When Do You Need a Trust Instead of a Will in Your Estate Plan?

A last will and testament is a fundamental estate planning tool in Florida. However, adding a trust can offer some advantages in certain situations. There are some important differences between the two that are helpful to understand.

What is a Will?

A will is a legal document that outlines what happens to your belongings, property, and assets after you pass away. Unlike a trust, which can take effect during your lifetime, a will only comes into play after your death.

In a will, you specify who gets what. The people named in your will are called “beneficiaries.”

A will also allow you to name guardians for your minor children. Wills usually go through a legal process called probate, where a court ensures everything is carried out correctly. Creating a will is a crucial part of planning for the future and making sure your wishes are respected.

What is a Trust?

In the context of an estate plan, a trust is a legal arrangement, generally created by a settlor or grantor, that directs one party, called the trustee, to hold property for the benefit of another party, called the beneficiary. The trustee is responsible for managing the property according to specific legal obligations.

Trust property can include any type of asset, such as cash, real estate, securities, or life insurance policies. There are different types of trusts, such as revocable and irrevocable trusts, each serving specific purposes.

Revocable Living Trust

A revocable trust, sometimes referred to as a living trust, allows you to manage your assets during your lifetime while providing specific instructions for how the assets should be managed and distributed after you’re gone. Revocable trusts can be amended while you’re still living and have capacity, to:

• Add or remove beneficiaries
• Change the trustee or name a successor trust
• Alter your instructions as to how trust assets should be managed

Irrevocable Trusts

An irrevocable trust, on the other hand, is a type of trust that, once created, generally cannot be changed or revoked. It may be established for various reasons, including minimizing estate tax liabilities.

In estate planning, individuals may need a trust to provide tax advantages, especially concerning estate tax. A well-crafted trust allows for the organized distribution of assets to beneficiaries, ensuring that the desires of the trust creator are honored.

If minor children are involved, a testamentary trust within a will may be established to manage and distribute assets on their behalf until they reach a certain age. Seeking guidance from an estate planning attorney is advisable to ensure that the trust aligns with one’s specific goals and complies with legal requirements.

When Should You Choose a Trust Instead of a Will?

Individuals with certain financial or family situations may benefit from using a trust instead of, or in addition to, a will.

Here are some scenarios where a trust might be preferable:

• If you want to avoid probate — If you want to skip the probate process, which can be time-consuming and costly, a revocable living trust can be an effective tool. Assets held in a living trust can be passed directly to beneficiaries without going through probate court.
• If you’re concerned about your privacy — Trusts are private documents, and their details typically remain confidential. In contrast, wills become public record during probate. If you prefer to keep your financial matters private, a trust may be more suitable.
• If you want to plan for illness and injury — A revocable living trust allows for the smooth transition of asset management in case you become incapacitated. The successor trustee you appoint can manage trust assets without the need for court intervention.
• If you want more control over asset distribution — With a trust, you can exert more control over how and when your assets are distributed to beneficiaries. This is particularly useful if you have specific conditions or timelines you want to establish for the distribution of inheritances.
• If you have complex assets — Individuals with significant assets, business interests, or complex family dynamics may find trusts more flexible and capable of addressing intricate financial situations compared to wills.
• If you’re tax conscious — Certain types of trusts, like irrevocable trusts, can be used for estate tax planning, helping to minimize tax liabilities on the estate.
• If you have a blended family — Trusts can help to ensure that your spouse is taken care of, while protecting your children from being disinherited after you pass away.

It’s important to note that the decision to use a trust or a will depends on individual circumstances, and in many cases, a combination of both may be appropriate. Consulting with our estate planning attorney can provide personalized guidance based on your specific needs and goals.

Contact Vollrath Law to Draft Your Will or Trust in FL

Wills and trusts are not mutually exclusive in estate planning. In many cases, they can actually complement each other as part of a comprehensive estate plan.

For example, a will can transfer any leftover assets into a trust after death, allowing those assets to avoid probate and be distributed according to the trust terms.

The best way to ensure that your will or trust is effective in accomplishing your wishes is to make sure that it is well planned. At Vollrath Law, we have helped many people with their estate planning needs. Contact us today to learn more about how you can plan your estate.