When most people think about creating an estate plan for the first time, they envision executing a Last Will and Testament to serve as the foundation for their plan. A Will certainly can – and often does – serve as the foundation for a comprehensive estate plan; however, it is not the only option. A trust can also function as the cornerstone of your estate plan. When it comes to Wills vs. trusts though, how do you know which one is right for your estate plan? The best way to ensure you are making the right decision is to consult with an experienced Florida estate planning attorney. In the meantime, however, it may help to learn more about each option and the factors typically considered when making your choice.
Last Will and Testament Basics
At its most basic, a Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. Your Will allows you to make both specific and general gifts. For example, you might make specific gifts of your vehicle and $10,000 to a beneficiary. You could also gift a percentage of your estate to a beneficiary. For example, you could gift 25 percent of your entire estate to a beneficiary. A Will also offers you the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Trusts are divided into two broad categories – testamentary and living trusts. A testamentary trust does not activate until the death of a Settlor and is typically activated by a provision in the Settlor’s Will. A living trust becomes active as soon as the formalities of creation are complete.
Wills vs. Trusts – Considerations
Both a Will and a trust can be used to distribute your estate assets after your death. When deciding which one to use as your primary estate planning instrument, the following factors should be taken into consideration:
- Probate avoidance – probate is the legal process that follows the death of an individual. Probate can be time consuming and costly. A Will is generally required to go through the probate process as are most assets distributed through the provisions in a Will. Trust assets, on the other hand, bypass the probate process.
- Minor children – a minor child cannot inherit directly from your estate. Therefore, if you are the parent of a minor child, or you plan to have children in the near future, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority.
- Spendthrift beneficiaries – gifts made in your Will become the unconditional property of the beneficiary once the transfer of ownership is complete. If you have a spendthrift beneficiary to whom gifting a lump sum of money is not a good idea, a trust might be a better choice. A Trustee manages the assets held in a trust and the Settlor creates the terms of the trust, allowing you to retain a certain degree of control over gifts you make using a trust.
- Modifications – A Will can be amended or revoked at any time as can a revocable living trust or a testamentary trust. An irrevocable living trust, however, cannot be modified or revoked once activated.
- Size and complexity of estate – if the estate assets are relatively simple and the overall value of the estate modest the cost of administering a trust may not be warranted. In that case, a Will makes more sense.
- Estate planning goals and objectives – sometimes, a specific estate planning goal and/or objectives dictates whether a Will or a trust is the better choice.
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding Wills vs. trusts and how to decide which is right for your estate plan, contact the experienced Florida estate planning attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.