A will, sometimes referred to as a “last will and testament,” is a legally binding document that primarily details what will happen to your assets after your death. There are three important parties essential for every will:

1. The Testator: This is the individual who makes and executes a will.
2. The Beneficiary or Beneficiaries: This is the class of individuals who are the intended recipients of the estate assets.
3. The Executor or Personal Representative: This is the person who possesses legal title to the estate assets after death and administers the assets in accordance with the provisions of the will in the best interest of the beneficiaries.

In the absence of a properly prepared and executed will, your estate and its assets will be handled in accordance with the intestacy laws of the state in which you are domiciled at the time of death, which generally follow a simple consanguinity distribution plan administered by a probate court. Depending on your intent prior to death, this may result in estate assets being distributed in a manner that you may not have contemplated.

There are a few important points worth mentioning:

1. A will only becomes effective upon the death of the testator.
2. The term “individuals,” when used in the context of beneficiaries, whether in a will or trust context, includes any type of beneficiary whether it be a person, charity, foundation, etc.
3. The administration of estate assets by the executor can only be accomplished through the probate court.

1. Choose a trusted and knowledgeable attorney to draft the will. While this is not necessary for the will to be legally binding, it ensures that the will meets all statutorily prescribed elements, is enforceable, and makes it less susceptible to potential will contests after your death.
2. Choose a guardian for your minor children, if applicable. This is an important aspect of estate planning that is often overlooked by young couples as they view estate planning as a process exclusively reserved for older, more financially well-established individuals.
3. Choose a trusted individual to act as the executor to administer the will in accordance with its terms after your death.
4. Choose the beneficiaries of the will estate. Estate assets can be distributed in any manner and to any individual prescribed in your will.
5. Execute the will in accordance with the attorney’s instructions. States differ regarding execution requirements. Some states require multiple witnesses plus a notary for the will to be enforceable, while other states are beginning to allow digital execution. For this reason, it is critical that you work with an attorney who has specific knowledge and experience drafting wills, preparing estate plans and is familiar with current laws.

A will is generally a cost-effective approach to estate planning. The legal costs associated with the preparation of a proper will should be far less relative to the preparation of a more comprehensive estate plan that includes a trust.

A trust is more complex than a will and is defined as a legal body that maintains assets for another individual. People who set up trusts are generally advised to also have a will in place to ensure that the two work in tandem to capture every asset of the individual and direct proper distribution. There are three important parties essential for every trust:

1. The Settlor or Trustor: This is the individual who creates and funds the trust with personal assets.
2. The Beneficiary or Beneficiaries: This is the class of individuals who are the intended recipients of the trust assets.
3. The Trustee: This is the person or, in the case of a corporate trustee, the entity, who possesses the legal title to the assets, handles the administration of the trust and is expected to act in a fiduciary capacity and in the best interest of the beneficiaries.

A will and trust are generally viewed as complementary to each other and not an “either/or” in estate planning. A trust is generally used to extend the settlor’s control over their assets after death. A trust may stay in existence for years or decades after a settlor’s death, operating in a manner consistent with the settlor’s wishes and design. A trust may also be used to act as asset protection against potential creditors of the beneficiaries and may be used as a deferred tax shelter or be designed to minimize taxes, limited only by creativity and the Internal Revenue Service.

Almost any asset in which you hold an interest can be held in trust. A distinguishing factor between trusts and wills is the fact that while wills take effect only after death, the most common “grantor” trust springs into existence as soon as it is properly executed by the Settlor. While a will and trust take effect at different points in time, setting up a trust involves many of the same estate planning steps involved in the creation of a will. These steps include:

1. Choose an Estate Planning Attorney: You should consult an attorney who specializes in estate planning and trust preparation. This should generally be the same attorney who prepares your will to ensure your complete estate plan operates as intended.
2. Choose a Beneficiary or Beneficiaries: Like the beneficiaries of a will, provisions of your trust will dictate the individuals who you intend to receive the trust assets. Again, “individuals” in this case includes all intended recipients of the trust assets.
3. Choose the Manner and Method of Distribution: A trust operates in a different manner than a will. A trust offers almost unlimited flexibility in how, when and to whom the trust assets are distributed. This is particularly important for settlors with minor children. Upon the Settlor’s death, a trust can be designed to set aside assets for a minor child to be managed by the trustee and then distributed to the child in any desired manner — distributed based on life events (i.e., education, wedding, buying a house) or distributed based on age (i.e., one-third at age 18, one-third at age 25 and one-third at age 30) or any combination so desired by the Settlor. Similar terms can be prescribed for the distribution of trust assets to any trust beneficiary and is not limited to the Settlor’s minor children.
4. Determine the Assets used to Fund the Trust: As estate planning and probate and trust laws have evolved, so have the types and styles of trusts. There is a plethora of trust styles to suit specific and complex planning situations and asset types. Furthermore, in contrast to a will, an individual is not limited to establishing a single trust. Depending on the circumstances, planning objectives and assets, you and your attorney may find it prudent to establish multiple trusts to separate and best effectuate your planning goals. The assets you choose to use to fund each trust will also depend on your planning objectives, the intended beneficiaries and, in many instances, potential tax consequences or benefits. This highlights the importance of working with an experienced estate planning attorney who understands all the nuances associated with trust planning and administration.
5. Execute the trust agreement in accordance with the attorney’s instructions. As with wills, states differ regarding execution requirements.