They are intended to accomplish at least one similar function - the disposition of property upon death. Among other useful features, however, the living trust is intended to accomplish the administration of an estate and distribution of assets without having to conduct a probate proceeding. There are numerous very good reasons to avoid probate.
I've written a longer article on this topic that you can review on my web page. I will include a link to the page with this answer. The article also includes discussion of other common estate plan documents (power of attorney, health care directive, etc.)
The foregoing is commentary regarding a general legal question. It is not intended to be legal advice specific to the reader's individual situation nor does it create an attorney-client relationship between the author and any reader. You are encouraged to contact a qualified attorney to discuss your legal situation.
A trust is at least two things:
1) A substitute for a Will. It names who gets your assets when you die.
2) A means of holding title to your assets, both while you are alive and after death. The trustee of the trust succeeds to your interest in the assets and can legally control them both during your lifetime and after your death. The successor trustee does not need authority from a court to handle assets. Therefore, a trust is generally less expensive to administer than a Will. The trust also provides for a means of controlling the distribution of your assets. In other words, you can stagger the distributions so that your beneficiaries do not receive everything at once. While you can sometimes do this with Wills, also, it generally involves ongoing probate court administration, which is cumbersome and more expensive.
*** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.
A will and a living or revocable trust are two different things. A will directs where your property will go upon death and will need to be probated. This is a process that is public, is handled through the Probate court, and typically more expensive than administration of a trust. Simply put, a trust holds title to property while you are alive and directs who should get the property upon your death. Property held in trust is not required to go through probate and title will automatically pass to the beneficiaries ("new owners") per the terms of the trust.
This response is provided for information purposes only. It is not intended to be legal advice and should not be treated as such. For legal advice concerning this matter please see an attorney to discuss your particular situation.
Wills and Living Trusts have a similar goal – the disposition of your assets upon death. However, until your death, there are significant differences in how you must manage and title your property if you intend to utilize a living trust; failure to consistently do so could undermine the intended purpose and advantages of the living trust. While there are some good reasons to utilize living trusts, there are also good reasons to use a Will. It mostly comes down to the size, type, and diversity of your estate, tax considerations, and the complexity of your post-death property disposition. The only way to know which method of estate planning would be best for you, would be to consult with an estate planning attorney. And you will find that the opinion of the attorneys can vary depending upon their own personal preferences. If you utilize a living trust, you will still need a Will in case something has fallen through the cracks, and is not part of the corpus of your living trust. The most important thing for you to remember is to get your estate planning completed, for the sake of your family. It makes an already difficult time for them a little less traumatic.
The biggest differences are:
1. A will has no power or authority until you die. Its as though the words are on an unread letter. Whereas a trust is in force and active the second it is signed. A Trust is like making a contract with yourself or starting a company. It exists and is living.
2. You can list a Trust as a beneficiary but not a will (remember a will means nothing until you pass away).
3. A Trust can provide lifetime disability planning.
4. When you pass away with a Will your heirs need to go to a probate court to be given power to access your assets, this can take months or years. When you die with a Trust the current Trustee (you) dies and the successor Trustee (whoever you named) takes over. This theoretically happens instantly. The Trustee has power over the trust assets from the day you pass away (subject to the trust terms).
Otherwise they can do many of the same things in slightly different ways. Most of the other differences revolve around costs of administration and oversight. I do not list them because they are so dependent on your specific trust terms it would not be helpful.
Disclaimer: The foregoing answer does not constitute legal advice, is provided for informational and educational purposes only for persons interested in the subject matter. Each situation is fact specific and may be subject to state specific laws. Without a comprehensive consultation and review of all the facts and documents at issue it is impossible to evaluate a legal problem fully. This answer does not create an attorney-client relationship. No Tax Advice - Circular 230 Disclaimer - Any information in this comment is not intended to constitute a comprehensive and complete tax consideration analysis, and may not be used by the taxpayer to eliminate or reduce penalties by the IRS or any other governmental agency, nor for the purpose of promoting, marketing or making recommendations to other persons on any tax-related matters.