Wills and living trusts are legal documents that determine how your estate will be distributed following your death. In the absence of such documents, your property will be distributed among your heirs as prescribed by statute. Because this distribution is unlikely to match your own preferences, you should carefully consider creating a will, a trust, or both.
A will is a legal declaration of a person's intentions regarding actions to be performed following his or her death. Wills do not avoid probate, which is the process by which a court oversees the disposition of a decedent's property. Nevertheless, wills ensure that disposition of property is in accordance with the decedent's wishes.
A trust is a document that designates a " trustee" to hold legal title to property and to administer the property according to instructions contained in the trust document. The person who creates the trust is known as the " trustor," or "grantor," or "settlor." A person entitled to use trust property or to receive income or other benefits from the trust is a "beneficiary." A person who creates a living trust may act concurrently as trustor, trustee, and beneficiary of the trust. While the person remains alive, he or she may control and use trust property in the same manner as a regular owner would. The only difference is that property is purchased, held, sold, invested, etc. in the name of the trust, rather than in the person's own name. Upon the person's death, the living trust enables property to pass to others without probate. This mobility is because the person has transferred legal ownership of property to the trust which remains "alive" even after the person's death. The trust itself provides for designation of a new trustee to take over control of the trust. The new trustee is obligated to manage trust assets as instructed by the trust itself. This obligation usually includes distributing trust assets in a manner prescribed by the original owner.
Which is better – a will or a trust? There is no simple answer. Trusts avoid probate, while wills do not. On the other hand, wills may require less maintenance than trusts. Trusts provide greater privacy than wills because will transactions become a matter of public record. In any event, wills and trusts are not mutually exclusive. Each provides certain benefits the other does not. The two can compliment one another in accomplishing estate planning goals.
Estate planning involves complex issues. The foregoing discussion of wills and trusts is provided only as an introduction to these documents. You should seek appropriate legal counsel to determine how best to meet your individual estate planning requirements.