Wills and trusts are both testamentary legal devices used to control and administer property after the owner dies. They both operate fairly differently, though. A will operates as a set of directions that must be followed by the courts. Trusts, on the other hand, operate as a form of asset management where the executor, or person responsible for administering the trust, does have some limited ability to make decision on behalf of the trust creator, also known as the settlor.
Revocable and Irrevocable Trusts
All trusts are either revocable or irrevocable. This classification is rather self-explanatory, but the consequences of the classification are important. Revocable trusts can either be changed or voided any time by the settlor. On the other hand, irrevocable trust can never be changed once they are established. Once property is placed in a trust it is usually considered trust property and not the property of the settlor -- in essence, the settlor looses his property rights. This is not true with revocable trusts. Since a settlor can claim back the property at any time, the legal system treats the property as that of the settlor and not of the trust. This means the settlor can still be taxed on the property and can be reached by creditors. This would not be the case if the property were to be placed in an irrevocable trust since the property rights transfers from the settlor to the trust.
Living and Testamentary Trusts
Living trusts are trusts that are created and are effective during the lifetime of the settlor, while testamentary trusts become effective after the death of the settlor. Both living and testamentary trusts operate substantially the same way, but living trusts have the added benefit of avoiding probate if properly financed while the settlor was living -- that is, all the property taxes have been paid and none of the property suffered from devaluation due to negligence. Testamentary trusts always go through the probate process.
Wills are straightforward documents in regards to how they function. The courts essentially follow the exact directions the will sets forth. The creator of the will, or testator, just needs to make sure that her intentions are clear, concise and do not conflict. It is when these ambiguous situations arise that the courts have to step in and have to determine the testator's intent. They'll do their best to decipher the intent, but there are no guarantees. Wills can be typewritten or handwritten in some states. Handwritten wills are referred to as holographic wills.
Last Wills vs. Trusts
There are both positives and negatives to last wills and trusts. Wills are beneficial because they usually make the probate process quick and easy. The courts generally do not have to work at trying to determine how to administer the testator's property, and do not have to decipher the testator's intent -- all of this should be clearly outlined in the will. On the other hand, the property is still considered the testator's, so it is susceptible to creditors until legal possession has passed. Conversely, trusts act as a form of asset protection. When property is placed in an irrevocable trust it becomes trust property and cannot be touched by the settlor's creditors. Trusts do have executors that are in charge of controlling the trust. Even though an executor may be completely trustworthy and work hard to follow the settlor's directions, the courts still have to perform some oversight. This can draw out the probate process.