Last Will and Testament
Commonly referred to as just a “Will”. A Will is a legal document that typically provides for how you want to distribute your assets after your death, for who you want to give the authority to carry out your wishes as stated in the Will, and for who you want to serve as guardians of your minor children. Your Will may also be used as a mechanism to forgive debts that are owed to you if that is your wish.
When you die without a will, unless the disposition of your assets is provided for by operation of contract (i.e. transfer or payable on death designations to bank and/or investment accounts, or via a Trust you set up), or by operation of law (oftentimes rights of survivorship created by deed on real estate property), state laws will control how your assets are to be distributed as opposed to you controlling how those assets will be distributed.
With the proper provisions included in the Will in place, you can control how your assets will be distributed after you die. For instance, you may have young children or grandchildren that you want to provide for but you do not want for them to have access to all the assets you intend to give them until they’re a little more mature and after they have reached a certain age. Or maybe you want to provide for someone that has a disability without jeopardizing that person’s access to public benefits or assistance. You could achieve those objectives by creating “trusts” (i.e. a “special needs trust” for a disabled beneficiary) in your Will that don’t become effective until after you die and go through the probate process as required by Florida law.
Living Trust (Revocable Living Trust)
A “revocable living trust” is an agreement where a trustee holds legal possession of property/asset for the benefit of another. Once properly executed, a Living Trust becomes effective during the life of the person that created it and thus operates as a legal entity. The Living Trust is intended to hold title to your various assets during your lifetime and for your benefit. Typically, you or a combination of you and your spouse will serve together as the initial Trustee. After death, the Living Trust becomes irrevocable, and a successor trustee takes over and manages and disposes the assets held by the Trust according to the terms of the Trust.
Property owned by a Living Trust that you established prior to your death is not typically subject to probate proceedings. For folks that live in Florida this would be useful if you own property in other states. For instance, Florida probate proceedings do not pertain to real estate holdings in other states, so oftentimes an additional probate proceeding (referred to in Florida as ancillary probate) will be necessary in the state the real estate is located in in order to effectively transfer legal title to the intended beneficiaries. By transferring the title of real estate property to a Trust that you establish prior to your death, you may be able to avoid the cost of an additional probate proceeding and have the trustee transfer title to the intended beneficiary according to the terms of the trust instrument.
Pros for setting up a Living Trust centered estate plan
- Provides built-in incapacity planning for you. When properly funded with your property, a well drafted living trust will incorporate incapacity planning provisions that will be controlling should you lose mental capacity to manage your affairs. In this situation the successor trustee you name in your document could take over the duties of trustee and lessen the risk that you have to go through costly and oftentimes embarrassing public guardianship proceedings.
- Provides more privacy than a Will that is subject to public probate proceedings. Also, your Will becomes a public document as well. In the absence of a living trust that directs the distribution of the trust’s assets, the distribution of your estate’s assets will become a matter of public knowledge.
- The cost for a formal probate administration in the state of Florida could become expensive. Florida law provides guidance as to what is reasonable attorney’s fees for handling the probate of the estate for “ordinary” services rendered. The “reasonableness” of the attorney fee is calculated on a sliding scale based on the value of the estate’s probate assets. However, legal fees for probate may vary among attorneys.
- If you have property such as real estate, business interests, or investments located in other states and in the case of investment accounts where there isn’t a branch in your home state, probate may have to be opened in each of those states where the real estate, business interests, or investments are held. Changing ownership of the property from your name so that the Trust owns it can avoid additional probate proceedings. In some cases, probate can be avoided entirely.
Cons for setting up a Living Trust centered estate plan
- The cost of properly setting up a living trust centered estate plan will likely be much higher than an estate plan where the Last Will and Testament is the centerpiece for disposing of your property.
- It will take more time to set up a living trust centered estate plan and will require a continued investment in terms of time to properly maintain and fund the Trust.
- Funding the Living Trust can be a pain. Banks and other entities such as life insurance companies, and brokerage companies, etc. will need to be contacted in order to change title and ownership to the trust. New deeds will have to be prepared and recorded. Partnership and LLC interests may need to be assigned. And if you want the Trust to own other items of personal property such as valuable jewelry or artwork and there are many of these valuable items, a comprehensive and detailed schedule of assets will need be created to assign ownership of these items to the Trust.
- You will still need to create a Will. The function of the Will created in conjunction with a Living Trust is a little different than that of a Will created in a Will centered estate plan. Your attorney will have to create a “pour over will” which serves as a catch all by transferring ownership of your assets that aren’t held by the living trust, into the living trust. However, in order to transfer those assets (if any), probate will be required.
- While probate avoidance is desirable and may be the objective for creating a Living Trust, probate in the state of Florida provides a benefit to the beneficiaries. After all known creditors of the estate have been notified and publication of a “Notice to Creditors” is made in a probate administration, creditor claims against the estate can be forever barred if not filed with the court within a specific time frame (i.e. 90 days after publication of the notice to creditors). In the absence of this procedure, creditors against the estate typically have up to two years to file a claim against the estate.