One of primary tools in an Estate plan is a Trust. There are variety of different types of Trusts but the basic concepts remain the same. Florida Trusts are governed by Florida’s Trust Code Chapter 736 but Trusts nationwide follow the same basic patterns.
What is a Florida Trust?
A trust is an instrument designed to hold assets based on a stated plan called a Trust Agreement. This works using several key roles.
The Parties/Roles in a Florida Trust:
Grantor/Settlor/Trust maker: This is the person or person(s) that put assets into the Trust and design the provisions of the Trust.
Trustee: This is the person that takes legal ownership of Trust assets pursuant to the Trust Agreement and is legally obligated to follow the terms of the Trust Agreement and the provisions of Florida’s Trust Code. These responsibilities include duties to the beneficiaries to administer the estate pursuant to the terms of the Trust agreement. This includes things like investments, making payment to the beneficiaries, completing the necessary tax returns of the Trust and making distribution of the Trust assets.
Beneficiary: The beneficiaries of a Trust are those individuals entitled to receive assets from the Trust and from the Trustee. They are entitled to transparency regarding the administration of the Trust, accounting and can enforce their rights under the Trust agreement by holding the Trustee accountable in a Court of law in Florida if necessary. Beneficiaries are entitled to annual accountings, information regarding trust administration.
WHY WOULD YOU CREATE A TRUST FOR ESTATE PLANNING IN FLORIDA? REVOCABLE LIVING TRUSTS
There are several advantages of a Revocable Living Trust when it comes to Estate planning.
- FASTER ADMINISTRATION
One advantage of Trust Administration is the speed upon which the Trustee can take control of assets and act for the benefit of beneficiaries. When comparing a Trust to an Estate administration the Trustee will have authority to manage the assets of the Trust pursuant to the Trust agreement without the need for an application to the Probate Court. For example, a trust may authorize a Trustee to liquidate a Property which he or she would be able to do freely. In a Probate Administration in Florida an Executor/Personal Representative can liquidate property but must first obtain an Order approving the sale from the Court, provide notice to creditors, wait out the objection period, possibly have a hearing etc…. - PROTECTION AND INCENTIVES FOR BENEFICIARES
- SPENDTHRIFT CLAUSES
Another advantage of Trust Administration compared to a simple Last Will and Testament is a concept referred to as the “hand beyond the grave.” Unlike a Last Will and Testament, in Florida a Trust can hold property/monies for a long duration of time for the continued benefit to the beneficiaries. Common examples include provisions such as a “spendthrift clause” which are designed to restrict capital to beneficiaries and prevents the beneficiary from pledging the funds he/she would receive from the Trust to a 3rd party and prevents the beneficiary’s creditors from attaching to the funds. This has a number of advantages for youth beneficiaries who may not be mature enough to adequately manage their finances, but it is also useful for providing distribution of assets and avoiding claims of marital property in a divorce or protecting inheritance against large known creditor claims and pending judgments. The basic idea being that because the beneficiary cannot readily access the distributions without the approval of the Trustee, it is not an asset subject to creditor claims. Certain obligations, such as spousal support/child support and several federal and state exemptions are the only exceptions to this general rule. - INCENTIVE CLAUSES
Aside from creditor protection to beneficiaries the only unique benefits to Trusts are incentive clauses. This is a type of restriction whereby the Trustee does not distribute funds to the beneficiary until some clearly identified objective occurs. Popular identifications include provisions such as graduation from college or simply reaching a certain age. The type and nature of the conditions are unless and generally up to the Trust maker to select. - BLENDED FAMILIES
A common problem arises when spouses have children from prior unions and a stepparent/step-child scenario exists. Florida Trusts can be written to become irrevocable on the death of either spouse which protects the non-blood descendants of the deceased spouse.For example: Ann and Bob are married with Ann having a daughter Angelina and Bob a son Bryson, both from prior marriages. If Ann passes away without an Estate plan, Bob may inherit, by virtue of being a surviving spouse, the majority or all of Ann’s assets. If Bob remarries or leaves everything to Bryson, Angelina will be effectively cut out of her mother’s Estate.If the same family created a revocable living trust that became irrevocable on Ann’s death the funds or assets could be preserved in the Trust to ensure that Angelina would receive a portion of the Estate.
- SPENDTHRIFT CLAUSES
- AVOIDING PROBATE
Much of the focus in modern estate planning deals with avoidance of the Court proceedings necessary to oversee the transfer of assets. This is referred to as the Probate process. Florida Trusts if designed and funded correctly will allow for the avoidance of assets being subject to Probate Administration. This can allow for substantial savings for your family as the costs of a probate administration can be substantial. - PLANNING FOR INCAPACITY
Many of us will experience issues with capacity as we advance in age. A revocable living trust can facilitate the transfer of control over assets upon the incapacity of the original Trustee. Similar to a Power of Attorney this will facilitate the continued use of the Trust assets for the beneficiaries upon the incapacity of the original trustee. - PRIVACY
Another advantage of a Florida Trust is privacy. The contents of a Last Will and Testament are public and must be admitted to Court. That means that if you decide to leave out a family member or provide certain things to certain beneficiaries that will all be public information and available after you pass away. In certain circumstances this can cause unnecessary drama. Conversely a Trust is a private document, the Trustee has an obligation to share the contents with qualified beneficiaries only. This allows for a discrete administration of affairs.
SO SHOULD I CREATE A FLORIDA TRUST?
Ultimately the decision on whether to create a Trust as part of your Estate plan is something that is dependent upon your specific circumstances. This is a decision that should be made only after speaking with experienced counsel. Give our office a call to discuss your specific situation, we offer no obligation free consultations.
Disclaimer: The information contained in this website is for informational purposes only and provides general information about the law but not specific advice. This information should not be used as a substitute for advice from competent legal counsel as laws change and the facts in your specific case need to be analyzed.
