Wills & Trusts

Estate planning for you and your family can be a stressful task. One of the main questions that come up during Estate Planning is: Do I need a Trust or a Will?

Wills are generally the easier of the two to set up. Even though it is the easiest to set up, it still has its drawbacks. Trusts are a great device if you are looking for privacy and greater protection; however they entail more work and costs.

The revocable, or “living,” trust is often promoted as a means of avoiding probate and saving taxes at death. The revocable trust has certain advantages over a traditional will, but there are many factors to consider before you decide if a revocable trust is best suited to your overall estate plan.

WHAT IS A WILL?

A will is writing, signed by the decedent and witnesses, that meets the requirements of Florida law. In his or her will, the decedent can name the beneficiaries whom the decedent wants to receive the decedent’s probate assets. The decedent can also designate a personal representative (Florida’s term for an executor) of his or her choosing to administer the probate estate.

If the decedent’s will disposes of all of the decedent’s probate assets and designates a personal representative, the will controls over the default provisions of Florida law. If the decedent did not have a valid will, or if the will fails in some respect, the identities of the persons who will receive the decedent’s probate assets, and who will be selected as the personal representative of the decedent’s probate estate, will be as provided by Florida law.

WHAT IS A REVOCABLE TRUST?

A revocable trust is a document (the “trust agreement”) created by you to manage your assets during your lifetime and distribute the remaining assets after your death. The person who creates a trust is called the “grantor” or “settlor.” The person responsible for the management of the trust assets is the “trustee.” You can serve as trustee, or you may appoint another person, bank or trust company to serve as your trustee. The trust is “revocable” since you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.

During your lifetime the trustee invests and manages the trust property. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amount. If you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. This is one of the advantages of a revocable trust.

Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. The trustee’s responsibilities at your death are discussed below.

Your assets, such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust. Assets that are not properly transferred to the trust may be subject to probate. However, certain assets should not be transferred to a trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.

Here are some more pros and cons:

  • A revocable living trust is a private contract between the trust maker and trustee(s). However, a will has to go through probate, which of course is public record and anyone can read your last Will and Testament, list of beneficiaries and assets, and the breakdown of who gets what. This is not the safest way to protect your heirs, as public knowledge of inheritance can cause a lot of headache.
  • Another benefit of a revocable living trust is that you have the ability to plan your mental disability planning. This is a great protection if you or your spouse becomes incapacitated.
  • The main benefit of a revocable living trust is that you can avoid probate.
  • Trusts are considered their own legal entity in a sense, so you will have to change the name on registrations, deeds, and set up new bank accounts, if you want them to be part of the trust.

As you can see Trusts and Wills have both benefits and drawbacks. But, here is the real twist to trusts that most do not realize, you still should have a will drafted. Yes that’s right a will. Most people believe if you have formed a trust, you do not need a will. That is not completely true, because a trust takes time to draft and transfer to become valid, the will is an intermediary protection during this process.

If you have any more questions regarding Estate Planning for your future, please contact us today, we will be happy to help.