Your will is a foundational document in your estate plan. Something to keep in mind, though, is that a will has to be handled in probate court, and probate can be time-consuming and costly. Probate proceedings are also public, so the contents of your will can be accessed by nearly anyone. A trust, on the other hand, can be coordinated with a will to avoid probate and privately protect and distribute assets according to your wishes.
Consider rocker Lou Reed's estate plan, which offers a sort of cautionary tale with regard to wills and trusts. The former Velvet Underground singer, the value of whose estate is estimated at $30 million, died in October 2013. He had a will -- reportedly 34 pages long -- but he didn't create a trust.
The details of Lou Reed's estate have been widely reported. His wife, artist Laurie Anderson, will receive $9 million in real estate and 75 percent of residual assets, and his sister will receive 25 percent of residual assets. Reed also set aside $500,000 for the care of his mother. Again, we can report these details because they are available through the probate court.
If Reed wanted to keep his assets out of probate, then he could have created a living trust. He could have funded the trust in his lifetime and specified in his will that the assets were in the trust. Then the trustee, not the probate court, would oversee the management and distribution of assets.
There are two types of living trusts -- revocable or irrevocable. You can learn more about these important tools at our estate planning overview.
Source: Forbes, "Lou Reed Walked On The Wild Side With His Estate Plan," Daniell Mayoras and Andy Mayoras, July 10, 2014