When you look at your list of daily tasks and appointments, what jumps out? The presentation that you have to prepare? That hot stock you want to buy? The trip that you need to plan? The start of your daughter's soccer game?

Thanks to all of these seemingly urgent tasks, one of the last things on your mind is probably writing a will or thinking about putting your assets in a trust. However, whether you've got dozens of stocks and bonds and other investments or just a few dollars, putting off setting up a trust or will can be a huge mistake. A will or a trust can ensure that you leave loved ones properly cared for, prevent disagreements among possible heirs and prevent unnecessary attorney fees from eating away at your estate.

We'll explain the differences between a will and a trust -- not to mention just how important this kind of documentation is, especially at the time of death.

What Is A Will?

A will is a document that tells legal authorities what should happen to your possessions when you die. It can be any length, and in most states it must be witnessed by others who agree that you have the mental capacity to make your own choices.

If you have minor children, it designates their legal guardian (with whom your children would live) and sometimes a financial guardian, who'd make sure that your assets are distributed to your kids appropriately through their minor years and in full when they reach legal age or another designated date. After you die, a will must be verified as valid in 'probate court,' which is a court of law that deals specifically with wills and estates.

What Is a Trust?

A trust is akin to a mini corporation through which property intended for the benefit of one party, the 'beneficiary,' is held by another party, the 'trustee.' The trustee and the beneficiary also can be the same person. Sometimes there are many beneficiaries, and sometimes there are many trustees.

Trusts allow your assets and possessions to skip the probate court process and go directly to intended recipients, saving time and money spent on court and attorney fees.

Trusts can also be arranged to cooperate with laws currently in effect in order to avoid various types of taxes. But if the law changes by the time you die, aspects of the trust governed by former laws may no longer result in the best tax outcome.

[InvestingAnswers Feature: Shield Your Hard-Earned Money from Uncle Sam With a Trust]

Why Wills And Trusts Matter

Unfortunately, 65% of American adults do not have wills, according to a 2010 Harris poll conducted for Lawyers.com. And the numbers don’t improve for older Americans: Four in 10 baby boomers also lack one, based on a 2012 survey conducted by RocketLawyer.com.

Without a will, you take a risk. Your money, house, car, boat, other material items and minor children land in limbo -- with no clear recipient, beneficiary or guardian to receive them.

The same RocketLawyer survey also found that half of Americans with children do not have a will. If you have kids and you don't create a will before your death, the probate court will decide who will be the guardian of your children. Although this is usually the closest family member, without specific instructions, your kids could end up in an environment that's not to your liking.

A trust is geared toward folks with a positive net worth and assets, such as cars, houses, savings accounts and a substantial amount of life insurance. If you don't have much in the way of assets, a trust may not be necessary.

A trust requires planning and maintenance and can be more expensive to create than a will. However, upon your death, the trust will be immediately transferred to your beneficiary -- with no lengthy and costly probate involved.

A trust can be very important for unmarried heterosexual couples as well as for women and men in same-sex marriages because federal law does not yet accept such marriages. Because same-sex and unmarried couples can't use the same estate tax exemptions and other tax loopholes as heterosexual married couples, trusts allow a partner to pass assets to the other partner without having to pay taxes that heterosexual married couples are exelempt from paying.

How Do Wills and Trusts Work?

Wills: A will can be one sentence or several pages long. The writer's death activates the document. The title must read 'Last Will and Testament of …,' and the document must state that the writer not only has the mental capacity to make decisions but is also of legal age.

Two disinterested parties must then sign it, and a notary public must verify the writer's identity and signature. The will also can be handwritten, with no witnesses necessary. However, a handwritten will is valid only in some states and it can be contested easily. Text added after the signature is made isn't recognized as part of the will.

Following the writer's death, the will goes into probate court, and a person is appointed executor (male) or executrix (female) in charge of making sure that the will is carried out. If an executor is not named in the will itself, the court will appoint one.

Trusts: A trust is a legal entity created by a document that states the contents of the trust are being held for another party. The 'trustee' manages the assets in the trust and distributes it. The 'beneficiary' is the person to whom the property will go. The terms of the trust outline when the property will be distributed, who it will go to, who is in charge of the trust and how the property can be used. For example, will the assets pay for little Johnny's future rent or will they be designated for his education only? One common clause: Only earnings may be taken out of the trust, while the original amount given to the trust must remain intact.

There are many different types of trusts, and each one has its own rules about when ownership can be transferred and to whom. The most common type, a revocable trust, is one in which the 'grantor' (the people/person who give(s) the property to the trust) is also the trustee and beneficiary. This type of setup allows people who have money in non-retirement accounts that lack 'transfer on death' instructions to avoid the time and cost spent in probate. Additionally, the amount in assets and the name of the beneficiary would not be made public, which would occur in probate.

A trust created while the grantor is still alive is called a living trust; some living trusts are revocable and others irrevocable, depending on how the trust is made and what restrictions it puts on the assets in the trust. A trust created upon the grantor's death via a will is known as a testamentary trust and is irrevocable. Upon the death of the grantor, a trustee takes actions specified by the terms of the trust.

Should I Have a Will or a Trust?

Whether a will or a trust is advisable depends on your situation, although parents with minor children definitely should have a will.

People who have noted beneficiaries on all of their retirement accounts and/or instructions on their non-retirement accounts and assets may not need a will if they have no other assets. Because beneficiary forms are part of many financial accounts, the beneficiary named in those accounts will be honored first -- before a will or trust or lack thereof.

Same-sex or unmarried couples with a positive net worth should have a trust if they want their assets to pass on to a partner. Folks with a high net worth also should consider a trust. (Again, a will also works, but it likely will cost more time and money to go through probate court.)

How to Create a Will

An estate planning attorney is not necessary to create a will. You can purchase a will document at websites like LegalZoom. The cost starts at $69. If you have many assets or a complicated situation -- i.e. same-sex couples, unmarried couples, kids from multiple marriages, real estate assets and business assets -- an estate planning attorney is advisable.

Trusts, especially complicated ones, are best put in the hands of an attorney. However, a basic trust also can be created through such sites as LegalZoom. The cost starts at $249.

Attorney fees can range from about $2,000 for a single person with an uncomplicated situation to $10,000 or more for a married couple with a more complex situation.

What You Need To Do Now

  • Don't procrastinate. Unless you have a crystal ball, you just never know when death will occur.
  • Determine which type of document best suits your situation. You're the only one who knows the extent of your assets, but if you have minor children, you must get a will.
  • Keep your will or trust current. Life is fluid. As you increase assets and expand your family, your will or trust should be updated to meet your changing needs. For example, wills and trusts should be revised following unexpected events such as a divorce or the death of a spouse or a child. A substantial inheritance also can inspire a revision to your will or trust.
  • Let someone know where you keep your documents. A family member, relative or trusted friend should be able to easily find your documents at the time of your death to prevent any confusion.

Remember …

You can and should protect what belongs to you -- and control your assets by creating a will or a trust. Don't leave to chance the fate of what you've worked so hard to earn!

Suzanne G. Beyer is co-author of 'The Inventor's Fortune Up For Grabs,' a true story of the mayhem caused by a poorly worded trust.

This article originally appeared at LearnVest.com:
Wills and Trusts 101

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