The Retirement Tax Window: The Years When Doing Nothing Can Be Expensive
Explore retirement tax planning strategies, including Roth conversions, RMDs and tax-aware withdrawals, to help manage taxes throughout retirement.
Author: Matthew Williams CFP®, RICP®, CEXP®, CASL®, AEP® | Director of Financial Planning at Impact Advisors Group
For many families, the best answer to the will versus trust question is actually both. A will and a living trust serve different purposes, and when they are coordinated correctly, they can help protect your family, organize your assets, reduce uncertainty, and create clearer instructions for what should happen if you become incapacitated or pass away.
As a financial planner, I look at these documents as pieces of a much larger financial plan. A will may provide instructions for assets that pass through your estate and allow parents to address guardianship. A properly funded living trust may help certain assets pass outside probate while also creating instructions for how those assets should be managed during incapacity and after death.
The important word is coordinated. Your estate plan should work with your investments, retirement accounts, beneficiary designations, insurance, real estate, and family goals rather than sitting in a drawer as a separate set of documents.
The simplest distinction comes down to when the documents operate and what property they control.
A will primarily provides instructions for what should happen after your death. A revocable living trust can hold and manage assets during your lifetime, provide instructions if you become incapacitated, and direct what happens to trust property after your death.
A will generally becomes part of the probate process when it is used to transfer probate property. In Massachusetts, for example, state law generally requires a will to be declared valid through probate before it can be effective to transfer property or nominate an executor, subject to limited statutory exceptions.
A living trust works differently because assets that were properly transferred into the trust are owned through the trust structure. That distinction is what can allow those assets to be administered without first transferring them through the probate estate.
A will is a legal document that sets out your instructions for property that passes through your estate after death.
Among other things, a will can:
For parents, the guardianship issue can be especially important. Massachusetts law allows a parent to appoint a guardian for a minor child by will or another qualifying written document. Pennsylvania law also permits certain parents to appoint a testamentary guardian through a will.
That is one reason a trust does not automatically make a will unnecessary. Even families with sophisticated trust planning may still need a will to address matters that the trust itself does not handle.
Probate is the legal process used to administer certain property after someone dies. Depending on the estate and the state involved, that process can include validating the will, appointing a personal representative, identifying assets, addressing creditor claims, and ultimately distributing property.
A will does not avoid probate simply because it contains clear instructions.
A properly funded revocable living trust may reduce the amount of property that must move through probate because assets already titled to the trust can generally be administered by the successor trustee.
That can matter when a family values:
A trust still has to be properly created and funded. Signing a trust agreement without actually transferring appropriate assets into it may leave the estate with many of the same probate issues the family was trying to avoid.
A revocable living trust is generally created during your lifetime. You transfer selected assets into the trust and usually retain significant control while you are alive.
For many revocable trusts, the person creating the trust also serves as trustee during life. A successor trustee can then step in under the circumstances described in the trust, such as incapacity or death.
This can make a living trust particularly useful for families who are thinking beyond the transfer of assets at death. The trust can also provide a framework for managing property if the person who created it can no longer manage it personally.
Yes. This is one of the biggest practical differences in a will versus trust analysis.
A trust can provide detailed instructions about how and when beneficiaries receive money.
For example, instead of leaving a large inheritance outright to a young adult, the trust might authorize distributions for:
Imagine parents with two young children and significant investments. They may want their children to benefit from the assets but may not want an 18-year-old receiving a large inheritance all at once.
A trust can allow a successor trustee to manage those assets under written instructions until the children reach appropriate ages or milestones.
For parents who are also saving for education, that type of legacy planning should be coordinated with the family’s broader college planning strategy. Education savings accounts, trust provisions, and retirement resources can overlap in ways that deserve careful planning.
A living trust may deserve greater consideration if you:
Someone with property in both Massachusetts and Pennsylvania, for example, may have a very different estate planning situation from someone whose entire estate consists of a checking account, one retirement account, and a modest personal residence.
Complexity matters.
A larger estate does not automatically require a trust, and a smaller estate does not automatically mean a trust has no value. The decision should follow the family’s actual assets and goals.
Usually, a comprehensive trust-based estate plan still includes a will.
One common document is a pour-over will. Its purpose is generally to direct qualifying probate assets that were left outside the trust into the trust after death.
A pour-over will should not be treated as a substitute for funding the trust correctly during life. Assets passing through the will may still have to go through probate before reaching the trust.
That is why estate planning requires more than signing documents. Account ownership and asset titling have to match the plan.
One of the most common planning problems I see is a family spending time creating an estate plan but forgetting to coordinate beneficiary designations.
Retirement accounts, life insurance policies, payable-on-death accounts, transfer-on-death arrangements, and certain jointly owned assets may transfer according to their own beneficiary or ownership instructions.
That means a beautifully written will cannot fix every outdated beneficiary designation.
This becomes especially important with retirement assets. Someone may update a will after a divorce, marriage, birth, or death in the family while leaving an old beneficiary designation on a retirement account.
That is why understanding how assets such as IRAs and employer retirement plans fit together is important. Our discussion of the differences between IRAs and 401(k) plans provides additional context for families reviewing how retirement accounts fit into the larger financial plan.
Estate planning is strongest when the legal documents and the financial plan tell the same story.
That coordination can uncover problems that may otherwise stay hidden.
For example, suppose a couple creates a trust directing assets to their children in stages. Their taxable investments are transferred into the trust, but their IRA still names an outdated beneficiary. The trust may work exactly as drafted while the retirement account follows a completely different path.
The planning documents did not fail. The coordination did.
The same principle applies to investment management. Estate planning decisions can affect who eventually controls or inherits investment assets, which is one reason broader issues such as the hidden costs and responsibilities of managing investments yourself belong in long-term planning conversations as well.
Families near our offices in Duxbury and Dedham, Massachusetts, and Warrington, Pennsylvania should remember that estate administration is governed by state law.
Massachusetts
Massachusetts operates under the Massachusetts Uniform Probate Code and Massachusetts Uniform Trust Code. A will generally must be admitted to probate to establish its effectiveness for transferring probate property, while a trust does not automatically require continuing judicial supervision simply because it exists.
Pennsylvania
Pennsylvania gives the Register of Wills jurisdiction over probate and the appointment of estate representatives. Its Uniform Trust Act separately governs trusts, including revocable trusts and successor trustee responsibilities.
These differences are another reason families who own property in multiple states should coordinate with an experienced estate planning attorney rather than relying on generic documents.
Is a trust better than a will?
A trust is not automatically better. A will and trust perform different jobs. A trust can provide probate avoidance and ongoing asset-management advantages for properly titled assets, while a will remains important for probate property and issues such as guardianship.
Does a living trust avoid probate?
Assets properly owned by a living trust generally do not need to be transferred through the settlor’s probate estate simply to reach the trust beneficiaries. Assets left outside the trust may still require probate.
Do I need a trust if I have children?
Not every parent needs a living trust, but parents should consider how inheritances would be managed for minor or young beneficiaries. A will is also particularly important because state law may allow parents to nominate guardians through it.
Can I control when my children receive money through a trust?
Yes. A properly drafted trust can provide instructions for when and how beneficiaries receive assets, including staged distributions or distributions for specific purposes.
Should I update my will or trust after creating it?
Yes. Estate planning should be reviewed when major financial or family changes occur, including marriage, divorce, births, deaths, significant asset changes, property purchases, moves to another state, and changes to beneficiary designations.
The right strategy begins with your actual family and financial situation.
Ask yourself:
Your answers can help an estate planning attorney and financial planner determine whether a will, trust, or combination of both best supports your goals.
Making the decision between a will versus a trust should ultimately help make life easier for the people you care about. A will can establish critical instructions after death. A living trust can provide additional control, privacy, incapacity planning, and potential probate advantages when it is properly structured and funded.
The strongest plan usually comes from bringing the legal and financial pieces together.
If you are reviewing your estate strategy or wondering whether your current documents still match your investments, retirement accounts, and family goals, we can help you evaluate the financial side of that plan and coordinate with the appropriate legal professionals. Start with our free financial assessment to identify gaps early and build a plan designed to protect both your assets and the people who depend on you.
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