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About the Florida living trust
A revocable trust (also called an inter vivos trust or living trust) is an agreement a person makes during their lifetime so that property can be passed to another person or entity after their death. The "revocable" portion means that the person can move property in and out of the trust during their lifetime or cancel the trust if they would like. They can also change the trustees and beneficiaries during their lifetime. Revocable trusts are often used as a will substitute because, unlike a will, property in a trust does not have to go through probate. Revocable trusts are central to most of our estate plans.
“Revocable trusts are often used as a will substitute.”
Some people are under the impression that "trusts" are just a tool for the extremely wealthy to pass property to future generations. However, the truth is that a revocable trust is very useful in estates of different sizes because they are flexible, relatively inexpensive, and allow for avoidance of the probate process. Another misconception is that property in a revocable trust is somehow "protected" from creditors. That is generally not the case.
Why should I have a revocable trust?
FIrst, some definitions. The person that creates the trust and establishes the rules is called the "settlor." Other names are "grantor" or "trustmaker" but settlor is the most legally correct term. The trustee is the person that manages the property in the trust for the benefit of the beneficiaries. The trustee owes a fiduciary duty to the beneficiaries to administer the trust for their benefit according to the terms of the trust.
Usually, a revocable trust the settlor, trustee, and beneficiary are all the same person while that person is alive. When the person dies, the successor trustee named in the document takes over as trustee and the new death beneficiaries start to benefit from the trust pursuant to its terms. The revocable trust becomes irrevocable at death of the settlor.
How does a revocable trust work?
A living trust is a private document. It is not typically recorded in the public record and the government is not involved. This sets it apart from a will. While the original settlor is alive, all taxes and losses flow through to the settlor directly. A separate tax ID is not required while the settlor is alive.
Important to note is that any instructions in the trust that direct the trust property to be distributed after the settlor's death must be executed in the same way as a will (i.e., signed at the end with two witnesses and, ideally, a notary). Also helpful to know is that a revocable trust executed in another state will be recognized by Florida so long as it was validly executed in that other state.
What are some advantages of a revocable trust?
- A living trust can help avoid guardianship in the event that the settlor is incapacitated. A named successor trustee can take over without Court involvement, as the trust should contain how incapacity will be determined.
- Avoiding probate is another huge advantage. Probate has substantial attorney fees (often 3% of the value of the estate up to $1 million in value) plus Court costs and public notice costs. Also, a will is a public document, which can be viewed by the public whereas a trust is private. Also, probate takes months to years to complete and the trust actions are immediate.
- A living trust can be very helpful when you own property in multiple states. A separate probate process is necessary in every state where a person owned real property at the time of their death. However, property in a trust will not have to go through probate, avoiding a lot of headaches.
There is a lot to consider when creating a revocable trust. Beyond those items mentioned here, there are different forms of trusts, such as marital or unified credit trusts, which can have tax and asset protection implications. We can help you set up an effective revocable trust that meets your goals.
