- A will is a single document that can be prepared either through an attorney or with the aid of a book, software or website. The will takes effect once it's properly signed and witnessed, and affects only the property that's described in the document. A revocable trust can be created fairly easily through a document called a declaration of trust. A trust governs only the property that is transferred to the trust. Transferring property into the trust document is an additional step that is not necessary in creating a will. Property that you expect to own for the rest of your life must be titled in the name of the trustee "in trust," and is usually transferred as a gift.
- The largest single difference between a revocable trust and a will, and the primary motivation for creating a trust, is to avoid having your estate distributed through a time consuming and potentially costly probate proceeding. Probate is a court-supervised process specifically designed for the validation of wills and the disposition of property according to the deceased instructions. Trusts, on the other hand, are not subject to court supervision. The person you choose in the trust document to replace you as trustee after you die disposes of the trust assets according to the terms of the declaration of trust document.
- Another benefit of avoiding probate is privacy. A probated will and the assets of the estate become a matter of public record. While for most people this is not an important issue, for some it might be enough reason to create a trust. The contents of a trust document or the assets owned by the trust remain undisclosed to the public, except in the case of real estate, for which transfers to a trust are often noted on the publicly recorded ownership document.
- There are some slight differences in taxation whether a revocable trust or will is used. A revocable trust does not offer an exemption from tax liability on income or capital gains realized by the trust property. Nor does it exempt property from the estate tax, even though the property does not pass through probate. A probated estate can choose its own fiscal year and use this to its tax advantage, whereas most trusts must use the calendar year as their fiscal year.
- Attorneys and financial planners usually recommend having both a revocable living trust and a will. A trust is used to leave larger assets to an heir such as real estate, interest in a business, or other long-term investments. A will can be used to transfer more transient property like bank deposits or a car. If property is mentioned in a will but is later made subject to a trust, the trust document takes precedence.