What Is the Difference Between Wills and Trusts
Wills and Trusts are popular items included in estate plans. Naples estate planning attorney James Nici explains the difference between these common estate planning documents, a will, and a trust.
4 Things You Need to Know About Wills & Trusts
What’s the difference between a will and trust?
The difference between a will and a revocable trust is twofold. First, both documents will dispose of an individual's assets at death. However, a revocable trust is also operative during the individual's lifetime, which means it can also avoid guardianship for those assets properly titled in the name of that revocable trust.
Does my will or trust get filed with the state?
A will is a revocable trust, that does not get filed with the state. However, when someone dies, their will is deposited with the clerk of court for the county in which the individual resided. A revocable trust is generally never deposited or filed anywhere else.
How do I protect my children’s inheritance from creditors or divorce?
This is a very important question. Many of my clients are concerned that when they pass away and they leave their assets to their children, they're concerned that those assets may be taken from their children in the form of a lawsuit. Maybe a bankruptcy or even divorce. At our firm, we create what's often referred to as a creditor-protected inheritance trust, in which case the individuals can decide whom their assets would go to. Presumably, their children and then their children would inherit those assets in a way that's protected from their creditors or potential future divorce.
What’s the difference between a testamentary trust and a living trust?
The difference between a testamentary trust and a living trust is that a living trust is created while someone is alive, often referred to as a revocable living trust. A testamentary trust, however, comes into existence when the individual dies and is usually created under that individual will.
1. The Difference Between a Will and a Trust
Wills and Trusts are common documents included in an estate plan. Each has a role and certain benefits. There are several key differences between a will and a trust. The first difference is when they are effective. A will only become effective when the individual dies, whereas a trust is effective immediately after it is signed and funded. This means that a trust is in effect should you become incapacitated, so it eliminates the need for a court-appointed guardian to oversee financial interests.
Additionally, in a will, you can name a guardian for minor children. In a trust, you cannot name a guardian for your child. However, a trustee can manage assets held in the trust for a minor beneficiary.
Finally, wills are probated, while trusts pass outside of probate. Probate is the court process of distributing your estate after your death. Avoiding probate has many benefits, including decreased costs, a faster transfer of property, and a reduced likelihood of a successful contest. Additionally, using a trust and avoiding probate allows you to keep your records private. Because probate proceedings are public records, anyone can request and access a will.
2. Whether Your Will or Trust Gets Filed with the State
Neither your will nor revocable trust needs to be filed with the state after you create it. Both documents should be stored in a safe place where you keep important documents. You should ensure that your family members know the location of your will or trust.
When you die, the custodian of your original will needs to deposit it with the Clerk of Court in the county where you resided within ten days of receiving information that you are deceased. If you were a resident of Naples when you died, Collier County is the proper jurisdiction for your probate proceeding. In Collier County, probate is handled by the 20th Judicial Circuit Court located at 3315 Tamiami Trail East Naples, FL 34112.
A revocable trust is not deposited or filed anywhere, even after your death. Unlike a will, it never becomes part of the public record.
3. How to Protect Your Children’s Inheritance from Creditors or Divorce
Most people’s greatest concern when creating a trust is their children and how to protect their inheritance from being taken away through a lawsuit, bankruptcy, or future divorcing spouses. Thankfully, there are strategies that you can use when creating an estate plan to ensure that this does not happen.
An estate planning attorney can assist you in creating a creditor-protected trust. Creditor-protected trusts are irrevocable. Irrevocable means that once the grantor creates it, they surrender their right to amend, terminate, or revoke the trust. A trustee manages the assets in the trust as dictated in the trust document. Under Florida law, the grantor (creator of the trust) cannot also be named as a beneficiary in the trust. Asset protection trusts are complex documents, so working with an experienced estate planning attorney is critical.
4. The Difference Between a Testamentary Trust and a Living Trust
A living trust (sometimes called a revocable living trust) is created while you are alive. It is a stand-alone document, separate from your will. Because it is a separate document, a living trust avoids probate, saving time and money. (However, if a living trust is not funded, except through your will, it will also need to go through probate). Another benefit of a revocable living trust is that you have the power to modify it during your lifetime.
In contrast, a testamentary trust comes into existence when you die. It is established through and works together with your will. Because it is included in your will, a testamentary trust is subject to probate. It is an irrevocable trust. Many Florida institutions will not allow a testamentary trust to be named as a beneficiary on an account or insurance policy. A testamentary trust can be used to prevent minors from inheriting property outright at age 18, ensure that a special needs beneficiary will be protected, or provide a lifetime income to your surviving spouse.
Call A Naples Estate Planning Lawyer
If you have questions about wills and trusts and creating an estate plan, you should contact Nici Law Firm. James R. Nici is an experienced estate planning Naples attorney with almost 30 years of experience. He can create an estate plan that fits your needs and include a revocable trust or another type of trust that suits your needs as well as other parts such as advance directives. Contact our office today at (239) 449-6150 or use our web form to set up a free consultation and learn more.