than a Will.
The Last Will Tax Ambush
A Will isn’t a tax planning tool. It doesn’t remove assets from your taxable estate or alter the tax attributes of annuities and retirement accounts. While death may trigger benefits like a stepped-up cost basis, transferring assets via a Will generally doesn’t change their tax status.
The Trust Sabotage
Phyllis’s Trust didn’t avoid probate because it wasn’t funded. Assets must be titled in the Trust’s name or designate the Trust as a Pay-on-Death or Transfer-on-Death beneficiary. Listing assets on a Trust schedule doesn’t suffice—legal title must change, including for real estate and business entities.
The Trust Shortfall
Phyllis’s Trust didn’t reduce taxes because it lacked tax planning provisions. Entry-level Trusts often omit these tools, which can preserve a deceased spouse’s tax exclusion, manage retirement account payouts, direct tax liability to the most efficient entity, enable multi-generational tax-free transfers, or minimize taxes for non-U.S. citizen spouses. Effective tax planning requires deliberate inclusion, sometimes involving multiple Trusts with distinct purposes.
The Will and Trust Combo
Do you need a Will or a Trust? Usually, both. A Trust avoids probate and enables tax planning, while a “pour-over Will” catches assets inadvertently left out. Phyllis had both but didn’t understand that having them wasn’t enough. They must be used correctly.
And the Winner Is . . .
Neither a Will nor a Trust alone typically suffices. Most need both, but documents alone leave gaps. A Trust’s probate avoidance depends on funding—titling assets in its name or naming it as beneficiary. Tax planning requires strategic deployment of retirement accounts, life insurance, and annuities. For instance, withdrawing from retirement accounts or annuities may be wiser than adding to them, and owning life insurance can become less tax-efficient than having it. Missing these nuances risks costly errors.
So What?
You need a Will and a Trust, and the Trust must be funded. Tax planning varies by individual. If this article sparked an action item for your Will or Trust, write it down and act. Having a car doesn’t get you to the store unless you drive it to the right destination. Be intentional with your planning.
Move Along Equipped With Information
Wills and Trusts aren’t one-size-fits-all. Suitability is critical. Consult qualified advisors to design, implement, review, and update your Will and Trust.
Last Will vs. Living Trust © 2025 by Rick Durfee is licensed under CC BY 4.0 
Last Will vs. Living Trust