Understanding the differences between the two is critical in making the proper decision to meet the needs of your estate plan. The important thing to note is that they both make use of a last will and testament, perhaps the most essential document that an individual planning the disbursement of his assets in preparation for his death should have.

Last Will and Testament

The typical last will and testament is more involved within a will-based estate plan since it contains all of the specific details regarding the disbursement of the deceased individual's assets. It will also contain information on guardians for any minor children. However, the last will and testament found in the trust-based estate plan is much shorter and less detailed since the information is found in the revocable living trust.

Will-based Estates Versus Trust-based Estates

Whether an individual sets up a will-based estate or a trust-based estate is more a matter of personal preference and a need for a more sophisticated framework. The will-based estate plan incorporates the following four documents: a last will and testament, a living will, a financial power of attorney, and an advance medical directive or medical power of attorney. The trust-based estate plan incorporates these same four facets along with a revocable living trust which contains specific instructions for the remainder of the individual's life.

Will-based Estates

A will-based estate plan is one that typically contains a last will and testament as the primary means of distributing assets upon the death of the individual whose will it is. It not only includes the name of the individuals or organizations that will inherit the assets, but it also includes when they will receive them.

A last will and testament is overseen by the individual's personal executor or representative. This individual is chosen by the person whose will it is and the information is included within the document itself. The powers granted to the personal executor are also listed within the document so there is no question as to what he should be doing legally.

The primary purpose of the last will and testament is to distribute the property of the deceased to designated individuals. It includes the names of all of the beneficiaries along with the specific details of the property that they will inherit. Any details related to the disposition of the inherited property will also be included in this document.

Trust-based Estates

A trust-based estate plan is one that begins with a revocable living trust along with the four documents listed above. The assets of the individual are included in the trust while the individual is still alive.

The last will and testament within a trust-based estate is designed to include any assets that are inadvertently missed within the trust. The missed assets will then transfer or pour over into the individual's trust upon his death during the probate process. This is why the last will and testament included within a trust-based estate plan is often referred to as a “pour over will.”

This last will and testament generally includes the name of the personal executor for the estate along with his specific duties or powers. Typically, he is in charge of taking care of any unfunded assets that have not been included within the trust.

Someone referred to as the successor trustee or administrative trustee is chosen by the individual who is setting up the trust-based estate plan as his personal executor. He is also named within the documentation along with his specific duties or powers.