What is a Revocable Living Trust?
January 11th, 2021
If you are considering the options available for your estate plan, you may have come across the idea of a revocable living trust. This alternative to a traditional estate plan gives you more control over what happens to your assets. It also reduces or even eliminates the role of the Florida probate court in your family’s resolution of your affairs. Find out what a revocable living trust is, and what you will need to do to create and fund one.
What is a Revocable Living Trust?
A revocable living trust is kind of a “Will substitute.” Formally, it is a legal entity created to hold, manage, and distribute your assets and property on your behalf. Trusts have a language all their own. If you create any kind of trust it will involve these terms:
- Grantor or donor: The person who created the trust. That’s you.
- Trustee: The person responsible for managing the assets. For a revocable living trust, this is often you, too, at least at first. After you pass away or become incapacitated, management will pass to successor trustees to handle the distributions.
- Beneficiary: The person who is entitled to receive the benefit of the trust assets. While you are still alive, you and possibly your spouse or dependents will be the beneficiaries. After you pass away, the trust documents will describe what each beneficiary should receive.
Living Trust vs Will
A living trust can serve much the same purpose as a Last Will and Testament. Both are estate planning documents that direct how your assets are distributed after you pass away. However, the Florida probate court is responsible for overseeing the “probating” of your Will. It will be involved in resolving disputes between potential heirs and monitor the actions of your personal representative (or executor). Your personal representative cannot take possession of your assets and start distributing them to your heirs until officially appointed by the Court. In a living trust, the transfer of property to the hands of the successor trustee happens automatically.
Your successor trustee may need to provide a death certificate or certain trust documents to banks, financial advisors, and others involved in holding your assets, but unless a dispute arises, the court will play no role in the process. This allows a living trust to protect your family’s privacy, and avoid the chances that a judge will misunderstand what you wanted to happen to your affairs.
A trust also supplements the need for a durable power of attorney to manage your financial affairs and can be a great way to protect yourself if you are concerned about your faculties declining, causing you to make the wrong decisions for your money. If you become unable to manage the trust because of your health, a co-trustee or successor trustee can step in and make sure your care is paid for, without needing to turn to the probate court for a guardianship or conservatorship. (However, your estate plan will still need to include documents designating a health care surrogate to make health decisions for you.)
Revocable Trust vs Irrevocable Trust
As grantor, you can choose to make your trust revocable or irrevocable. For most clients, when you are using a trust as part of your estate plan, a revocable living trust is the best choice. That is because as long as you are alive and mentally competent, you can choose to amend or dissolve the trust (revoking it) at any time, for any reason. Once you die, a living trust becomes irrevocable until all its assets have been distributed.
By contrast, an irrevocable trust is set up in a way that becomes final as soon as it is created. For most clients, there is no reason to give up control over your assets while you are alive. However, if you are planning to minimize estate taxes, trying to protect your assets from creditors, or trying to become eligible for government benefits, an irrevocable trust may be the best choice. Be sure to discuss your financial priorities with an experienced estate planning attorney before creating your trust to make sure you choose the right option.
Creating and Funding a Revocable Trust in Florida
Trusts are not as straightforward as a Will or power of attorney form. They give you far more control over what happens to your assets, but they can also create problems if they are not carefully worded. Before creating a trust, you and your attorney should discuss:
- Who to name as co-trustees and successor trustees
- What triggers the transfer of management authority to a successor trustee
- Any limits on how the trustee can manage your assets
- Who appoints a new trustee if there is a vacancy
- How a trustee can be removed for mismanagement
- What reports the trustee should provide to beneficiaries
- How the trustee should handle distributions to young beneficiaries
- Any special needs or concerns for beneficiaries
- Whether the trust will include special provisions for pets, property, or other assets
However, unlike a Will, a trust isn’t finished when the paperwork is signed. You and your trust attorney should go further, which often involves transferring property into the trust’s name, signing new deeds, and, in some cases, setting up a trust bank account. By taking the time to fund your trust, you will be sure there are assets to handle your care while you are alive, and avoid the probate process after you have passed.
At Harrison Estate Law, we know how to use revocable living trusts to give our clients control over their assets during their life and after their death. We know how important it is to follow up by funding your revocable trust, and can help you through the process to be sure everything is set up right. Please contact us online or via email or call 352-559-9828 to schedule a free consultation. If you don’t live close to Gainesville we are happy to set up a phone or Zoom call.