A Will and a Trust serve different purposes. Most people don`t have either one. A Will and a Trust are similar in the effect that both let you designate exactly how you want your assets and other personal property to be distributed to your friends, family and other loved ones after you die. The difference between a Will and a trust is that a Will probates through probate court, but a trust doesn`t. A Trust is administered outside of the probate court after you die.
People prepare a trust to avoid paying these probate taxes. Generally, you would not need to prepare a trust to avoid probating your Will if you net assets amount to less than $1 million (This amount which is exempt from Federal Estate Tax increases to 1.5 million in 2004 and 2005, 2 million in 2006 through 2008, 3.5 million in 2009 and then in 2010 there is no federal estate tax. However in 2011 the Federal Estate Tax is returned to the 2002 level).
In this case, a Will would serve the same purpose as a trust because the federal tax laws do not tax a person`s asset for the first $1 million (different amount as noted above in subsequent years) after they die.
