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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 to navigate. 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.
First, what is a Last Will & Testament?
Commonly referred to as a Will, this document is the most common tool for estate planning. Here, 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, or personal representative 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, terms cannot be altered after the Testator passes. We offer a Joint Last Will & Testament for spouses looking to simplify their estate portfolio.
Advantages: This document is not as cumbersome as a Trust at formation. We simply state your assets and 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 or Deed is not necessary.
Disadvantages: First and foremost, a Last Will and Testament does not avoid probate on its own. In fact, most ofter a Will is required to be filed with the Probate Court. There are no liability protections, potential tax shieldings, nor immediate transfer of assets to beneficiaries. For instant transfer of real estate, a Lady Bird Deed may be used with a Last Will & Testament (See Deeds). This Instrument is more simple at inception, yet may become more strenuous for your heirs and loved ones in the future.
What is a Trust?
With a Trust, the Grantor transfers all possible assets under the umbrella of the Trust, while the Grantor is still alive. Most often a Grantor appoints oneself the Acting Trustee to maintain control over the assets during their lifetime. Once the Grantor passes or has a diminished capacity, the person nominated 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.
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 between Court costs, filing fees, and an Attorney if need be. The assets herein would also circumvent any “generation skipping tax”,and further avoids any federal death or inheritance tax. This type of Trust will not need a separate EIN or tax filing, simply your Social Security Number. Trust assets are immediately transferable to beneficiaries upon the Grantor’s passing. This Instrument may be more tedious at inception, yet simplifies the estate for your heirs and loved ones in the future.
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) Often necessary when creating a Trust, a Pour Over Will & Quit Claim Deed will be discussed simultaneously with discussions regarding a Trust.
So, what is the difference between a Will and Trust?
There are two main differences between a Last Will and Testament and a Revocable Trust.
1) 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, attorneys, etc. It is also important to keep in mind, without Court supervision, there is is little accountability if assets are transferred improperly.
2) Herein Florida, when a Will is probated, the Will and other Court documents may 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 within the estate, that were not transferred to the Trust, the assets will be devised according to Florida intestacy laws to include probate.
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.