Life is an adventure and, with only one chance to make the most of it, planning ahead is a powerful way to embrace the unexpected. If the thought of living life to the fullest gives you a little anxiety, consider the peace of mind estate planning can give you. If you’ve never heard of a trust (or have heard of it but never stopped to give it much thought), this two-part blog series is a quick introduction to how a trust helps you have financial control of your future no matter what comes your way.
This blog is the first in a two-part series on trusts in Florida. The first part will focus on the definition of a living trust in Florida and detail the revocable trust. The second blog will explain irrevocable trusts and will include other specialized trusts that can be considered in estate planning.
What is a Living Revocable Trust?
Living trust comes from the Latin, “inter vivos” which translates to “among the living.” A Florida living revocable trust allows you to transfer assets into a trust while you are living and continue to use them. The document spells out how your assets will be managed in the event you are unable to do so yourself, due to death or incapacity, and how the assets will be distributed upon death.
3 Roles in a Revocable Trust
Grantor
Trustee
Beneficiary
A living trust allows you to retain control over your assets while living as the “grantor” or “settlor” of your own trust. You choose your own successor trustee – the person who will manage your assets in the event of your incapacity or death and transfer any funds to your beneficiaries after your death. The ability to retain control of assets after incapacity or death is one reason a living revocable trust is a popular component of estate planning.
Two Types of Trusts
Revocable
Irrevocable
A revocable trust is a document that can be modified as needed as often as you want while you are alive. The document will detail all your assets, including but not limited to real estate, investments, income, and bank accounts. “Funding” the trust with your assets prior to your death is how you get the maximum benefit from the trust. Transferring assets to your revocable trust during your lifetime ensures that your successor trustee has access to your trust assets immediately upon your death.
Why Do I Need a Living Trust in Florida?
A trust can create protection for your family in the event of unexpected incapacity or death. Rather than going through the time-consuming and expensive process of probate, a trust ensures everything remains private and your successor trustee manages your assets after your death. The Florida revocable living trust can provide peace of mind in these five situations.
Benefits of Living Trust
Avoid probate
Avoid guardianship
Give you control after death
Avoid guardianship for minor children
Asset protection for your beneficiaries
Protection for individuals with special needs
Does Everyone Need a Living Trust?
Life events happen to everybody. All life stages can present a reason to protect any assets you have in case of incapacity or death. A living revocable trust can be an important protection if you become disabled, allowing your successor trustee to provide for your care.
Life Stages for a Revocable Trust
Getting married
Purchasing a home
Starting a business
Having a baby
A Florida living revocable trust is a benefit to any person of any age. It is important to appoint someone to take care of you and your finances should you be unable to manage your own affairs. A revocable trust does not require a minimum amount of funding. Additionally, it is able to be modified at any time, adding to, or changing the terms of the trust at any time as you move through the stages of life.
What is Probate?
One of the purposes of a living revocable trust is to avoid probate. So, what is probate? Probate is the court-supervised process of gathering a decedent’s assets, paying any remaining debts, and distributing the remaining assets to the decedent’s beneficiaries. It may be necessary for the court to be involved if no other direction from the decedent was documented, such as in a trust.
In general, the court oversees the payment of the probate proceedings, the decedent’s funeral expenses, and then the decedent’s outstanding debts – in that order. Any remaining assets will be distributed to beneficiaries that have been identified in the process.
Does a Revocable Trust Help Avoid Probate?
A revocable trust helps avoid the probate process. A “Notice of Trust” is required in the county where the decedent lived at the time of death. This gives notice to any creditors of the existence of a trust and their rights to enforce claims against the assets.
Who Can Act as Trustee or Successor Trustee?
You can name almost anyone as your successor trustee. This is an incredibly important decision because the person you name will hold a position of power over your estate. While the grantor outlines the exact duties and powers that the successor trustee will have, it is a significant amount of responsibility for the person you choose.
The person you choose as your successor trustee should be trustworthy. They will need to work with other beneficiaries and professionals to settle your estate without creating friction. This role carries a lot of responsibility and may be best handled by a corporate trustee or professional advisor. The trust should be written to allow the successor trustee to hire qualified professionals to help them, including attorneys, accountants, and financial advisors.
What are the Responsibilities of a Trustee?
You can instruct your successor trustee to have broad or limited powers, but – bottom line – they are acting as your fiduciary. They don’t have to live in Florida or be related to you, but they must accept the responsibility. Also, they must understand that there is a strict standard of care involved in performing trust functions.
Responsibilities of Trustee
Keep records of all trust transactions
Issue statements of account to trust beneficiaries
Hold trust property
Invest trust assets
Distribute trust income and/or principle to beneficiaries, as directed in the trust
Can I Draft My Own Living Trust?
Please don’t. Any experienced Elder Law Attorney will tell you that they make more money fixing Do-It-Yourself documents than if they had been hired to draft the document originally. To avoid income tax problems and improperly transferred assets, consult an experienced Elder Law Attorney who can connect your trust funding goals with the rest of your estate planning. Not all assets are appropriate for trust ownership. Don’t let the advice of an unlicensed person or a DIY trust document leave your assets vulnerable to probate.
A living revocable trust is one way to ease the burden for yourself and your loved ones in the future. You are speaking your wishes to your family after death or disability. Thus, allowing them to honor your plan as outlined in this important document. A revocable trust takes stress off your family and shows them how much you care for them by preparing for difficult times.
Understanding complicated estate planning documents and using their knowledge to protect your family are just two of the reasons why Elder Law Attorneys are a Resource We Love. Learn about Living Trusts and other estate planning tips in the Legal and Financial Section of our Blog.