A last will and testament contains specific terms for asset distribution to your loved ones after you die. Your executor must file a petition in court to have your will offered for probate, the legal settlement of your estate. The executor named in your will oversees your estate's financial affairs, the transfer of items and cash to your beneficiaries and the execution of your final wishes. A living trust becomes effective once created by you. You may name yourself as trustee -- the person who controls the income and assets in the trust -- and fund the trust as you see fit. The trust pays out income and assets as you dictated in the trust agreement.
Wills are typically the same insofar as content required under state laws, like your signature, the signatures of witnesses and the naming of an executor. The exact terms of a will vary by person. A will may be revoked by you if you draft another will while still living and specify in the document you are revoking all prior wills. You may amend a current will by filing a codicil, a document that only amends a specific part of your will. Living trusts typically come in two types: revocable and irrevocable. A revocable trust may be ended by you or your trustee at any time or in accordance with the procedure set forth in your trust agreement. An irrevocable living trust generally cannot be terminated, although ending the trust may be possible through court action if there are extenuating circumstances, such as a trustee you named stealing trust income. Both types of trust may be amended if you provided for amendments in the original agreement.
A will must be probated in court, so filing, court and legal fees will be paid by your estate as a result. Your executor must make an inventory of all of your assets and the associated values. Once your assets have been distributed, estate taxes must be paid by your heirs, based on your estate's value. Your heirs may contest your will, and a will challenge can be costly for your estate. A living trust may allow your heirs to avoid probate entirely. The assets and income may be distributed to your heirs more quickly than probate, in accordance with your trust agreement. However, if your trust is not properly structured or contains errors, the trust may be held invalid, and have financial and legal consequences for your heirs.
You may still need a will if you did not put all of your assets into your trust. Assets that are not part of your trust upon your death cannot be distributed according to the terms of the trust. A will that directs all assets be placed in your trust may shorten the probate proceedings. Your assets are still subject to estate tax, even if in a trust. The tax amount may be less than your heirs would pay in probate, depending on the validity of your trust and the size of your estate.