When planning for the future, you may be wondering: What type of trust is right for me? Trusts are powerful estate planning tools, but they are not all the same. In Florida, two common options are testamentary trusts and living trusts. Each works differently when it comes to when the trust takes effect, how assets are distributed, and whether changes can be made.
What Is a Testamentary Trust?
A testamentary trust is created through your last will and testament and only comes into effect after your death. The probate court oversees the process, and the trust is set up according to the instructions in your will.
Key points about testamentary trusts:
- They do not avoid probate since the will must be submitted to the court.
- The trust begins only after your passing.
- You decide the terms in advance, such as when and how beneficiaries will receive assets.
For example, you might leave instructions that your children inherit funds at specific ages, or that a surviving spouse has access to income while preserving the principal for other beneficiaries.
What Is a Living Trust?
A living trust, also known as a revocable trust, is created during your lifetime. You transfer ownership of your property into the trust while you are alive, and you can continue managing the assets as trustee.
Living trusts offer several benefits:
- They often avoid probate, allowing for faster distribution to beneficiaries.
- You can amend or revoke the trust while you are alive, giving you flexibility if your circumstances change.
- Privacy is maintained, since unlike wills, trusts generally do not become public record.
Funding the trust is an important step. This means retitling assets such as real estate, financial accounts, and other property into the name of the trust.
How Are Assets Distributed?
- Testamentary trust: Assets are distributed according to the instructions in your will, but only after probate is completed. Beneficiaries may need to wait months or longer before receiving their inheritance.
- Living trust: Assets can be distributed more quickly since the trust bypasses probate. This is often a priority for families looking to reduce delays and legal costs.
Can You Make Changes?
- Testamentary trust: Because it is tied to your will, you can change the terms during your lifetime by updating your will. After your death, the terms cannot be modified.
- Living trust: As long as you are mentally capable, you may change, add, or revoke provisions. This flexibility makes living trusts attractive for people whose financial or family situations evolve over time.
Do Trusts Protect Assets from Creditors?
This is one of the most common questions clients ask.
- Testamentary trusts typically do not shield assets from creditors during the probate process.
- Revocable living trusts also do not protect your assets from your own creditors while you are alive. However, when structured properly, a living trust may provide some protection for beneficiaries after your death, depending on Florida law and the terms you set.
For stronger asset protection, additional planning may be needed, such as creating an irrevocable trust.
Steps to Create a Trust in Florida
Creating a trust is a multi-step process. Working with an attorney ensures the trust is valid and properly funded. Typical steps include:
- Identify your goals – Decide who you want to benefit, what assets should be included, and whether you want to avoid probate or add protections.
- Choose the trustee – Select someone you trust to manage the assets. Many people name themselves as trustee of a living trust.
- Draft the trust document – An attorney prepares the legal paperwork to ensure compliance with Florida law.
- Sign the trust – Proper execution is required, including witnesses and notarization in some cases.
- Fund the trust – Retitle property, accounts, and investments into the name of the trust. Without this step, the trust may not achieve its intended benefits.
Which Trust Is Right for You?
There is no one-size-fits-all answer. Testamentary trusts may be a good fit if you want to set conditions for inheritance but do not mind probate involvement. Living trusts are often preferred if you want flexibility, privacy, and a smoother transfer of assets.
Talk to Verras Law About Your Estate Plan
At Verras Law, we will help you determine whether a testamentary trust, a living trust, or another option best fits your goals. We have experience guiding Florida families through estate planning and administration, from drafting trusts to funding them properly. Contact us today to schedule a consultation and take the next step in protecting your loved ones and your legacy.