What is the difference between a trust and a will?

When it comes to estate planning in Florida, individuals often wonder whether they should create a trust, a will, or both. While both are essential tools to ensure your assets are distributed according to your wishes, trusts and wills serve different purposes and function in distinct ways. 

An experienced Florida trust and will lawyer can explain the difference between trust and will and help you make informed decisions about how to plan your estate effectively.

Definition and Purpose

What Is a Will?

A will, also known as a "last will and testament," is a legal document that specifies how your assets will be distributed after your death. It also allows you to name an executor who will oversee the administration of your estate and carry out your wishes. In addition, a will lets you designate guardians for minor children.

What Is a Trust?

A trust is a legal arrangement in which you, as the grantor, transfer ownership of your assets to a trustee, who manages them for your chosen beneficiaries. Trusts can be established during your lifetime (living trusts) or upon your death (testamentary trusts). They offer more control over how and when your assets are distributed.

Key Differences Between a Trust and a Will

Probate Process

• Will: A will must go through probate, a court-supervised process in which a judge validates the will, pays off debts and taxes, and oversees the distribution of assets. Probate in Florida can be time-consuming and expensive, especially for large estates.
• Trust: Assets in a trust avoid probate, allowing for quicker and more private distribution to beneficiaries. This can save time, reduce costs, and keep your financial matters out of the public record.

Privacy

• Will: Once a will is submitted for probate, it becomes a public document. Anyone can view its contents, including the distribution of assets and the identities of beneficiaries.
• Trust: A revocable or irrevocable trust remains private. Only the trustee and beneficiaries are aware of its terms and contents, ensuring confidentiality.

Timing of Asset Distribution

• Will: Assets specified in a will are distributed only after probate is completed, which can take months or even years in Florida.
• Trust: Assets held in a trust can be distributed immediately upon the grantor’s death or according to a schedule outlined in the trust agreement.

Control During Lifetime

• Will: A will takes effect only after your death. It does not provide any control or management of your assets while you’re alive.
• Trust: A living trust (revocable living trust) allows you to manage and control your assets during your lifetime. You can also make changes to the trust or revoke it entirely if your circumstances change.

Costs to Establish and Maintain

• Will: Creating a will is typically less expensive and simpler than establishing a trust. However, the probate process can lead to significant costs for your heirs.
• Trust: Setting up a trust may involve higher upfront costs and complexity, as it requires transferring assets into the trust’s name. However, it can save your beneficiaries money in the long run by avoiding probate.

Guardianship for Minor Children

• Will: A will allows you to name a guardian for minor children, ensuring their care is handled according to your wishes.
• Trust: A trust does not address guardianship for minor children. This must be outlined in a will.

Asset Management in Incapacity

• Will: A will does not provide any protection or management of your assets if you become incapacitated.
• Trust: A living trust can include provisions for managing your assets if you become incapacitated, with a successor trustee stepping in.

Advantages and Limitations

Advantages of a Will

• Simpler and less expensive to create
• Allows you to name guardians for minor children
• Can include instructions for assets not transferred to a trust

Limitations of a Will

• Requires probate, which can be costly and time-consuming
• Becomes a public document during probate
• Does not provide for asset management during your lifetime or in case of incapacity

Advantages of a Trust

• Avoids probate, saving time and money
• Provides privacy for your estate
• Offers control over how and when assets are distributed
• Can reduce estate taxes

Limitations of a Trust

• Higher upfront costs to establish
• Requires effort to transfer assets into the trust
• Does not allow you to name guardians for minor children

When Should You Use a Trust or a Will?

Deciding whether to use a trust, a will, or both depends on your unique estate planning situation, your financial goals, and your priorities for distributing assets to family members. A comprehensive estate plan can also include specific instructions for funeral arrangements. 

A Will May Be Best If:

• You Have a Relatively Simple Estate: If your assets are straightforward—such as a single home, a vehicle, and a bank account—a will is often sufficient to direct their distribution.
• You Want to Name a Guardian for Minor Children: A will is essential if you need to designate a legal guardian to care for your children in the event of your passing. This is a critical provision that a trust alone cannot provide.
• You’re Not Concerned About Probate or Privacy: If you’re not bothered by the probate process, or if the public nature of probate court records does not concern you, a will may meet your needs without additional complexities.

A Trust May Be Best If:

• You Have a Larger or More Complex Estate: For individuals with significant assets, such as business interests, multiple real estate holdings, or overseas assets, a trust provides more advanced options for managing and distributing wealth.
• You Want to Avoid Probate: Assets held in a trust bypass the probate process, allowing heirs to receive their inheritance more quickly and with fewer legal fees. This is particularly important if you own property in multiple states, as it avoids the need for probate proceedings in each jurisdiction.
• You Value Privacy and Quicker Distribution of Assets: Trusts are not subject to public probate proceedings, ensuring that your family’s financial matters remain private. Moreover, the trust administration process is typically faster than probate.
• You Want to Provide for Minor Children or Beneficiaries Over Time: Trusts allow you to set conditions for distributing funds, such as providing a steady income stream over time or delaying large payments until beneficiaries reach a certain age.
• You’re Concerned About Incapacity and Want a Plan for Asset Management: Unlike a will, a trust allows you to plan for the management of your assets if you become incapacitated. A trustee can step in and manage the trust property on your behalf.

Using Both a Will and a Trust

For many Floridians, the most complete estate plan incorporates both a trust and a will. This dual approach ensures that all aspects of the estate are properly managed and distributed.

A pour-over will is a type of will often used alongside a trust. Its primary purpose is to transfer any assets that were not placed into the trust during the person’s lifetime into the trust at the time of death. This ensures that no assets are unintentionally left out of the trust, providing a safety net for the estate.

Combining a trust and a will provides flexibility, efficiency, and peace of mind, ensuring that your wishes are honored while minimizing legal complications for your loved ones.

Legal Considerations in Florida

Homestead Property

Under Florida state law, special rules apply to homestead property, which may impact whether a will or trust is better suited for your estate. Homestead laws protect a primary residence from creditors and limit how it can be transferred upon death. Consulting an attorney is essential to navigate these laws.

Tax Implications

Florida does not have a state inheritance or estate tax, but federal estate taxes may apply to larger estates. Trusts can be structured to minimize tax liabilities or avoid estate taxes, making them a valuable tool for high-net-worth individuals.

Avoiding Legal Challenges

Wills and trusts can both be contested under Florida law, typically on grounds such as undue influence, fraud, lack of capacity, or joint ownership of a person’s assets. Proper legal guidance is vital to ensure your documents are drafted and executed correctly.

Get Legal Assistance from Our Florida Trust and Will Lawyers at Veliz Katz Law

Both wills and trusts are important estate planning tools, but they serve different purposes and offer unique advantages. Clients in Central Florida choose our dedicated estate planning attorneys at Veliz Katz Law for these reasons and more:

• Decades of Experience: With over 60 years of combined experience, attorneys David Veliz and Norberto Katz bring unmatched knowledge to estate planning.
• Proven Record and Reputation: Proudly serving Central Florida families since 1994, we have built a legacy of trust and success in estate law.
• Comprehensive Legal Services: From crafting bespoke wills to creating complex trusts, we address all aspects of estate planning for our clients.
• Client-Centered Approach: We prioritize open communication, ensuring you are informed and satisfied throughout the process.
• Compassionate Representation: Our team is committed to helping families navigate estate planning with care, understanding, and personalized strategies.

At Veliz Katz Law, we utilize our legal skills and experience to deliver thoughtful, effective solutions for all your estate planning needs. Let us guide you in safeguarding your legacy and protecting your loved ones’ futures. To schedule your free consultation, call us at 407-410-4146 or contact us online.