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A trust is an integral part of your estate plan. It provides protections that a Last Will and Testament simply cannot provide. The probate process is too time-consuming and expensive for you not to consider your other options.
We like to give our clients options at the Elder Needs Law firm. Schedule a consultation with us, and let's discuss the benefits of incorporating a revocable living trust.
What is a Revocable Living Trust?
Revocable Living Trusts are also called "Revocable Trusts" or just "Living Trusts" – all terms that mean the same thing. Revocable Living Trusts are most commonly used to get property owned in your life to your heirs quickly and privately. It is an opportunity to avoid probate, a court-supervised process where the assets owned are distributed per a testator's will or Florida law where there is no will.
The Players in a Revocable Living Trust
In a Revocable Trust, the creator of the trust (probably you) is called the "Grantor" or "Settlor" (I commonly use the word Grantor in my Living Trust documents). While alive and has the capacity, the Grantor is simultaneously the Trustee.
The Trustee is designated to control and make decisions regarding all accounts and property held by the Revocable Living Trust (e.g., usually bank accounts, brokerage accounts, and real estate while the Grantor is alive and possibly life-insurance proceeds and retirement account distributions after the Grantor passes away). The Trustee must follow the rules as outlined in the Living Trust.
The Revocable Living Trust is Essentially an Instruction Manual
I commonly refer to the Revocable Living Trust as an instruction manual or rule book. The Grantor, while his/she is alive and not incapacitated, is always allowed to change the rules or revoke the trust entirely. As the name suggests, the trust is referred to as a "revocable" trust because the Grantor will retain control and can make changes, amendments, or revoke it entirely while they have the mental capacity to do so.
Revocable Living Trusts Change to Irrevocable Living Trusts
When the trust's Grantor becomes incapacitated or dies, the Revocable Living Trust automatically becomes an irrevocable trust– meaning the rules and instructions are now set in stone. Irrevocable trusts are notably less flexible than a revocable living trust.
The Revocable Trust will designate one or more "successor trustee(s)" who must then follow the instructions as to what to do with the property either-
(a) while the Grantor is alive but incapacitated, and then
(b) after the Grantor's death.
If you are interested in making a revocable living trust to benefit your minor children but are having difficulty deciding who the Trustee should be, schedule a consultation with one of our estate planning attorneys.
Living Trust Vs. Last Will and Testament
There are a few notable differences between these estate planning vehicles.
When Each Takes Effect
Revocable Living Trusts are called "living" because they can be utilized right away - literally immediately after the Grantor properly signs the trust document. This is a stark contrast to the Last Will and Testament, which is essentially just a written document until the Testator (maker of the will) actually passes away.
The Living Trust avoids probate, which delays benefits to spouses and other beneficiaries. A Revocable Living Trust is activated immediately and provides for a smooth and seamless transition to successor trustees, allowing assets to be utilized as instructed.
If you value privacy, avoiding probate would mean that your affairs will not be public record. Creditors may come out of the woodwork with claims upon being notified of a testator's death by the estate's personal representative.
Dealing With Financial Affairs While Alive
Revocable Trusts have a vital role to play while the Grantor is alive but incapacitated. For assets adequately placed inside the Revocable Living Trust, the Successor Trustee can then utilize the assets held by the living trust to, among other things, pay for things that the Grantor needs or would benefit from.
Estate Tax Planning
When an estate is left to your family, they'll have to pay the applicable income tax and federal estate tax from the taxable estate before they benefit.
To keep your estate intact when distributing assets, effective estate tax planning measures must be implemented. As much as possible, you should reduce or avoid estate taxes. They can really cut into your estate. But lowering taxes is a job for you - not your designated beneficiaries at Probate Court. By then, it will be too late.
We have to be intentional while we are still alive. A lawyer with expertise in estate planning knows the methods to lessen the burden of estate taxes on the estate. As much wealth as possible can be passed on to loved ones using specific procedures. Ask us about the homestead tax exemption during your consultation. To decide which tactics to use to lessen the estate's tax burden, an estate planning attorney at our firm will assess the estate.
Not All Heirs Should Receive Assets Outright – A Revocable Trust Can Protect Your Family
Another primary advantage a Florida Revocable Living Trust has over Last Will and Testament is: With a Will, you are generally leaving assets to specific people (a typical example: to my son, X, and my daughter, Y).
But often, one or more beneficiaries would be harmed by receiving funds outright. What if son X is married and his spouse has children from a prior relationship? Perhaps you, the Grantor, want to ensure that your assets are only used to benefit your own familial line. If you gave 50% of your assets to your son through a Will, and he then got divorced, a large piece would go to the ex-wife! If your son, in this example, passes away (before or after you), then the surviving spouse gets everything.
We have other examples of keeping assets in the trust, even after the Grantor passes away, to protect children from creditors. There are trusts designed for that child with poor spending habits. As experienced Florida estate planning attorneys, we have seen virtually everything. Let's discuss your options.
Finally, the creator of a Revocable Trust can create sub-trusts and special needs trusts. If any of your heirs are disabled, elderly, or have special needs, a special needs trust (held within your Revocable Living Trust) can protect their access to means-tested government benefits, such as Medicaid or SSI for Disabled Persons.
Experienced Florida Trust Attorneys
The Elder Needs Law attorneys have extensive experience answering questions relating to trust assets and the best course of action for each client's specific needs. We can guide you with important decisions involving a subject such as this one.
To arrange your consultation, get in touch with us today.