When speaking with your estate planning attorney, be prepared to learn a new language and new concepts as you trudge forward to develop your estate plan. During my initial estate planning meetings clients often ask me the difference between a will and a trust and what's right for the client and his or her family. Both of these tools play a key role in how your property is distributed at your death so it's important to appreciate the similarities and distinctions.
Wills
A will goes into effect on your death and directs the distribution of property that is held in your individual name at the time of your death. A will also appoints an executor (also called a personal representative) to handle matters relating to your estate such as paying any estate taxes, selling your property, and distributing your property in accordance with the terms of your will. Your will can also serve to nominate a guardian to serve for your minor children.
Trusts
A trust is an arrangement where you appoint an individual (or sometimes an institution) called a trustee to hold title to property for the benefit of one or more individuals. Perhaps you have young children and if you were to die you do not want them to have full access to your property until reaching a certain age: a trust structure is a tool to help achieve this goal. Among many other uses, a trust can also include technical provisions to help reduce potential estate taxes on your death and can help to protect the trust assets from creditors of a beneficiary.
The difference
In terms of distinctions, a will is generally required to be filed in the county where you live when you die, while a trust typically can remain private and not public record. A will can also contain trust terms within the will itself.
For instance, I could have a will, the "Will of Bryce J. Helfer," which appoints a personal representative for my estate, nominates a guardian for my minor daughter, and directs that my property is to be held by a trustee (not necessarily the same individual as my personal representative) for the benefit of my daughter until she reaches age thirty. Under this scenario, the Will of Bryce J. Helfer also serves as the trust for the benefit of my daughter.
For a host of reasons, a trust is often a standalone document. In this case, I would have the "Will of Bryce J. Helfer," and also the "Bryce J. Helfer Trust," and on my death my will would direct that any assets held in my sole name at my death would be distributed to the Bryce J. Helfer Trust to be governed under the terms of the trust.
Talk to your estate planning attorney to learn more about how a will and a trust can help to achieve your estate planning goals.