What’s the Difference between a Will vs Trust Based Estate Plan ?
What’s the Difference between a Will vs Trust Based Estate Plan ?
| Issues | Trust-Based Plan | Will-Based Plan |
|---|---|---|
| Incapacity Planning | Yes. Trust are typically preferable over a financial Durable Power of Attorney (DPOA) for controlling your assets. | No. Must rely on financial Durable Power of Attorney or joint account ownership, which can be problematic. |
| Guardianship Avoidance | Yes. | No. |
| Probate Avoidance | Yes. | No |
| Control | Yes, since the trustee controls the trust assets while you are alive and healthy, incapacitated, and after death. | None while you are alive, since the Will only becomes operative upon your death. Must rely on DPOA. |
| Asset Protection | Yes, for spouse and beneficiaries including special needs persons. | No, unless Will is probated and trusts are established by court order through a formal probate administration. |
| Will Challenge | Yes. | None. |
| Cost | Costs more up-front, and usually less upon death. Legal fees saved after-death typically more than pay for extra cost of up-front costs. | Costs less up-front, but usually more after-death due to probate court proceeding requirement. |
| Time Commitment | More time required up-front to “fund” the trust. Less time usually required after-death due to probate avoidance. | Less time required up-front, usually focusing on setting up and confirming beneficiary designation paperwork. More time required after-death. Formal administration probate takes 6 to 12 months. Creditor period lasts 3 months. |
| Privacy | Yes. | No. (Will is public record and viewable at courthouse and so are your assets and beneficiaries). |
| Tax ID Number | Use your own SSN. Upon death, new IRS EIN required. | New IRS Tax EIN required upon death. |
| Homestead | Avoid probate by retitling home is trust. For married couples, best practice is to wait until death of first spouse before transferring title into trust. Asset protection for married couples with Tenanc y b y the Entireties. | Probate required for this asset. Consider benefits and disadvantages of using a “Lady Bird Deed” (a/k/a Enhanced Life Estate Deed). Disadvantages include loss of creditor protection and title insurance problem. |
| Medicaid Pre-Planning | Excellent Pre-Medicaid planning tool. Probate can be avoided under Florida Statutes Section 732.2025(8). | No. Will requires probate. Must rely on DPOA. No ability to shift assets to spouse’s trust for asset protection. |
| IRA Planning | es, trusts offer accumulation and conduit trust planning options, giving you greater flexibility on distributing IRA assets to beneficiaries for asset protection planning purposes, second marriages, and special needs persons. | Not available. Trusts offer greater flexibility, asset protection, and planning strategies. |
A revocable trust is a document that places most of your assets into a trust during your lifetime. The assets are owned and managed
by the trust, but you continue to use your assets as you normally would (living in your home and spending your money as you wish).
After your death, the trust is managed by a trustee chosen by you, who distributes your assets to your beneficiaries at the times you
choose.
