Wills and trusts are among the basic building blocks of estate planning, and yet many people are unsure of what exactly the difference is between the two. Below, we go through the essential aspects of wills and trusts, and how both can be critical to furthering your Florida estate planning goals.
WHAT A WILL ACCOMPLISHES
Put simply, a will is a must for any adult’s estate planning. A will is the legal document which takes effect upon your death which directs how your assets should be distributed, and can provide additional guidance regarding payments of your debts as well as the appointment of an executor who will oversee the payment of debts and distribution of your assets.
Without a will, a Florida probate judge will have to apply state laws of intestacy to determine who will receive your property, which may diverge wildly from those you intended to benefit. The judge’s decision based on state law will take precedence over any statements you made to others concerning your property or your written statements outside of a legally valid will.
HOW A TRUST IS DIFFERENT FROM A WILL
While a will is fundamental to making sure your estate is properly administered according to your wishes upon your death, a trust can provide benefits to you and your intended beneficiaries both during your life and after your passing.
With a trust, you will transfer assets to the ownership of the trust itself, which is a legally recognized entity managed by a trustee (which can be you or another person or entity) on behalf of your intended beneficiaries. You can transfer the assets during your lifetime, which is called a living trust, or you can incorporate a trust into your will to take effect upon your death, which is called a testamentary trust.
Depending on how you form the trust, the trust may be a revocable trust, meaning you have the right to transfer the assets back to yourself, or an irrevocable trust, which can provide tax and creditor protection.
WHY A TRUST CAN BRING ADDED BENEFITS TO YOUR ESTATE PLANNING
So how exactly does a trust provide added benefits to your estate planning that go beyond what is provided by a will? There are numerous benefits, including:
- Avoidance of Probate: When you transfer assets to a trust, they are no longer in your estate, meaning they will not have to go to probate court to be distributed. This can save your estate in legal fees, and provide your beneficiaries with your assets without delay.
- Directed Use of Assets: In creating a trust, you can provide specific direction on how your assets should be spent, invested, and used. You can thus use a trust to provide for specific needs for beneficiaries, such as educational needs or charitable causes without worry that your beneficiaries will waste assets on unintended uses.
- Protection from Creditors: Depending on how you structure the trust, you may be able to protect the assets in the trust from creditors (including taxing authorities) so that you can maintain those assets for your beneficiary’s use.