Wills vs Trusts for Physicians: When You Need Each

Every physician needs a will, but not every physician needs a trust—despite what estate planning attorneys might tell you. The difference comes down to your net worth, family situation, and whether you want to avoid probate. Understanding the distinctions can save you thousands in unnecessary legal fees.

This guide breaks down exactly what wills and trusts do, the pros and cons of each, when physicians need a trust versus just a will, and how to avoid overpaying for estate planning you don't need yet.

What is a Will?

A will is a legal document that specifies how your assets should be distributed after death and who should care for minor children.

What a Will Does:

• Names beneficiaries: Who gets what assets
• Appoints executor: Person who manages estate settlement
• Names guardians: Who raises minor children if both parents die
• Specifies bequests: Specific items to specific people
• Creates testamentary trusts: Trusts for minor children funded at death

What a Will Doesn't Do:

• Avoid probate (will goes through probate)
• Provide incapacity planning (doesn't help if you're disabled but alive)
• Override beneficiary designations (401k, life insurance go to named beneficiaries regardless of will)
• Protect assets from creditors or lawsuits

The Probate Process:

When you die with only a will, your estate goes through probate—the court-supervised process of validating your will and distributing assets.

Probate timeline: 6-18 months typically

Probate costs: 2-5% of estate value (attorney fees, court costs, executor fees)

Public record: Probate filings are public—anyone can see what you owned and who inherited

Cost to Create:

• Online services (LegalZoom, Nolo): $100-300
• Simple will from attorney: $500-1,500
• Complex will with testamentary trusts: $1,500-3,000

What is a Trust?

A trust is a legal entity that holds and manages assets for beneficiaries. You (the grantor) transfer assets to the trust, a trustee manages them, and beneficiaries receive benefits according to trust terms.

Key Players:

• Grantor: You (creates and funds the trust)
• Trustee: Person/institution managing the trust (often you, initially)
• Beneficiaries: People who benefit from the trust (often your spouse and children)

Revocable Living Trust (Most Common)

What It Is:

A trust you create while alive that you can change or cancel anytime. You transfer assets into the trust but maintain complete control during your lifetime.

How It Works:

• You create the trust and serve as initial trustee
• You transfer assets (house, brokerage accounts, bank accounts) into trust
• You manage everything normally—no change in control
• If you become incapacitated, successor trustee takes over (no court involvement)
• When you die, assets pass to beneficiaries without probate

Pros:

• Avoids probate: Assets pass to beneficiaries immediately without court
• Privacy: Trust terms remain private (unlike probate)
• Incapacity planning: Successor trustee manages assets if you're disabled
• Multi-state property: Avoids probate in multiple states if you own property in several states
• Smooth transition: Family gets access to assets quickly

Cons:

• Upfront cost: $2,000-5,000 to create (vs. $500-1,500 for will)
• Funding hassle: Must retitle assets into trust name
• No tax benefits: Revocable trusts don't reduce taxes
• No asset protection: Doesn't protect from creditors or lawsuits
• Ongoing management: Must maintain trust, update as assets change

Cost:

• Attorney-drafted: $2,000-5,000
• Online services: $300-800 (but you handle titling yourself)

Irrevocable Trust

What It Is:

A trust that cannot be changed or canceled once created. You permanently give up control and ownership of assets transferred to the trust.

Purpose:

Asset protection, estate tax reduction, Medicaid planning—not simple estate distribution.

Pros:

• Asset protection: Creditors can't reach assets in irrevocable trust
• Estate tax reduction: Removes assets from your taxable estate
• Medicaid planning: Assets don't count for Medicaid eligibility (if done 5+ years before)

Cons:

• Loss of control: You can't change terms or get assets back
• Irrevocable: Permanent decision with limited exceptions
• Complex: Requires careful planning and ongoing administration
• Tax complications: Different tax rules than revocable trusts

Cost:

• Creation: $3,000-8,000+
• Annual maintenance: Separate tax return, ongoing legal fees

Other Trust Types for Physicians

Testamentary Trust:

What: Created in your will, only comes into existence when you die

Purpose: Manage inheritance for minor children

Example: "Assets held in trust for children until age 25"

Benefit: Prevents 18-year-old from inheriting $1M directly

Dynasty Trust:

What: Irrevocable trust designed to last multiple generations

Purpose: Wealth transfer while avoiding estate taxes at each generation

Who needs it: Ultra-wealthy families ($50M+ net worth)

Special Needs Trust:

What: Trust for beneficiary with disabilities

Purpose: Provide for disabled child without disqualifying from government benefits

Who needs it: Parents of disabled children

Charitable Remainder Trust:

What: Irrevocable trust providing income to you, remainder to charity

Purpose: Tax deduction + income stream + charitable giving

Who needs it: High net worth + significant charitable intent

Will vs Trust: Comparison Table

When Physicians Need Just a Will

A will is sufficient if you:

• Are under 40 with net worth under $500K
• Have simple assets: One home, retirement accounts, basic financial accounts
• Own property in one state only
• Don't mind probate: In states with simple/cheap probate
• Want to minimize upfront costs

Essential Will Components for Physicians:

1. Executor: Person to manage estate settlement
2. Guardians for minor children: Both primary and alternate
3. Asset distribution: Who gets what
4. Testamentary trust for children: Holds inheritance until age 25-30
5. Specific bequests: Sentimental items, heirlooms

When Physicians Need a Trust

Consider a revocable living trust if you:

• Net worth over $1M: Probate costs become significant (2-5% of $1M = $20K-50K)
• Own real estate in multiple states: Avoid probate in each state
• Value privacy: Don't want estate details public
• Have complex assets: Business interests, significant investments, rental properties
• Want seamless transition: Family needs immediate access to assets
• Have blended family: Previous marriage, stepchildren
• Concerned about incapacity: Want clear succession plan

Typical Trust Setup Timeline:

1. Weeks 1-2: Meet with attorney, discuss goals
2. Weeks 3-4: Attorney drafts trust document
3. Week 5: Review and sign trust
4. Weeks 6-12: Retitle assets into trust (house, bank accounts, brokerage)

What Assets Should Go in a Trust?

Assets to Transfer INTO Trust:

• Primary residence
• Investment/rental properties
• Brokerage accounts (taxable accounts)
• Bank accounts (checking, savings)
• Business interests (with attorney guidance)

Assets to KEEP OUT of Trust:

• Retirement accounts (401k, IRA): Keep beneficiary designations, don't title to trust unless special circumstances
• Life insurance: Name beneficiaries directly (or irrevocable life insurance trust for large policies)
• HSA: Can't be owned by trust
• Vehicles: Usually not worth the hassle (use TOD if available)

Estate Planning by Life Stage

Residents/Fellows (Ages 28-35):

Minimum: Simple will + powers of attorney

Cost: $500-1,000

Why: Name guardians for kids, minimal assets to protect

New Attendings (Ages 32-40, Net Worth $200K-$1M):

Option 1: Will + powers of attorney ($500-1,500)

Option 2: Revocable living trust if net worth approaching $1M ($2,000-5,000)

Decision factor: Do you own property in multiple states or have complex assets?

Mid-Career (Ages 40-55, Net Worth $1M-$5M):

Recommended: Revocable living trust + pour-over will

Cost: $3,000-6,000

Why: Probate costs become significant, likely own real estate

Late Career (Ages 55+, Net Worth $5M+):

Recommended: Comprehensive estate plan with revocable trust + possible irrevocable trusts

Cost: $8,000-20,000+

Why: Estate tax planning, asset protection, sophisticated wealth transfer

Don't Forget: Powers of Attorney

Regardless of will vs trust, every physician needs these documents:

1. Healthcare Power of Attorney (Healthcare Proxy):

• Names who makes medical decisions if you're incapacitated
• Essential for physicians—you know what medical decisions matter
• Cost: $100-300

2. Financial Power of Attorney (Durable POA):

• Names who handles financial affairs if incapacitated
• Allows someone to pay bills, manage accounts, file taxes
• Cost: $100-300

3. Living Will (Advance Healthcare Directive):

• Your end-of-life care preferences
• Especially important for physicians (you've seen bad outcomes)
• Cost: Usually free template, or included with other estate docs

Common Estate Planning Mistakes

Mistake #1: No Estate Plan at All

40% of physicians have no will. If you die without a will, state law decides who gets everything and who raises your kids. Don't let this be you.

Mistake #2: Outdated Beneficiary Designations

Your 401(k) still lists your ex-spouse? Your life insurance goes to a dead parent? Beneficiary designations override your will—update them after major life events.

Mistake #3: Creating Trust But Not Funding It

Paid $4,000 for a trust but never retitled assets? The trust is worthless. Everything still goes through probate.

Mistake #4: Buying Expensive Trust You Don't Need

31-year-old resident with $100K net worth paying $5,000 for a trust? You don't need it yet. Start with a will.

Mistake #5: Not Updating After Major Life Changes

Marriage, divorce, kids, home purchase, moving states—all require estate plan updates. Review every 3-5 years minimum.

Mistake #6: Joint Ownership as "Estate Planning"

Adding adult child as joint owner on accounts can cause gift tax issues, expose assets to their creditors, and create family conflicts. Use proper estate planning tools instead.

Do You Need an Attorney?

Online Services (LegalZoom, Trust & Will, Nolo) Are Fine For:

• Simple wills with straightforward asset distribution
• Young physicians with simple finances
• Basic healthcare and financial powers of attorney

Use an Attorney If You Have:

• Net worth over $1M
• Blended families or complex family dynamics
• Business ownership
• Real estate in multiple states
• Special needs children
• Estate tax concerns (net worth over $13M individual, $27M couple)

Attorney Costs:

• Simple will + POAs: $500-1,500
• Revocable living trust package: $2,000-5,000
• Complex estate plan: $5,000-15,000+

Final Thoughts

Every physician needs an estate plan, but not every physician needs a trust. The key is matching the complexity and cost of your plan to your actual situation.

Simple rule:

• Under $500K net worth: Will + powers of attorney = $500-1,000
• $500K-$1M net worth: Will or basic trust depending on circumstances = $1,000-3,000
• Over $1M net worth: Revocable living trust + pour-over will + POAs = $3,000-6,000
• Over $5M net worth: Comprehensive planning with possible irrevocable trusts = $8,000-20,000+

Don't let an attorney sell you a $5,000 trust when a $1,000 will would suffice. But also don't skip estate planning entirely because you think it's too expensive or complicated.

At minimum: Create a will, name guardians for kids, establish powers of attorney, update beneficiary designations. Do this within your first year as an attending. Everything else can wait until your net worth justifies more complex planning.