Trust Creation and Administration

A Trust has three main parties – a Grantor (a/k/a Settlor), a Trustee, and Beneficiaries. The Grantor is the creator, the person or persons who create the Trust. The Grantor can be a single individual or multiple individuals. The Trustee holds the legal title to the Trust property for the benefit of the Trust Beneficiaries. The Beneficiaries receive the benefit of the Trust assets.

A Revocable Trust – or a Living Trust – allows the Grantor to serve as the primary Trustee and Beneficiary during the Grantor’s life. This means that the Grantor can amend and revoke the Revocable Trust at any time during the Grantor’s life. For example, if the Grantor decides to remove a Beneficiary of the Trust, the Grantor can do so at any time by making a Trust Amendment.

If the Grantor is incapacitated, the successor Trustee steps into the shoes of the Grantor and manages the Trust assets for the benefit of the Grantor. If the Grantor is deceased, then the Trust becomes irrevocable and the Trust can only be changed for very specific circumstances.

4 Reasons Why Everyone Needs a Revocable Trust

One of the most common estate planning tools used in Florida is the Revocable Trust – often called the Revocable Living Trust or the Living Trust. Estate planning attorneys use Trusts because they come with unmatched benefits.

“Avoiding probate, saving your inheritors a huge amount of money and also time.”

“Avoiding guardianship, which physically and emotionally demanding for the guardians.”

“Managing assets during incapacity or after death.”

“Maintaining privacy and protecting assets from 3rd party claims during your and your heirs’ lifetime.”

The final estate plan is cheaper, more effective and properly secured against claims and creditors. Continue below to learn the different practical uses for Trusts in your estate plan.

1- Trust Probate Avoidance

Anything titled in the name of the Trust will avoid probate. This is one of the most popular reasons why Trusts are created.

For example, if you create a Revocable Trust and place your house into the Trust, the house will be titled in the name of the Trust and will avoid probate because the house is no longer solely titled in your name. This is the same for any assets that are titled in the name of the Trust or when the Trust is the beneficiary for the asset (e.g. a bank account has the beneficiary as the Trust).
It is very important that if you create a Trust that it is properly funded. A properly funded Trust means that all of the client’s assets are either titled in the name of the Trust or the Trust is the beneficiary of the asset.

Most estate planning attorneys will draft Trusts and not help the client properly fund the Trust. If your Trust is not properly funded then there could potentially be a probate (very expensive) and a trust administration. This means the attorney gets paid twice after you die – an attorney’s dream!

Make sure your Trust is properly funded.

Trusts are also great for avoiding ancillary probate. Ancillary probate occurs when a decedent owns real property in multiple states and all of the properties are titled solely in the decedent’s name. This means that there will be a probate in multiple states! If a Trust is created and properly funded by titling all of the decedent’s properties into the name of the Trust, then probate will be completely avoided.

2- Managing Assets During Incapacity or After Death

The Trust is also a great tool for avoiding guardianship and managing assets during incapacity or after death. If you do not have a Revocable Trust in place and are incapacitated, a guardian may need to be appointed by the court to manage your assets. Guardianships are time consuming, very expensive, and emotionally draining for families.

However, if you have a well drafted and properly funded Revocable Trust and are incapacitated, your Successor Trustee will immediately take over the role of Trustee and seamlessly manage the Trust’s assets. The Trustee can pay your bills and manage the Trust assets for your benefit.

If you have a Revocable Trust and are deceased, the Trustee will step in immediately to gather your assets, manage your assets, and distribute the Trust assets based on what is written in the document. There will be no probate if the Trust is properly funded. If you do not have a Revocable Trust and there is a probate, it can take weeks – or even months – for someone to begin managing, protecting, and gathering your assets.

3- Trust Maintains Privacy

Trusts are also used to maintain privacy. The Trust is a private document both during the creator’s lifetime and after the creator of the Trust is deceased. No one is allowed to see the contents of the Trust without the creator’s permission. The Will, on the other hand, is a public document that will eventually be filed with the probate court and will be available for anyone to see.

If the Trust creator is deceased the Trust is administered privately amongst the Trustee and the Beneficiaries. This allows the details of the Trust and the assets of the Trust to remain completely private from the public.

Trusts are phenomenal Estate Planning tools when they are well drafted and properly funded! Don’t let anyone tell you differently. Interested in effective and Estate Planning solutions? Call Us today!

4- Trusts are Essential Tools for Estate Planning

Trusts allow you to specifically distribute assets however the Grantor likes. For example, you can make both specific distributions (e.g. $10,000 to a charity) and residuary distributions (e.g. 10% to a charity) in whatever manner they prefer. This provides much more flexibility than a simple beneficiary form provided by a financial institution.

Trusts can also protect assets for beneficiaries and potentially eliminate state income taxes for beneficiaries. You may have a child or relative who is a spendthrift (not good with money), in a rocky marriage, or currently has creditors. If any of these situations are a concern then you can distribute your assets to a Trust that is specifically set up within your Trust. If the assets are distributed outside of the Trust, then they are fair game to creditors or an ex-spouse.

With the right spendthrift language in the Trust, the assets distributed to your child or relative going through money issues, potential divorce, or creditor issues can be protected in almost any circumstance. Then once the situation is resolved the assets of the Trust can be distributed or can continue to be held in Trust.

Trusts can also eliminate state income taxes for your beneficiaries. Only seven states currently do not have a state income tax—with Florida being one. Many clients have out of state beneficiaries listed in their Will or Trust. If Trust assets are distributed outright to these out of state beneficiaries, then the assets will be subject to the state income tax where the beneficiary lives. If the Trust assets are held in Trust for the beneficiary and the proper planning is done in setting up the beneficiary’s Trust, then state income taxes can be avoided while the Trust continues to grow in principal and distribute income yearly to the beneficiary.

Another big benefit of a Trust is that if any of your beneficiaries are disabled or receiving government benefits, the distributions can be made to that beneficiary’s Special Needs Trust within your Trust. This Special Needs Trust will prevent the beneficiary from being knocked off of government benefits and provide the beneficiary with a nest egg that the beneficiary can use to supplement what the government benefits do not pay for.

Types of Trusts

There are many different types of Trusts. The type of Trust or Trusts you use will depend on your estate planning goals. Here are some of the most commonly used.

Revocable Living Trust

A Revocable Living Trust operates for the benefit of the creator during the creator’s lifetime. The creator places their assets in the name of the Trust or names the Trust as the beneficiary of their assets. When the creator of the Trust dies, the Trust will distribute the assets based on what the Trust document says.

The Revocable Living Trust is by far the most common type of Trust used in Florida. It can be a great planning tool if well drafted and properly funded. The main benefit of a Revocable Living Trust in Florida is avoiding probate.

Pet Trusts

Florida law allows the creator of a Pet Trust. These types of Trusts are becoming more and more popular. They allow a creator to set aside a specific amount of money for food, vet bills, toys, and other various expenses, for any animals that they own upon death. The Pet Trust will typically have multiple people listed who can take care of the animal or animals (e.g. there will be a primary caretaker listed and then a back-up in case the primary caretaker cannot take care of the animal).

Trusts for Children or Minors

Revocable Living Trusts will usually terminate upon the death of the creator. When leaving assets to children or minors it is often better to have the Trust that is terminating distribute the assets to a specific Trust created within the Trust for the benefit of the child or minor. This Trust can last for a specific period of time (e.g. 25 years of age) or the Trust can last for the child’s lifetime.
The Trust can list out the specific distributions of the Trust (e.g. 20% of the Trust is to be distributed at the age of 21). The Trust can even have language in it that allows the Trust to pay for the child’s education or housing. But most importantly—if the Trust is properly drafted—the assets held in Trust for the child can be protected from the child (the child going on a crazy spending spree), any of the child’s creditors, or parents or relatives who may try and take advantage of the child.

Special needs trusts

Special Needs Trusts allow beneficiaries who are receiving government benefits to continue receiving those government benefits. Many government benefits—such as SSI, Medicaid, Food Stamps—are means tested. If someone has too much money, they will not qualify for the government benefits.
A Special Needs Trusts allows assets to be distributed to someone receiving government benefits to continue to receive the benefits even though the assets within the Special Needs Trust far exceeds the resources allowed by the government benefits program.
A well drafted Trust will often have contingent Special Needs Trust language in it. That way if one of your beneficiaries ever becomes disabled and needs access to government benefits program, the distributions made from your Trust will flow to the Trust’s contingent Special Needs Trust instead of outright to the beneficiary.

Are you ready to take your Estate Planning to the next level? At Daily, Montfort & Toups, we draft bulletproof Trusts and Estate Plans perfectly tailored to your unique case.