Wills and trusts are tools commonly used in estate planning. Wills and trusts help you distribute your possessions and assets to your family, friends, and other beneficiaries after you pass away. However, wills and trusts operate differently and serve different purposes. Learn more about the differences, benefits, and disadvantages of wills and trusts below.
A Last Will and Testament is a written document that specifies how you would like your assets divided among family, friends, and charitable organizations after you pass away. Wills allow you to indicate who you would like to receive individual items, property, or family heirlooms. You can allocate funds for specific purposes in your will, such as for a grandchild’s education fund or a charitable donation. You can also name a guardian for your children or specify a caregiver for your pets.
Wills must be a typed, written document. Oral or handwritten wills (called holographic wills) are not valid in a Florida court. Wills must be signed by the testator (the will’s creator) and two witnesses.
Wills are a personal way to indicate your final wishes to your family and friends. You may include a sentimental, heartfelt letter along with your will, providing a sincere way to communicate with your family after your passing. Wills work well when dividing personal possessions and family heirlooms like jewelry, furniture, and other sentimental items that may not have a specific financial value. Wills are also the best way to name a guardian for minor children.
Wills are often executed through probate, a formal legal proceeding that distributes the assets stated in the will to beneficiaries after your debts have been paid. Probate can be a lengthy process where your entire estate is valued, creditors make claims against your estate, and your debts are paid.
A trust is a financial agreement between a trustor (you), a trustee (the person overseeing the trust), and beneficiaries (the people who receive the assets within the trust). Trusts resemble business partnerships and are designed to handle your financial affairs.
Trusts are created for financial reasons and become active on the day they are made. Revocable and irrevocable are the two primary types of trusts. A revocable trust transfers property to beneficiaries immediately upon your passing. Irrevocable trusts are mainly used for tax purposes and cannot be modified once they are created.
One of the most significant benefits of creating a trust is that it allows property and assets to pass from you to beneficiaries while avoiding probate. Trusts may accelerate the asset division process after you pass away, as the assets are already divided, and the beneficiaries are already named. They also cannot be challenged in court.
Trusts do not allow you to divide your personal belongings or non-financial assets. Another disadvantage is that irrevocable trusts cannot be altered once established, and the trustor loses control of the assets while living. Trusts also need to be regularly managed.
In many cases, creating a will and a trust makes sense. They both serve a unique role in your estate plan and ensure your beneficiaries can access the full value of your estate. Assure your estate is taken care of with an encompassing estate plan from Peppler Law, P.A. Call our Oviedo office at 407-316-2045 to discuss your estate planning needs today.