Florida residents who are investigating their estate planning options will often be choosing between wills and trusts. While each of these can provide an estate plan that outlines a person’s wishes for asset distribution after death, the way that each document does this is very different. Understanding the differences is important before choosing a path.
According to OnTheMoneyRadio.org, trusts can preserve assets more effectively. This is due in large part to the avoidance of probate. Probate is a process that involves a judge overseeing the execution of a will. The cost of this can eat up as much as 10 percent of the total gross value of an estate, reducing the amount that heirs will receive. In Florida, the threshold for probate is an estate value of $75,000.
Probate not only consumes a portion of an estate’s value but time as well. It can take one or two years for the process to complete. While this is underway, all assets are frozen, leaving beneficiaries waiting for extended periods of time to receive their intended distributions. Additionally, the details of a will and of a probate proceeding are all public. For people with business interests, that could put confidential information into the hands of competitors. Details of a trust, on the other hand, are private.
One commonly held belief about trusts is that they eliminate or reduce estate taxes or federal income taxes. The Palm Beach Daily News indicates that this is only possible with an irrevocable trust. Revocable trusts, which are more common, do not offer any tax exemption benefits.