1. Q. What is the difference between a Will and a Living Trust?
A. Last Will and Testaments (“Wills”) are legal documents that control the distribution of your property when you pass away.
Living Trusts are also legal documents that direct how your property will pass upon your death. However, Living Trusts are created during your lifetime. If they are properly drafted and funded, Living Trusts will avoid probate and can provide for the efficient management of your property in the event you later become incapacitated and can no longer handle your affairs.
2. Q. Will the individuals I name in my will receive all my property?
A. Maybe not. A common misconception that people have is that the will controls where all my property will go when I pass away. However, if you own property jointly with another, a different result might occur.
For example, if your will says “upon my death, all my property goes to my three children, equally”. If one of your children is named on your bank account, then depending on how the account is titled, upon your death all the funds in the account will pass to the child named on the account and your other two children will receive none of the funds in the account.
Furthermore, if you have a named a beneficiary on a life insurance policy or under a retirement plan (i.e. IRA, 401(k), pension plan), the person named as the beneficiary with receive the proceeds of the life insurance or retirement account even if your will says otherwise.
3. Q. Can I create my own Will?
A. You can, but be careful because the Florida Statutes have strict requirements as to the formalities that must be observed to ensure that your will complies with the law and is given full legal effect.
4. Q. What happens if I don’t have a Will or Trust?
A. You will be deemed to have died “intestate”. This means that the intestate succession laws contained in the Florida Statutes will determine who will get your property and how much. If your will is invalid in any way, the intestacy laws will be applied no matter what your wishes were before you passed away.
5. Q. Upon my death, Can I leave my property to whomever I choose?
A. The general answer is yes, as people are given wide discretion to leave their property to whoever they want in whatever amounts they choose, with a few exceptions. If a person passes away with a surviving spouse, the surviving spouse is entitled to 30% of the elective estate. The elective estate includes a wide range of interest in the property the decedent had at the time of his or her death or had transferred prior to his/her death. If a person makes a will and then subsequently becomes the natural or adopted parent of another child, depending on the language in the will, the child born or adopted after the will is executed might be entitled to a certain share of the decedent’s estate.
6. Q. If I create a Living Trust, do I lose control of my property?
A. No, a person who creates a living trust can be named the trustee of the trust and can reserve to him or herself the power to amend or revoke the trust at any time.
7. Q. What is probate?
A. Probate is the legal process of settling the estate of a deceased person. It includes paying all the claims, expenses and taxes and then distributing the person’s property to those persons entitled to receive it.
8. Q. What types of assets go through probate?
A. All property owned by the decedent except for property that is owned as joint tenants with right of survivorship, all property held in trust, accounts that are payable upon death or that are payable to named beneficiary under a life insurance policy, annuity or retirement account.
9. Q. Does a Living Trust Avoid Probate?
A. Yes if the trust has been properly funded. The process of funding includes transferring the title of certain assets to the name of the trustee of the trust. If the trust is not properly funded, the trust will not have its intended effect.
10. Q. Who controls my affairs if I become disabled?
A. If you have a funded trust, the persons named as successor trustee will manage the assets in the trust. For all other assets, the persons named as agents under a valid power of attorney will have control over those assets. If you do not have a trust or a valid power of attorney, guardianship proceedings will have to be opened up in court to have a guardian named. The guardianship process is a long, expensive and cumbersome way to deal with incapacity. Proper planning for incapacity is highly recommended.
11. Q. Will a living trust protect me from creditors?
A. No. A living trust will no more protect your than if you don’t have a funded trust. However, there are numerous asset protection strategies that may be employed if you are worried about creditor issues.
12. Q. Will my estate be subject to Estate tax when I pass away?
A. Maybe, depending on the size of your estate and who your beneficiaries are. If you leave all of your property to your spouse, your entire estate will qualify for the unlimited marital deduction and no estate tax will be due on your death.
13. Q. Will my beneficiaries have to pay tax on the inheritances they receive?
A. No, neither the Federal Government nor the State of Florida impose a tax on the recipients of inheritances.
14. Q. Can I protect my beneficiary’s inheritance from his or her creditors?
A. Yes, if you leave an inheritance for a beneficiary in a trust, it may be possible to draft language that makes it less probable that the assets of the trust would be available for creditors of the beneficiary.
15. Q. If I leave an inheritance to my beneficiaries, will it be protected if they get a divorce?
A. Yes, by leaving assets to a beneficiary in a trust, those assets will not be considered “marital assets” in the event of a later divorce. However, the assets of the trust may be available if the beneficiary fails to make any support payments.
16. Q. Will receiving an inheritance disqualify my beneficiary from receiving government benefits?
A. Possibly. However, if you want to leave assets for a beneficiary who is receiving government benefits, you can leave those assets in a “special needs” trust.