Will vs. Trust: What is the Difference?
You may be thinking about starting your estate planning process but don’t know where to start. Should you create a will, trust, or both? What is the difference between the two? What if you do nothing? Both wills and trusts provide instructions on how to distribute assets and property to beneficiaries after death, but the primary difference is that a trust can avoid the probate process. Whether you need a will or a trust can be determined not only by your financial situation, but also how you desire for your estate to be administered after your death.
If you pass away without creating a will or a trust, then your property can become probate property and your heirs will need to administer the estate through the probate court in accordance with your state’s intestacy laws. However, if your property lists co-owners or beneficiaries, it can pass to them outside of the probate process.
A will is a set of instructions that describes to whom you wish your assets to be distributed upon your death. It allows you to name a Personal Representative, which is someone to administer the probate. A will can be revised so long as you are competent, and we recommend that you update your will as needed to ensure your wishes regarding your estate are up to date when you pass. Any changes such as marriage, divorce, new births or adoptions, a shift in your financial situation, and a change in attitude regarding family members should be considered and reflected in your will. You should consult an experienced attorney to understand your rights and obligations to certain family members when creating your will. For example, if you are married, you must leave no less than thirty percent of your estate to your spouse.
In Florida, if your estate plan consists solely of a will, assets will be distributed through probate. If you have assets over $75,000 (not including homestead property), then this specific probate is a process known as “formal administration.”Formal administration is a time-consuming and complex process that involves publishing notices to creditors regarding the administration of an estate, settling debts with creditors, and distributing your assets in accordance with your will. In Florida, the average probate process usually will last nine months to a year, or even longer in some instances, depending on the complexity of the estate. If your estate is under one million dollars, the attorney representing the personal representative, as well as the personal representative, are entitled to 3% of your estate’s value and this will be taken out of the asset distribution as compensation for administering your estate. Additionally, the probate process is a public proceeding, meaning the terms established in your will and how your assets are distributed are available to the public.
A trust does everything a will does, but it allows you to transfer your property during your lifetime to be managed by a trustee, for the benefit of a specific purpose or beneficiaries. During your lifetime you can appoint yourself as trustee of your own trust and administer it as you wish, but it is important to select a successor trustee to continue administering your estate after you pass or become incapacitated. Because the trust owns the assets, they are shielded from the probate process, and can be privately administered in an efficient manner. If you have a complex estate or wish to remain private, you may want to consider creating a trust.
A trust may be revocable or irrevocable, both of which can avoid the probate process. A revocable trust allows you to change or revoke the instructions set out in the trust. For example, you may add or remove beneficiaries, transfer more assets to your trust, or sell trust property. You can design your trust in a way that will be most beneficial to you during your lifetime such as designating funds to be available to you if you become disabled or need assistance with care. A revocable trust becomes irrevocable after your passing, meaning your trustee(s) will not be able to revoke the trust or change the terms of your trust. If you create an irrevocable trust, it is more difficult to modify or change. Once you create an irrevocable trust, any assets contained within the trust are owned by the trust and can rarely be altered, except under very specific exceptions.
Ensure you are fully informed as you plan your future and contact SAMUELS WOOD PLLC at 561-864-3371 to discuss your situation in greater detail.
