Wills vs. Trusts: Which Is the Better Option?
Making end-of-life decisions, such as drafting a will or trust, naming healthcare surrogates, or designating a guardian, are difficult and avoided by many for as long as possible. While such issues naturally remind a person about his/her mortality, it is unquestionably better to leave loved ones with instructions and guidance about how to treat one’s property following death. This information reduces the likelihood of drawn disputes that can tear a family apart, and ensures the wishes of the deceased about his/her property are known and followed. Once the decision is made to tackle these issues, the next important matter is choosing the estate plan that best executes the creator’s intent. The most well-known estate planning vehicles are wills and trusts. While both address the distribution of assets following death, there are key differences that must be understood before a choice is made. An overview of the benefits and drawbacks of each estate planning tool will be discussed below.
Many people are familiar with the term ‘living trust,’ and believe it to be the most effective way to avoid probate and minimize death taxes. Living trusts allow the creator to manage his/her assets while alive, and distribute those assets after death. This type of trust is revocable because the creator can cancel or modify it at any time. The creator retains the ability to manage his/her property by serving as the trustee, and has the option of naming alternate or successor trustees to take over in case of incapacitation or death. In order to get the most benefit from a living trust, all of the creator’s property must be transferred into the name of the trust during his/her lifetime. This step is crucial because any property still owned by the trust creator at death will be subject to probate. Following this procedure keeps the estate details private and out of the public forum of probate court. Further, a living trust can avoid the need for a court-appointed guardian if the creator becomes disabled. This benefit derives from the fact that the creator can outline how and who should take over his/her affairs in this situation, and thus bypass the large expenses typically assessed in a court-supervised guardianship. Additionally, if the creator has minor children listed as a beneficiary of a life insurance policy or retirement account, a trust will allow the parent to appoint a guardian to manage these funds in the event the parent dies while the child is still a minor. Finally, a trust is useful in situations for anyone owning property in multiple states, a common circumstance among Floridians. Placing this property in a trust will alleviate the need for separate probate proceedings, saving both time and money.
While wills cannot offer the privacy, tax benefits, and lack of court involvement that trusts can, they can still provide an important function that makes it worthwhile to execute one. As noted above, a trust only covers property transferred into the trust’s name. Consequently, if a person dies with property titled outside the trust, a court will determine who the next owner is. If there is no will in place to indicate who should receive this property, the rules of intestate inheritance will apply, which distribute property based on legal and familial relationships. In this case, the deceased has no say in who receives the property, and these proceedings often lead to protracted legal battles among family members. This situation is easily avoided if a provision in a will specifically picks up any property not in the trust and specifies how it should be handled.
Speak with a Florida Estate Planning Attorney
Structuring the division of property once a person is gone is a serious and complex determination that should be made under the guidance of an experienced estate planning attorney. The Tampa law firm of Bubley & Bubley, P.A. works to create an estate plan that best serves the wishes of our clients, and we can help you assess your situation. Contact us to schedule a free consultation.