How is a Living Trust different than a Will?

A will is what estate planners typically refer to as a "testamentary instrument." That means that a will takes effect only upon your death.

A living trust, on the other hand, takes effect as soon as it is signed and assets are transferred to it. Both a will and a living trust are, at their core, a set of instructions for the administration and disposition of assets and payment of administration expenses and taxes at death. A living trust, however, also directs the management of assets during life. As a result, if you have a properly funded living trust, your incapacity will not require a guardianship proceeding; your successor trustee can simply continue to manage the assets in your trust without court intervention or supervision.

Likewise, if you have a living trust to which all your assets have been transferred, your estate will avoid probate at your death. All of your assets will simply pass according to the instructions you left in your living trust and, although an administration process is still necessary, it is usually accomplished outside the courtroom at a much lower cost, with the help of your estate planning and administration attorney.

Even if you have a properly funded living trust, you must still have a will, though it will be a different kind of will. A will that is a companion to a living trust is often called a pour-over will.

A pour-over will serves several functions, including the appointment of a personal representative, the appointment of a guardian for minor children, the disposition of personal property, and the transfer (pour-over) of non-trust assets into your living trust.