A living trust also known as a revocable trust (“RTr”) may be an effective estate planning tool. It is simply an agreement created by the grantor, who is the person making the RTr, to manage assets during the grantor’s lifetime and efficiently distribute assets upon death of the grantor. During the grantor’s lifetime, the grantor is free to add or withdraw assets from the RTr as the grantor deems fit. Unlike an irrevocable trust (“ITr”), the grantor may change the trust provisions and the grantor continues to own and control trust assets unlike an ITr where the assets are no longer owned or controlled by the grantor.
“Taxable events” such as a gain, loss, or income flow through to the grantor’s personal return similar to an S-Corp, and the RTr rarely utilizes a EIN. Instead, the grantor’s social is usually utilized for tax purposes.
The RTr provides a couple of distinct benefits:
• Probate Avoidance/Mitigation;
• Incapacity.
Probate Avoidance/Mitigation. The RTr usually mitigates probate costs as well as the frustrations with probate administration, and many times, it completely avoids probate. A RTr may avoid probate by effectuating the transfer of assets during your lifetime to the trustee eliminating the need to use the probate process to make the transfer after your death.The trustee has immediate authority to manage the trust assets at your death at which time the RTr becomes irrevocable.
While an appointment by the court is not necessary, the trustee is subject to duties as delineated in the Florida Trust code. The interests of the beneficiaries may be protected from creditors’ claims by a “spendthrift” provision in the trust agreement, and a “Notice of Trust” may need to be filed with the probate court placing possible creditors on notice to ensure the Trust assets are not improperly subject to creditor claims. The language of the RTr must be precise. In some situations, the personal representative may seek payment of administrative expenses/obligations of the decedent’s estate from the Trust to the extent that the PR certifies insufficiency of funds. Thus, there may be no probate avoidance in some situations although the filing of the Notice of Trust limits exposure to trust assets for two-(2) years.
Incapacity. Many individuals, unfortunately, will face a situation involving medical incapacity. A RTr provides a mechanism for a successor Trustee to take over the management of Trust property for the grantor’s benefit. A RTr may allow the grantor and the grantor’s beneficiaries to avoid a public guardianship and the costs associated with a guardianship. The RTr provides continuity of management in the event of incapacity to the grantor/trustee protecting assets as well as the beneficiaries of those assets.
You may contact Cox Law PLLC, 813-685-8600, or any experienced Florida lawyer to assist in the drafting and creation of a Revocable Trust.