Should You Put Your Investment Property in a Will or a Trust? While a will is commonly thought of as a fundamental estate planning document, it often proves inadequate—especially for real estate investors.
Wills do not shield assets, avoid probate, or provide any form of incapacity planning. For investors with substantial holdings, this creates serious risks for your family and your legacy.
The four primary disadvantages of a will for real estate investors highlight why a revocable living trust offers a more comprehensive solution.
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1. Wills Are Public and Invite Unwanted Scrutiny
Short Answer: When your estate passes through probate, your assets and beneficiaries become a matter of public record.
This loss of privacy can expose your heirs to unnecessary risks. A disgruntled relative, creditor, or opportunist can examine the probate records and potentially interfere with the estate distribution.
The probate court publicly inventories your real estate holdings, financial accounts, and personal belongings. This includes personal assets such as vehicles, collectibles, and financial holdings that may become exposed through the probate court.
For real estate investors, this is particularly concerning—tenants, business associates, or even local competitors could learn sensitive details about your portfolio.
Solution: A living trust allows for a completely private transfer of your assets outside of probate court.
2. Wills Provide No Control During Incapacity
Short Answer: A will is legally inactive until your death and offers no protection if you become mentally or physically incapacitated.
Imagine you suffer a severe injury or illness that leaves you unable to manage your affairs. Who will collect rent, pay property taxes, or manage your business interests? If your estate plan consists solely of a will, your family must seek court-appointed authority just to act on your behalf.
Even a trusted family member may be legally barred from managing your properties or accessing your financial accounts without prior court approval.
This delay can be catastrophic for real estate investors whose properties require ongoing management.
Solution: A revocable living trust names a successor trustee who can step in immediately to manage your affairs without court interference.
Bonus: Download Anderson’s Free Emergency Binder. Used with a proper estate plan, this resource helps you navigate some of life’s most challenging situations.
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3. Wills Can Freeze Access to Critical Assets
Short Answer: Your heirs may lose access to your financial accounts, real estate, and business income until the probate process concludes.
When you pass away with only a will, banks and institutions typically freeze accounts until the court authorizes distribution. Real estate assets may sit unmanaged. Rental income may accumulate without a legal channel for access. Meanwhile, your surviving spouse or children may be facing mounting bills or ongoing financial obligations.
Probate delays—especially in complex estates—can last several months to over a year. This underscores the inefficiencies of the probate process for investors who rely on consistent cash flow and management continuity.
Solution: A trust structure allows your successor trustee to gain immediate authority over your estate, ensuring continuity and uninterrupted access to critical resources.
4. Wills Trigger Probate in Every State You Own Property (Ancillary Probate)
Short Answer: If you own real estate in more than one state, your heirs will likely face ancillary probate—a separate legal process in each jurisdiction.
Let’s say you live in Nevada but own investment properties in Florida and Arizona. Your executor will need to complete probate in Nevada before initiating probate proceedings in each additional state where real property is located.
This multi-jurisdictional probate results in:
Duplicate court fees and attorney costs
Delays in transferring or selling properties
Increased emotional stress for your family
Solution: Placing out-of-state properties into a revocable living trust or LLC owned by a trust avoids the need for ancillary probate altogether.
Will vs. Trust for Multi-State Real Estate
How to Avoid Probate for Real Estate (Checklist)
How do I avoid probate if I own investment property?
☐ Establish a revocable living trust and title your properties in the name of the trust
☐ Use LLCs or land trusts for properties in litigious or high-risk states
☐ Draft a pour-over will to ensure any overlooked assets are captured by your trust
☐ Designate direct beneficiaries for accounts like your retirement account to bypass probate entirely
This estate plan structure offers asset control during life and seamless transfer upon death—with no court oversight.
What Is Ancillary Probate?
Ancillary probate refers to a secondary legal process required in each state where the deceased owned real property outside their home state.
This type of probate adds significant cost and complexity to the estate administration process. Ancillary probate can be entirely avoided when real estate is held in a trust or limited liability company (LLC) with clear succession instructions.
Will vs. Trust: Which Protects Real Estate Better?
FAQs: Wills vs. Trusts for Real Estate Investors
Q: What types of trusts should real estate investors consider?Revocable living trusts are ideal for avoiding probate and maintaining control during your lifetime, while irrevocable trusts may be used for asset protection and minimizing federal estate taxes.
Q: Do I need a power of attorney if I have a trust?Yes. A durable power of attorney is still necessary to manage legal and financial decisions for any assets or situations not covered by your trust.
Q: Can life insurance be placed in a trust?Yes. Life insurance can be owned by a trust or have the trust named as a beneficiary to help manage distributions and avoid probate delays.
Q: Which legal documents are essential in estate planning?A comprehensive estate plan includes a trust, pour-over will, power of attorney, healthcare directive, and possibly a life insurance trust depending on your needs.
Q: How do tax laws impact estate planning?Tax laws—especially around income tax and federal estate taxes—can greatly affect how assets are passed down. Proper trust structuring can minimize unnecessary tax burdens.
Q: When should I consult estate planning attorneys?Consult estate planning attorneys when you acquire significant assets, invest in real estate, or experience a life event such as marriage, a new child, or retirement. They ensure your long-term goals are fully addressed.
Q: Is it better to have your house in a will or a trust?A trust is better for real estate—it avoids probate, protects privacy, and allows for immediate control.
Q: Can I avoid probate with a will?No. A will guarantees probate. Only trust-based estate plans can bypass the court process.
Q: How much does an estate plan cost for real estate investors?Costs vary by complexity, but trust-based plans generally cost more up front and far less at the time of transfer due to probate avoidance.
Q: What is the main disadvantage of a will?Lack of privacy, loss of asset control during incapacity, and forced probate in every jurisdiction where property is held. This answers the question: What is the downside of having a will? In many cases, significant delays occur before assets are distributed to heirs.
Q: Why are living trusts better than wills for real estate?They offer probate avoidance, continuity during incapacity, and privacy—all critical for investors with income-producing assets.
Q: I only own one rental property—do I still need a trust?Yes. Even a single piece of real estate can trigger probate and delays for your heirs.
Final Take: Don’t Leave Your Legacy in Probate
Using a will as your sole estate planning tool can expose your family to unnecessary delays, legal fees, and public scrutiny. For real estate investors, the risks compound with every additional property or state where assets are held.
This reinforces the importance of estate planning for real estate investors who want to avoid the complications and inefficiencies of the probate process for investors with multi-property portfolios. While most investors benefit from a revocable living trust, high-net-worth individuals may also consider an irrevocable trust to achieve greater asset protection or estate tax reduction.
By establishing a revocable living trust, aligning it with LLC structures, and coordinating your plan with estate planning professionals, you can safeguard your portfolio, maintain privacy, and leave a streamlined legacy. Schedule a free 45-minute Strategy Session with an Anderson Advisor today and take control of your estate plan.
