There's a lot of discussion in the estate-planning world about whether wills or trusts are better for those making plans for their future.

In this clip from Industry Focus: Financials, Motley Fool analyst Gaby Lapera and Dan Caplinger, the Fool's director of investment planning, talk about the pros and cons of wills and trusts and how each can be a smart move in different situations. Learn what you need to know about wills and trusts, and it will help you make your own decision about which is better for your particular needs.

A full transcript follows the video.

This podcast was recorded on Sept. 22, 2016 for the Oct. 31, 2016 episode.

Gaby Lapera: We talked about wills, but I also know that trusts are something that is commonly recommended to people who are doing estate planning. Can you go over what the difference is between a will and a trust?

Dan Caplinger: Basically, what a will does is, it's a document that sits there, but it doesn't really take effect until the time of your death. Then, at that point, that's when the will kicks in and you follow the instructions that are given in it. A trust, on the other hand, is something that you can set up during your lifetime, it has the same instructions that you would find in a will to handle what happens to your assets after your death, but it can also make provisions for what happens to your assets during your lifetime.

For instance, a lot of the time, the way that a trust gets drafted, the person who's the trustee after the person who's created the trust essentially takes on the same role in managing that trust asset as someone who's given the power of attorney over your financial matters would be given to the assets that aren't in a trust setup. It's that same level of trust that you are establishing with the person that you name to take over if you're unable to do so. Now, the big advantage of having a trust over a will is, having a trust generally prevents you from having to go to a probate court to have your matters dealt with after your death. A trust doesn't have to be a public document. A trustee has the power after your death to take action as specified in its instructions. So, it doesn't generally need to have any court oversight to follow those instructions.

On the other hand, a will, in general, needs to be adjudicated before a court judge, and your will becomes a public document. In those situations, it's something that a lot of people are less comfortable with, having those documents be out there in the public eye. It's not like everybody's looking at them, necessarily, but they are available in case anyone is curious. For many people who are interested in maintaining their privacy, that's really not something that they need to have in everybody's business. They prefer the confidentiality that a trust setup allows you to maintain.

Lapera: So, with the wills, do they all have to be sent to probate?

Caplinger: The processes for dealing with wills differ from state to state. Some states have what are known as simplified proceedings in order to handle the vast majority of situations where there aren't that many assets, where you're only talking about transfers of a minimal amount of money, or a minimum number of pieces of property. But, a lot of time, the thresholds for those simplified procedures are pretty low. If you have more than just a minimal amount of assets that you're trying to pass on to your heirs, those simplified processes aren't available, and you do have to do a full-blown probate proceeding that involves hiring an attorney, getting the necessary court documents written up, and figuring out how to navigate that probate process, which could take months, or even years, and be extremely costly, especially if there are any complicated situations that arise.

Lapera: Can people challenge your will, if it ends up in probate court?

Caplinger: Yes.

Lapera: So, that would be another advantage of having a trust -- no one is going to be able to go to court, or, they're a lot less likely to be able to go to court and challenge it in court, right?

Caplinger: Yeah. Again, that becomes one of the elements of the confidentiality aspect of it. A trust document doesn't have to be public. That doesn't mean that it's invisible. For instance, in order for a trust to work, you have to actually put your property into the trust. For instance, if you own a house, you're going to want to do a deed transfer out of your own individual name into the name of the trust. So, anybody who looks up real estate property records, which are public documents, will know that your house is owned in the name of a trust. So, they'll know it exists. That opens the door to potential challenges. But it's not quite as simple of a process as it is when you have a will that's just out in the open.