Trusts and wills are estate planning tools i.e. ways through which a person can pass on assets to others after death. While information in a trust usually remains private, wills become public documents and go through probate. A will only comes into effect after death but a trust can be set up while the person is alive. There are pros and cons for both instruments.
edit What is a Will and a Trust?
A will is a short public document that comes into effect after death. It allows an individual to designate a beneficiary for their assets, caretaker for minors and an executor to ensure the instructions are followed.
A trust is a private, non legal document that allows an individual to nominate beneficiaries for their assets while they are living and after their death. After a person's demise, a successor trustee will help distribute the assets as specified in the trust document.
Here's a good video that explains the process and under what circumstances wills and trusts work better:
Although people may prefer to get legal advice when setting up a will, it is not always necessary. In order to be valid, a will must be written in sound judgment, clearly state it is an individual’s will, name an executor, and be signed in front of two witnesses.
A standard living trust can also be created using an off-the-shelf pack or with the assistance of a lawyer. In a trust, an individual, or trustor, gives another party, the trustee, the right to hold property or assets for the benefit of a third party, the beneficiary. The trust must be signed in front of a notary, and all property in the trust must be transferred to the name of the trustee using a deed or other transfer document.
Trusts do not go through probate, the process through which a court that decides the validity of a will and approves it for execution. They are therefore not made public documents after an individual’s death. However, they can become public if they are challenged in court.
As wills must go through probate, they become public documents.
Trusts must be actively managed to remain valid, and so are more expensive than wills, although they avoid the cost of probate.
Wills are fairly cheap to set up, but the probate process can be expensive, as many probate lawyers charge by the hour, and it can be an extensive and involved process.
edit Mental Disability Provisions
Trusts allow individuals to specify who should manage their property if they become mentally incapacitated.
Wills only come into effect after an individual’s death, and so cannot include such provisions.
edit Minor Children
Trusts allow an individual to name someone to manage trust property for minor beneficiaries. They do not allow an individual to designate a guardian for any minor children, and must be supplemented with a will.
Wills allow the user to appoint a guardian for any minor children.
Trusts do not contain a cut-off date for creditors to bring claims against the estate. This means that if the trustor owed money to any creditors, they can claim part of the trust as payment at any point after the trustor’s death.
Wills include a cut-off date for creditors to bring claims.
edit Books and Resources for Further Reading
Here are some good books on wills and trusts on Amazon.com.