In order to answer this question it is important to understand what each of these is and how they work.
Wills and estate planning trusts are documents that are the two most common ways to specify who will receive your property after your death. Both have similar features but their differences help to determine which might be the best choice for the individual client.
WILLS A Will is a written declaration by the individual, called the Testator, stating how their property (or "estate") is to be distributed after death and naming the person responsible for carrying out the instructions-the Personal Representative (or Executor).
The Will must meet certain legal requirements, including witnesses who are present when it is signed and who also sign the Will. The Will does not become effective until the Testator's death. If a court is needed to carry out the Will's directives, an estate proceeding, called a probate, is filed with the court and the personal Representative is then given authority to act on behalf of the estate.
Not all Wills require a probate proceeding; if the property does not require access to a financial account or changing title to personal or real property, no probate may be needed. If a probate is needed, the size of the estate determines whether it will be a "small estate" which is resolved with the filing of a single document called an Affidavit of Claiming Successor, or if a formal probate is needed in which case the probate will last at least four months and require entry of court signed judgment distributing property.It is a certain, time limited process with a definite beginning and end. A will is relatively inexpensive to prepare, but the probate process, if not a small estate, can be expensive.
Although there are many types of trusts, the estate planning trust that is discussed here is the Revocable Trust, sometimes called a Living Trust. It is created by a written agreement, called the Trust or Trust Agreement, between the person who owns the property, called a Settlor or Trustor, and a person who will manage the property: the Trustee.
The Trustee can be the same person, and usually is. In addition to managing the property during the Trustor's lifetime, the Trustee has other obligations, including paying bills, filing tax returns, and distributing the trust property after the Trustor's death to the persons or entities named in the Trust to receive the property. The title to the trust property is vested in the Trustee, according to the terms of the trust, which will designate a new trustee to take over management of the property when the Settlor/Trustee dies.
The trust can also provide that the new trustee assumes duties if the original trustee becomes incapacitated or no longer wants to serve as trustee. Because title to trust assets were transferred from the Trustor to the Trustee when the trust is established, the death of the Trustor does not require a court's assistance to transfer title; instead, the terms of the trust agreement determine what needs to be done. The trust allows the trustee to settle and distribute an estate without court involvement which generally is less expensive than a probate. Also, since there are no court papers that are filed, there is greater privacy for the Trustor and family. Trusts take effect as soon as they are created and the assets transferred to the trustee. The Trustor can revoke the trust or change its terms during his or her lifetime; after death a change will require court approval.
Establishing a trust is a two step process. First, the trust instrument is drafted and signed; then, the trust is funded by transferring title to individual assets from the name of the Trustor to the Trustee. Because trusts involve more work, they are more expensive.
In recent years, many financial planners and estate planners have recommended using a trust as a means to pass property ("Estate") to others after death. The cost difference between a probate and trust administration is often cited as the best reason. However, an estate that requires minimal court involvement can be probated inexpensively. The difference in costs may not be great when the relative cost of establishing the trust or writing a will are considered.
Another reason that a trust may be a good idea is the ability to plan for financial management in the event of incapacity. Trusts allow for continuity of care during old age, which is something that a Will simply does not do. Trusts are flexible and can include a wide range of provisions for care during one's lifetime and this flexibility may be important to some individuals.
The particular needs of each person should be considered when deciding which is the best way to plan an estate. The assistance of an experienced estate planning attorney is essential to insure that the proper estate plan documents are selected.