Your parents set up wills decades ago, when you were young. Now a friend swears by living trusts, and a seminar flyer in the mail promises to help your parents avoid probate and protect their home. You want to help them get this right, but the terms blur together.
This guide explains the differences in plain language. It's general information, not legal advice. Estate law is state law, and an attorney should prepare these documents.
Living trust vs. will at a glance
| Will | Revocable living trust | |
|---|---|---|
| Takes effect | At death | When signed and funded |
| Probate | Usually required for assets in the will | Generally avoided for assets in the trust |
| Privacy | Probate records are usually public | Generally private |
| If your parent becomes incapacitated | No help; need a power of attorney | Successor trustee manages trust assets |
| Names a guardian for minor children | Yes | No |
| Setup work | Simpler | More work: assets must be retitled |
| Medicaid protection | None | None for a revocable trust |
How a will works
A will says who receives your parent's property at death and names an executor to carry out those wishes. It does nothing while your parent is alive. After death, the executor typically asks the probate court for authority to collect property, pay bills and distribute what's left1. If someone finds the original will, many states require it to be delivered to the court1.
A will only controls property that passes through probate. Accounts with a named beneficiary, like life insurance, retirement accounts and payable-on-death bank accounts, go directly to the named person. So does property owned jointly with right of survivorship. That's why updating beneficiary designations is as important as updating a will.
What probate means
Probate is the court process for transferring property after someone dies1. Depending on the amount and type of property, a family may or may not need to go to court; many states offer simpler procedures for small estates1. Formal probate can take months, involves court filings, and creates public records. Costs vary by state and by how complex the estate is.
For some families, probate is a manageable process. For others, such as those with property in more than one state, a family member likely to contest the will, or a strong wish for privacy, avoiding it is worth the extra setup work of a trust.
How a revocable living trust works
With a revocable living trust, your parent creates a trust and usually serves as their own trustee. They transfer property into it: the house is retitled to the trust, bank accounts are renamed, and so on. Your parent keeps full control and can change or cancel the trust at any time. When they die, a successor trustee distributes the property according to the trust's terms, generally without probate for the assets the trust holds.
The catch is funding. A trust only controls what's actually in it. A trust document sitting in a drawer, with the house and accounts still in your parent's own name, may leave the family in probate anyway. Ask the attorney who prepares the trust to help with retitling, and keep a list of what has been moved.
- Pour-over will. Most people with a living trust also sign a short will that sends any leftover property into the trust.
- Successor trustee. Choose someone organized and trustworthy. The CFPB's guide for trustees explains the duty to manage money only in the beneficiaries' interest and keep records3.
- Taxes. A revocable trust generally doesn't change income taxes while your parent is alive. Federal estate tax applies only to estates above a high threshold set each year4, so most families won't owe it.
Planning for incapacity
For caregivers, the biggest practical difference may be what happens before death. If your mother develops dementia and can no longer manage money, a will doesn't help at all. A living trust lets the successor trustee step in to manage trust assets, usually after a doctor confirms incapacity, without going to court.
But a trust doesn't cover everything. Retirement accounts can't be put in a living trust, and some accounts and benefits will still need an agent. That's why a durable power of attorney is essential either way, along with health care directives. See advance directives vs. living wills. Without these, the family may need guardianship.
Trusts, wills and Medicaid
This is where families are often misled. Under federal Medicaid law, everything in a revocable trust is treated as available to the person who set it up2. Putting the house or savings into a revocable living trust does not help a parent qualify for Medicaid nursing home coverage.
Irrevocable trusts are different and can sometimes protect assets, but they involve giving up control, and transfers into them are subject to the 60-month look-back2. See Medicaid asset protection trusts and the look-back period. A will doesn't shield anything from Medicaid either, and in many states, Medicaid can seek repayment from the estate after death. See Medicaid estate recovery.
Which is right for your parent?
A will alone may be enough when:
- The estate is simple. A home, a bank account and retirement accounts with named beneficiaries.
- Your state's probate process is straightforward, or a small estate procedure is likely to apply.
- Strong powers of attorney are in place for incapacity.
A living trust may be worth it when:
- Your parent owns real estate in more than one state. Otherwise, the family may face probate in each state.
- Privacy matters. Trusts generally aren't public.
- Incapacity is a real concern and your parent wants a trusted person to manage assets smoothly.
- Family dynamics are complicated, such as a blended family or a child who needs help managing money.
Other ways to skip probate
A trust isn't the only way to keep property out of probate. Many families use a mix of simpler tools. Payable-on-death designations on bank accounts and transfer-on-death registrations on brokerage accounts send the money straight to a named person. Retirement accounts and life insurance pass by beneficiary form. Some states allow a transfer-on-death deed for a home, and joint ownership with right of survivorship passes property to the surviving owner.
These tools are cheap and easy, but they have drawbacks. Adding a child as a joint owner of a bank account or a house can expose the asset to that child's creditors or divorce, may count as a gift, and can create Medicaid problems. Beneficiary forms are easy to forget, so an old form may send an account to an ex-spouse or to a child who has since died. And none of these tools help if your parent becomes unable to manage money while alive. Ask an attorney how they fit with the rest of the plan before using them.
An example
Gloria, 78, owned a home in Ohio and a small cabin in Michigan, and her son worried about two probate cases. Her attorney set up a revocable living trust, retitled both properties and her savings into it, and named her daughter as successor trustee, with a pour-over will as backup. When Gloria developed dementia two years later, her daughter took over as trustee and paid the bills without going to court. The trust did not change Gloria's Medicaid eligibility; when she later needed a nursing home, the trust assets were counted as hers. This is an illustration; results depend on state law.
Keep the plan current
Whichever your parent chooses, review the documents every few years and after major events: a death, a divorce, a move to another state, a new grandchild, or a big change in savings. Check beneficiary forms at the same time. Make sure the executor or successor trustee knows where the originals are kept. After a death, our checklist on what to do when a parent dies covers the next steps.
Watch for trust mills and scams
Older adults are targets for high-pressure sales of living trust packages, often pitched at free seminars or by phone. Sometimes the real aim is to gather financial information and sell annuities or other products. Be wary of anyone who says a trust will eliminate all taxes or protect everything from nursing home costs. The IRS warns about trust arrangements promoted as ways to avoid taxes that don't follow the law7. Work with a licensed attorney you choose, and see our guides to scams targeting older adults and financial abuse.
How to bring it up with your parents
Talking about wills and trusts means talking about death and decline, which many parents avoid. Start with something practical: "If something happened to you, I'd want to know where your papers are and what you'd want." Ask whether their will is current, who they named, and whether they have powers of attorney. Don't push for a particular outcome or ask about your own share. If your parents want to plan, offer to help them find an attorney and gather documents, and let them meet the attorney privately.
If your parent is already showing memory loss, act sooner rather than later. A person must have enough capacity to sign a will or trust. Early in mild cognitive impairment or dementia, many people still can.
Questions to ask an attorney
- Will my parent's estate need probate in our state? And roughly how long does it take?
- Would a trust help with incapacity in our situation, beyond a power of attorney?
- Who will help fund the trust? And what's included in your price?
- How does this plan interact with Medicaid if long-term care is likely?
- What should our beneficiary designations say?
Free help with wills, advance directives and related issues may be available through Older Americans Act legal programs8. See also how to choose an elder law attorney.
