Estate Planning options and jargon can be confusing. So how do you know the best way to transfer your property to your loved ones after you pass away? Many people will argue that a Will is the best method; while others recommend a Trust. In many cases, someone will have both a Will and a Trust. There are benefits and drawbacks to each. Your decision on whether it’s better to have a Trust or a Will should take into consideration your personal concerns and priorities, as well as the nature of your estate and beneficiaries.
First, let’s look at how Wills and Trusts work.
What Is A Will?
A Will is the first Estate Planning document that most people consider. While there are many clear benefits of having a trust to pass on your property, a will can still be an essential document to have as part of your estate plan. It is particularly effective for small estate plans.
A Will designates someone to serve as the personal representative of your estate after your death, known as the Executor. If you are using your Will to distribute your property to your heirs, then your personal representative will name your beneficiaries and the property each one will inherit. It also is used to name a guardian for minor children; which cannot be done through a Trust.
Additionally, some people create a Trust but fail to properly transfer all their property into their Trust. This means there might still be property leftover that needs to be addressed. You can use a Will to instruct that any of your property that is not included in your Trust be transferred to your Trust upon your death.
What Are Trusts?
The most common type of Trust is a Revocable Living Trust. This means that you create the Trust while you are living; and you can amend the Trust or completely revoke it at any time. You are the trustee who can manage and access the Trust property while you are capable. If you become incapacitated or pass away, your designated successor Trustee will take over. The Trustee will then manage and distribute your Trust estate according to your instructions.
There are also Irrevocable Trusts, meaning that they cannot be modified except under strict and specific circumstances. Ownership of particular assets is transferred into the Irrevocable Trust and it legally removes all the rights of the person who created the Trust, called the grantor. This type of Trust can severely limit the grantor’s options. However, it can be an effective solution for wealthy individuals seeking certain tax advantages and asset protections.
How Do I Decide If It’s Better to Have A Trust Or A Will?
Most people should have a Will as part of their Estate Plan. However, you do not have to transfer your property to your beneficiaries through your Will. Instead, if you create a Trust, your property will be passed to your heirs through the Trust. So, which is better – a Trust or a Will? Here are some benefits of each and other factors to consider.
1. Preventing Probate
Probate is the legal process of distributing and wrapping up your estate. Having a Will makes the Probate process simpler than not having a will, but having a Trust can eliminate the need for Probate.
Instead, the property will be distributed directly to your beneficiaries from the Trust by your successor Trustee. This is the most common reason that people form Trusts to pass on their estate.
When a Will is submitted to Probate it becomes public record and anyone can obtain information about your Estate property and assets, as well as what each beneficiary receives. A Trust can be created by a Will, but that means the provisions of the Trust also become part of the public record. On the other hand, only your beneficiaries and Trustee have access to the contents of your Trust, if created during your lifetime and this confidentiality is an attractive benefit for many people.
3. Planning for Incapacitation
Your Will becomes effective after you pass away. It does not protect you or your estate should you become mentally incapacitated. You will need additional Estate Planning documents, such as Powers of Attorney for healthcare and property, to plan for the possibility that you can no longer manage your healthcare and financial affairs. If you do not have such documents in place, the court might need to appoint a guardian.
If you have a funded Revocable Trust, the successor Trustee can step in and take over if you become incapacitated; though your property will not be distributed until after you pass away. A Trust can ensure that your estate is properly managed even if you can no longer do so yourself.
Will and Trust Preparation in South Florida
Both Wills and Revocable Living Trusts are key elements of the Estate Planning process. Deciding which document is right for you depends on many different factors. Attorney Barry D. Siegel of The Siegel Law Group, P.A. can help you plan, create, or update your current Estate Plan, Will, or Revocable Living Trust. Call us toll-free at 855-FLA-ESTATE or at 561-955-8515 or schedule a free consultation.