Occasionally I am asked a basic estate planning question that I will review today, and that is the basic differences between estate-planning with a will as opposed to estate planning with a revocable living trust.
First, let’s start off with the will. Many people wrongfully believe that if they have a will then their estate will avoid the probate process. Actually, all wills are subject to the probate process. Probate, you may not realize, is not a tax. It is the legal process wherein your last will is admitted to court, your personal representative is appointed, your estate is inventoried, your creditors are cleared, taxes are paid, accountings are filed and ultimately your beneficiaries receive their inheritance.
Every aspect of the probate process is administered in a probate court. This means that your will’s contents and all of the other aspects regarding your estate are mostly open to the public. Anyone can go down to the courthouse and review the probate filings. In some counties, the probate filings are also available on the Internet.
You may argue that your father, mother, spouse or other loved one died with a will and their estate did not go through a probate process. This might be true if everything was owned jointly. While in some estates joint ownership of assets might be a wise thing to do, joint ownership of assets often leads to more problems than it solves. Visit my firm’s web site www.sbshlaw.com and click on the Video Learning Center link to watch a video about the perils of joint ownership if you want to learn more about why placing all of your assets in joint name is generally not a wise idea if you are doing so to avoid the probate process.
Whereas wills are only useful upon your death, revocable living trusts can help you during your lifetime. A revocable living trust is a legal agreement made between a Settlor (you) and your trustee (also ‘you’). The agreement details how the trustee is to hold, invest and distribute the trust assets both during your lifetime and upon your death.
Many wrongfully assume that if they create a revocable living trust then they’ll lose control over the assets that they’ve put into the trust. But this is not the case. You usually serve as your own trustee, meaning that you control the assets. Because the terms of your revocable trust can be amended, you can change any of the terms governing the assets so long as you are alive and competent. You can spend every last dime of assets held in your trust and no one can object.
Generally speaking, you usually transfer most of your assets into your trust upon its creation. Failure to fully fund your assets into your revocable living trust could end up in a probate administration on those assets. This is why it is so very important to make sure that the titles on your bank and brokerage accounts, as well as the legal title on the deeds to your real estate indicates the trust (by way of the trustee of your trust) as the proper owner.
If you should become disabled, your trust names a successor trustee who can step in for you to write your checks, pay your bills and manage your investments. Your successor trustee can be your spouse or other loved one. You may also name a bank or financial institution to help with these duties if you wish, although this is not a requirement.
Whenever you have a revocable living trust you usually also have a will, but the will doesn’t usually say who gets what at your death. Instead, it “pours into” your trust. These are known as “pour over wills”.
One of the advantages to a revocable living trust is that they are private, and are usually not subject to court supervision. While Florida law imposes requirements that your successor trustee must satisfy in the event of your death, most of those requirements do not require court filings. There is no trust inventory filed with a court, for example.
Anyone with any degree of net worth should consider implementing a trust. If you are a Florida resident, your trust should conform to Florida law. But that’s another topic entirely.
The Sheppard Law Firm has its main in Fort Myers and also in Naples by appointment.
© 2017 Craig R. Hersch. Originally published in the Sanibel Island Sun.
