Will vs. Trust: Which One Is for You?

Estate planning is not just a concern for the very wealthy. Everyone who owns property or has children has an obligation to specify how their estate should be distributed upon their death. A will is a statement of how you want your property distributed. A trust is a separate legal entity that holds your property and spends it according to the rules you made when you created the trust.

Using a will for your estate planning often requires that your estate go through probate. Probate is a legal, public process by which the state establishes that your will is valid, and decides who gets what after your death. Probate can be long and costly, and exposes your personal finances to public view.

Writing your will, however, is very simple. In many states, a handwritten document saying how you want your estate distributed is sufficient and will hold up in court.

The parts of your estate that are held in a living trust will not go through probate following your death. Instead, the terms of the trust control how your estate is distributed to your heirs. Your heirs will have immediate access to your estate, reducing the chance of financial hardship.

Creating a trust can be more complicated than writing a will. Title to the property that you want the trust to own must be explicitly transferred to the trust, which means filing more paperwork. A lawyer's help will probably be necessary.

If your estate is small (between $30,000 and $60,000 in most states), you do not own any real estate, and are not leaving money to a minor child a will should suit your needs. Even for larger estates, many states now offer ''informal probate'' which minimizes lawyer's fees and time in court.

If you are leaving money to a minor child use a "bypass trust" to maximize your and your spouse's inheritance tax deduction. If you are reluctant to have your personal finances made public, a living trust is the right choice for you.