Wills vs. Trusts.
What’s the difference and which one should I have?
Estate planning clients come in and usually start the conversation with, “I need to do my will” with the basic understanding that once the will is done their estate plans are set. While a will is a good starting point for some clients, it is not necessarily the best option for most clients. Here are a couple of differences between both documents.
A will is a legal document, which if executed properly, states how your estate will be distributed, who the heirs are, and who is in charge of administering the estate. A will does not begin to function until after the person has passed away. A will also requires the heirs and administrator to open a probate case in court to legally transfer the inheritance.
Trusts are also a legal document, which if executed properly, states how your estate will be distributed, who the heirs are, and who is in charge of administering the trust. The first major difference from a will is that the trust begins to function the moment it is executed, and then funded. The second major difference is a trust keeps your assets outside of a probate case. No court!
So which one should you have? Every client, and every situation is different. However, most clients should have a trust, if only for the sole purpose of keeping your estate out of probate. The probate process can be long and costly. In Florida, attorneys are allowed to charge up to three percent of the value of the estate in attorney’s fees in most cases. The average probate case lasts about one year. The record of the probate case is also public records, and could disclose certain financial information you may want to remain private. A simple revocable trust, if executed and funded correctly, avoids these issues, and can be administered much quicker.
There are situations where setting up a trust may not be economically efficient for a client. In those situations, a will works just fine as far as identifying the heirs, identifying the administrator, and the distribution of the estate. The final decision rests with the client. When consulting an estate planning attorney, make sure you are presented with all of your options. You should always be advised as to what the best option is based on your individual situation.