One of the questions that we often receive from potential clients is “What is the difference between a will and a revocable trust?” Sometimes people see information online that states they should have a trust, but doesn’t really go into the specifics of the differences between the two documents. Sometimes people think that a will operates like a revocable trust, or that a revocable trust is a more complex document than it actually is. If you understand the differences between a will and a revocable trust, you will be able to make a better decision about what document is right for your estate plan.
What is a will?
A will is a document a person creates that directs how that person’s property is to be disposed of after his or her death. The main drawback with a will is that it must be probated in order for any of the transfers to have an effect. Under section 732.901, Florida Statutes, the will must be deposited with the clerk of court in the county where the decedent (person who died) resided at the time of his or her death within 10 days after the date of death.
A will typically includes these provisions:
- Names the personal representative to preside over the administration of the estate.
- Instructions on the distribution of the decedent’s property.
- Provides for the payment of creditors.
- Gives specific powers to the personal representative.
What is a revocable trust?
A revocable trust is a document that essentially creates a new entity to own and control the assets that are put into it. A trust is revocable if the settlor can revoke the trust during his or her lifetime. When a settlor “revokes” the trust, the settlor is essentially cancels the trust and transfers any assets in the trust back into his or her name. Assets can move freely between a revocable trust and the settlor while the settlor is living. Once the settlor dies, the trust will then become irrevocable, which means that it likely cannot be ignored or undone. After the death of the settlor, the trustee of the trust must carry out the purpose and instructions until the trust states that it is to be terminated, or some other event arises that causes the termination of the trust under Florida law.
The main benefit of a revocable trust is that the assets owned by the trust do not need to pass through probate in order to be transferred to the beneficiaries. There are several other differences between a revocable trust and a will:
- A revocable trust creates a new entity that owns all of your assets. A will does not. With a will, the testator (person who drafted the will) continues to own the assets throughout his or her lifetime. With a trust, the trust owns the assets. For example, if you transferred your house to a revocable trust, the deed will show that the revocable trust is the owner of the house, not you personally.
- With a trust, the trustee must file a notice of trust in the probate court where the decedent resided when he or she passed away. Creditors will have 2 years from the date of death of the decedent to bring any claims against the trust.
- A trust provides some privacy of the assets included in the trust. A notice of trust is not required to include any information about the assets within the trust. Unlike a will in probate, there is no requirement to file an inventory of the trust with the court.
- A trust can provide for the transfer of assets within a much faster timeline than a will. A formal administration can take more than 6 months to complete, depending upon the complexity of the estate. Assets in a revocable trust can be distributed in a shorter time frame.
- A trust can provide for more flexibility than a will. For example, if you want to provide for the care of a minor child, a trust can provide for the child to receive payment from the trust assets until a certain age. A trust can provide that a beneficiary can only receive distributions if he or she completes college. A trust is a very flexible tool for estate planning attorneys. Wills have limitations, mainly that a will only has effect in a probate case. Once the probate is completed, the will does not have any further effect.
Should I use a will or a trust for my estate plan?
The decision to use a will or a trust depends upon several factors. One of the major factors to consider is the cost of probate. If the assets of the estate are going to result in a cost of probate that is greater than the cost to create a trust, then a trust is a good option. In addition to the cost of probate, there are other factors to consider when deciding whether to use a will or trust for an estate plan. If a person’s estate is complex, it usually makes sense to use a trust. For example, if a person own several closely held businesses or properties, a trust will make it easier to transfer the items after the person’s death. If a person wants to provide for a minor child after his or her death, a trust may make more sense than a will.
Contact us today to schedule a free consultation.
The only way to determine whether a will or trust will work for your unique situation is to talk with a Florida estate planning attorney. If you are interested in an estate plan review or to see if a will or trust will be right for your situation, contact us today to schedule a free consultation. During your consultation, one of our attorneys will explain the differences between a will and a trust and will help you determine how to best structure your estate plan to fit your desires.