Q: What is a will?
A: A will is a document that has been signed by the decedent and witnesses. Florida law has specific requirements concerning wills. A person writing a will (a testator) can name beneficiaries so that when he or she dies, assets will go to certain beneficiaries. A testator can also designate a personal representative to manage the estate and appoint guardians for minor or disabled children..
Q: When does a will take effect?
A: A will takes effect when the testator dies. When that occurs, it is the executor's responsibility to file the will with the court, notify and pay creditors' claims, and distribute the person's assets.
Q: What is a trust?
A: A document that spells out what is going to happen to a person's property. Many people have trusts because they want to reduce estate taxes, protect their assets from liability, and to avoid the probate process.
A trust is like a basket that holds all of a person's assets. The person puts assets into the trust during his or her lifetime, or the assets can go in after death.
Q: What are some of the terms used in a trust and what do they mean?
A: Estate: all the property owned by a person.
Corpus: the assets that are in a trust.
Personal property: property that is not real estate, anything that can be touched (jewelry, furniture, cars, etc.) or is intangible (bank accounts, stocks and bonds, etc.)
Real property: real estate.
Estate tax: tax that is imposed on property that is transferred after a person dies.
Principal: when used in the concept of a trust, it describes an asset that produces income for the beneficiary(ies). It is usually set up so that income can be produced for the beneficiaries for a longer period of time, rather than giving the asset out in one lump sum.
Living trust: a legal instrument established during the owner's lifetime. It allows the owner to manage the property that is within the trust. The owner basically acts as the trustee
Irrevocable trust: a trust that cannot be modified or revoked once it is established. It is usually formed for tax purposes or to control what happens to the assets.
Revocable trust: a trust that can be modified or revoked by the grantor (settlor).
Trustee: a person who holds or manages the trust property for the benefit of the beneficiaries. The trustee has a fiduciary duty to act for the benefit of the beneficiaries. (A trustee may be a person or an entity, like a bank or investment manager.)
Q: What are the benefits of having a trust?
A: A trust avoids going through the probate process. This means that the assets are distributed to beneficiaries more quickly and with significant savings in administration costs (e.g., attorney fees and court costs). Furthermore, there is generally no need to hire an attorney to distribute property that is held in the trust.
The grantor may control what happens to property after he or she dies; this includes restricting access to property.
A trust may be professionally managed, which may result in the assets being protected for a longer period of time.
A grantor may protect beneficiaries from their own inability to manage money by setting up spendthrift protection. This allows the grantor to dictate how and when a beneficiary will receive property from the trust.
