Understanding the difference between wills and trusts

Understanding the difference between wills and trusts

| Sep 5, 2020 | Estate Planning |

Many Florida residents are familiar with the term “probate,” which is the process by which a person’s assets are distributed after death, either in accordance with that person’s will or as provided for by the law in the absence of a will. Probate is done in court, and it can delay the distribution of funds and add some extra fees. Though probate can be a hassle, a will is an easy way for individuals to pass specific items of property on to a single person, like a family heirloom. However, there are other options.

For people who want to avoid probate, a trust may be the way to go. Trust funds can designate beneficiaries to receive certain investments and assets, and they also designate trustees to help execute the distribution. Property and assets covered by a living trust are assigned to beneficiaries during the life of the trustor, meaning the person creating the trust. Assets in a testamentary trust, which becomes final only upon a trustor’s death, still need to go through probate.

Even if someone initially lists property in a will, that property can still be moved into a trust account later in the owner’s life. This means a house deeded to one person in a will but later naming a beneficiary as the owner in a trust will go to the beneficiary in the trust.

Probate and estate administration can be complicated, both in terms of figuring out how to allocate one’s assets and in terms of understanding probate law in Florida. There are also tax considerations to take into account since the way that a trust is created can affect how much a trustor or beneficiaries pay in taxes. A probate and estate planning attorney may prove useful when drafting a will or creating a trust.