Wills and trusts are valuable estate planning tools that help you distribute your financial assets and possessions to your beneficiaries after you pass away. However, wills and trusts serve different purposes. In certain circumstances, having one or both of these tools as a part of your estate planning portfolio may be beneficial. Which should you choose? Below, we discuss what wills and trusts are and when each should be used.
What is a Will?
A will, formally referred to as a “Last Will and Testament,” allows you to divide your assets and personal possessions among your beneficiaries, including family, friends, and charitable organizations. In a will, you can indicate specific individuals to receive anything from real estate property to family heirlooms. You can also allocate funds for particular purposes, like donating to charity or setting aside a college fund for your grandchildren. The process of validating a will and distributing assets is a formal process called probate, which the Probate Division of the Circuit Court in Florida oversees.
When to Use a Will
Wills are best utilized when you want to list your personal possessions and give them to specific people. The assets in your will could be anything of sentimental or financial value, such as your great-grandmother’s handmade quilt, your wedding ring, or a portrait your spouse painted. If you have minor children, a will is needed to name a legal guardian for them if you pass away. You may also include a personal note to your loved ones in your will.
How to Create a Will
For a will to be legal in Florida, it must be a typed, written document that you and two witnesses sign. It is preferred if the two witnesses are not beneficiaries listed in the will. Handwritten wills are not considered valid in Florida courts. Wills only go into effect after you pass away, giving you complete control over your assets while alive. Wills are also simple to amend.
What is a Trust?
The purpose of a trust is to transfer financial assets from your estate to your beneficiaries while avoiding probate. Trusts are financial agreements that closely mimic
business partnerships. They are made between you (the trustor), a person who is in charge of overseeing the trust (a trustee), and the people who will receive the assets placed in the trust (your beneficiaries).
When to Use a Trust
Trusts may be a beneficial estate planning tool if you have many types of financial accounts. Trusts allow you to plan for services like Medicaid and avoid tax penalties for things like life insurance payouts. Another benefit of establishing a trust is that beneficiaries receive their assets in less time than with formal probate proceedings. They also cannot be challenged in court like a will can, accelerating the asset division process.
How to Create a Trust
Trusts go into effect the day they are created. Once you pass away, the assets stated in the trust are automatically transferred to the beneficiaries you list. Trusts are either revocable or irrevocable. You can control the assets inside a revocable trust while you are alive, but irrevocable trusts cannot be changed once made, and you lose access to the assets in them.
Wills or Trusts – Which Should You Use?
In many cases, having a will and a trust makes sense. Each estate planning tool has different goals and purposes, so there are benefits of having both as a part of a comprehensive estate plan. In this situation, a will would be used for you to send a personal message to your loved ones and name beneficiaries for specific assets like family heirlooms, personal possessions, and financial gifts. A will is also needed if you wish to name a guardian if you have minor children. A trust would be used to help manage the financial accounts of your estate and allow your beneficiaries to receive monetary funds in a way that avoids probate and is tax-friendly.
Boutty Law Firm – Orlando Estate Planning Attorneys
Not sure whether a will or trust is right for you? Contact the Boutty Law Firm. We will help you develop an estate plan so that all your assets are divided among your loved ones as desired when you pass away. Contact our Orlando offices at 407-710-0461 for a consultation today.