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Planning for your future can help protect your assets and ensure their smooth transfer to your heirs. However, estate planning can be a complicated process. There are two primary vehicles for estate planning: Last Will and Testaments, or simply a Will, and a Revocable Trust. Each legal instrument is governed by Florida State Law for Florida residents.
What is a Will?
A Will is an imperative document where the procurer, or testator, has established how he or she wishes their assets to be distributed upon their passing. The Testator will appoint an executor of the estate within the terms of the Will. The executor of the estate then oversees the administration of the Testator’s assets after the Testator's death pursuant to the Will’s instruction. A Will can be destroyed or amended by the Testator by following specific requirements under Florida law however, they cannot be altered after the Testator passes.
Advantages: This document is not as cumbersome as a Trust at formation. We simply state your assets / beneficiaries, there is no need to transition any bank account or property under the Last Will and Testament. There are no restrictions regarding assets; therefore, a secondary document, such as a Pour Over Will is not necessary.
Disadvantages: First and foremost, a Last Will and Testament does not avoid probate on its own. There are no liability protections as seen with the Trust between the business and personal estate or from creditors. There is no tax shielding. There are little protections for those estates whom worry of theft pertaining to the assets. there is no instant transfer of real property & a Lady Bird Deed may be necessary to protect one's primary residence (See Deeds).
What is a Trust?
With a Trust, the Grantor transfers the assets while the Grantor is still alive. However, rather than transfer them to the heirs and beneficiaries, the Grantor transfers the assets to a Trust. Most often a Grantor appoints oneself the Acting Trustee to maintain control over the assets during their lifetime.
Once he or she passes or has a diminished capacity, the person named as the Successor Trustee takes control of the assets and is responsible for maintaining the assets on behalf of the Grantor or transferring them to the heirs named in the Trust. We offer a Joint Revocable Trust for Spouses looking to join their estate portfolio. Often necessary when creating a Trust, a Pour Over Will & Quit Claim Deed will be discussed simultaneously with discussions regarding a Trust.
Advantages: Assets named or transferred under the Trust avoid the hardship and delay of probate. Probate may take up to two years and thousands of dollars. The assets herein would also circumvent any “generation skipping tax”and further avoids any federal death or inheritance tax . This Trust will not need a separate EIN or tax filing, simply your Social Security Number.
Disadvantages: Upfront, a Revocable Trust is often more time consuming and costly than its Last Will & Testament counterpart in order to avoid the cost and delay of probate. You have the option to include your financial accounts under the protection of the Trust. Few banks require one to change the account itself; therefore, if you have auto pay set up or checks, there is a possibility you may need to change over to the new account. To transition property, a Quit Claim Deed would be filed (See Deeds); however, I do warn clients, if you were to deed the home to the Trust, and there is a mortgage on the home, the county will take a document stamp fee. Additionally, a Trust often requires a Pour Over Will, see below.
What is the Difference between a Will and Trust?
There are two main differences between a Last Will and Testament and a Revocable Trust. An executor of a Will must file the Will in probate court and transfer assets through the probate process. With a Trust, the Successor Trustee does not have to go through probate court, and can make asset transfers without court supervision. Accordingly, a Trust may save the estate money by not having to pay out probate costs.
It is also important to keep in mind, without court supervision, there is is little accountability if assets are transferred improplerly. The second major difference is, in Florida, when a Will is probated, the Will and other court documents become public record. In a Trust, this does not occur, making a Trust a desirable option for those individuals who value privacy. However, if there are assets left with the estate not named in the Trust, the assets will be devised according to Florida intestacy laws. Generally, a Pour Over Will is necessary to ensure all assets are devised pursuant to the Testator's intent.
Pour Over Will:
A smaller, more concise, Last Will and Testament, that transfers assets or proceeds of assets not named in your Trust, to the Trust as to further avoid probate. This document includes assets that cannot be held under the Trust (the Trustee will take the proceeds of the assets and distribute to the named beneficiaries under the Trust) in addition with after acquired assets from the formation of the Trust.
For example, if one has not transferred stocks or properties obtained after he or she has created a Trust, those assets will have to go through probate unless there is a Pour Over Will to act as the estate’s safety net.