Estate planning is one of the most overlooked parts of real estate ownership. Many people think of wills and trusts as something only the wealthy need. The truth is: if you own a home, rental property, land, or even a small parcel, you need a plan for how it will be handled after you’re gone. Without one, the state decides for you — and it may not be what you would have chosen.

The two main tools for passing property to your heirs are wills and trusts. Both can protect your family and ensure your wishes are carried out, but they function differently and are suited to different circumstances. Let’s break it down.

 

What Is a Will?

A will is the simplest estate planning document. It’s a written statement of your wishes for how your assets — including real estate — should be distributed after your death.

 

Key Features of a Will

• Names who inherits your property, possessions, and money.

• Can designate a guardian for children or pets.

• Can create a testamentary trust (a trust that forms after your death).

• Requires probate (the legal process of validating and carrying out the will).

 

The Step-Up in Basis Advantage

One of the greatest benefits of passing real estate through a will is the step-up in basis. Here’s how it works:

• When you die, your property is revalued (“stepped up”) to its fair market value at the date of death.

• Your heirs inherit that new value as their cost basis.

• If they sell the property, they only owe capital gains tax on the difference between the stepped-up value and the sale price.

 

Example: You bought your home in 1990 for $100,000. Today it’s worth $350,000.

• If you gifted it during your lifetime, your heirs inherit your $100,000 basis. If they sell for $250,000, they owe tax on a $250,000 gain.

• If you pass it through a will, your heirs inherit it at $350,000. If they sell for $350,000, they owe no capital gains tax.

This is why real estate professionals and tax advisors almost always recommend waiting until death to transfer property rather than giving it away while living.

 

Costs and When to Use a Will

• Cost: $100–300 for an online will; $300–1,000+ with an attorney.

• Best for: simple estates under $1 million, such as leaving one home to your children or dividing assets evenly among a small family.

• Bonus: A will is the only legal document where you can name guardians for minor children. Even if you have a trust, you still need a will.

 

What Is a Trust?

A trust is a more complex estate planning tool that transfers property to a separate legal entity. The trust then holds and manages assets on behalf of your heirs. You appoint a trustee to oversee it according to your instructions.

 

Key Features of a Trust

• Can avoid probate, keeping distributions private.

• Can control when and how heirs receive property (age milestones, conditions, staggered payments).

• Can be revocable (changeable during your lifetime) or irrevocable (locked once created).

• Often used to manage complex estates or special circumstances.

 

Revocable vs. Irrevocable Trusts

• Revocable Trusts

  • Can be changed during your lifetime.

  • Usually still provide the step-up in basis at death.

  • Transform into irrevocable trusts when you pass away.

• Irrevocable Trusts

  • Cannot be changed once created.

  • Trade-off: offer tax advantages because the trust, not you, owns the assets. This can keep your estate below the taxable threshold.

  • Note: Federal estate taxes only apply if your estate is worth more than $13.99 million (as of 2023), so most families won’t face this issue.

 

Costs and When to Use a Trust

• Cost: $1,000–2,000+ to establish.

• Best for: estates over $1 million, multiple properties, blended families, special needs dependents, charitable gifts, or situations where privacy is important.

 

Simple vs. Complex Examples

• Simple Estate

  • You own one home in Lynchburg and want it left equally to your two kids.

  • Best choice: A will — affordable, straightforward, and ensures heirs get the stepped-up tax benefit.

 

• Complex Estate

  • You own several rentals, one child is a minor, another has special needs, and you want 20% of your estate donated to a local charity.

  • Best choice: A trust — it allows you to manage timing, protect dependents, direct charitable giving, and avoid probate.

 

Why Not Transfer Property While Alive?

Many well-meaning parents try to avoid paperwork by deeding their house to their kids before death. Unfortunately, this often backfires. The child inherits the original purchase price as their basis instead of receiving the step-up at death.

Result: Instead of blessing your heirs, you may leave them with a heavy tax burden. Wills and trusts are designed to prevent this.

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Costs at a Glance

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The Bottom Line

Almost everyone needs a will. It’s simple, affordable, and ensures your family is protected. A trust becomes valuable for more complex estates, higher net worth, or when privacy and control matter most.

Both are far better than leaving things undecided — or worse, gifting property while alive and unintentionally creating tax headaches for your heirs.

Out of respect for your family, friends, and the organizations you support, take time to create a plan.

If you’d like help deciding whether a will or trust is best for your situation, call me for a trusted local law firm recommendation.

Disclaimer: This article is for educational purposes only and is not legal advice. For details, accuracy, and nuances of your situation, consult a trusted local real estate attorney.