Florida Trust Law
he Estate Planning Law Firm, P.A.
Broward County Revocable Trusts and Florida Trust Law help.
Preparing Florida Revocable Trusts and avoiding Florida Probate. Florida Trust Litigation Information.
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Florida Trust Law Information
1. What is a Florida revocable trust?
A Florida Revocable Trust is a trust that is prepared by a Florida Grantor who is domiciled in Florida and the trust can be altered, amended or revoked. A revocable trust may also be known as a living trust or a revocable living trust. Prepared by a Florida grantor the person making the trust for their property they would be known as a Florida living trust or a Florida Revocable living trust.
A Revocable Trust is a technique a that can be used for administration of assets, both during the grantor’s lifetime and after death.
FLORIDA REVOCABLE TRUST Structure
A revocable trust is created when an individual (typically called the grantor in Florida but also known as settlor, or trustor) signs a trust agreement naming a person(s), a corporation, or both to administer the trust (the trustee or corporate trustee). In Florida and many other jurisdictions the Grantor can also serve as a trustee, the grantor and the trustee can be the same person. Generally a grantor does serve as the initial trustee of their revocable trust and then names a few successor trustees two or more of whom may serve as successor co trustees in order to insure continuity of management in the event of death or disability.
Naming a corporate trustee rather than an individual ensures that a competent and experienced trustee will always be available to act in the grantor’s interests and upon his or her passing assisting the Trust Beneficiaries with the trust administration.
There are advantages to using Corporate Trustees. In addition to always being available Corporate Trustees have professional experience in investing, management of money, and are very experienced in all aspects of trust administration as well as the ability to serve in a more objective manner then a family member would. However Corporate Trustees also frequently have minimum Trust account size that they will serve as the trustee for which may be $500,000 to a million or more. Also they are trust administration professionals they need to charge for their services so this may add additional administrative fees to the trust which will need to be balanced against the benefits from their services, the complexity and size of the trust and other factors to determine whether or not a Corporate Trustee is a good fit for a specific Trust Estate.
A revocable trust typically provides that property be managed for the grantors benefit. In most cases, the grantor retains certain rights over the trust during lifetime. These rights generally include the right to instruct the trustee to pay over all or any portion of the trust property, as the grantor desires, and the right to change or revoke the trust at any time. The trustee’s powers typically include the right to make discretionary distributions of income and principal to the grantor and, sometimes, to the grantor’s family, if the grantor becomes incapable of managing his or her own affairs. Florida Trust Law is contained in Florida Statutes chapter 737. When a grantor dies, the trust operates as provided for in the trust agreement. While the trust may be distributed outright upon the grantor’s passing if desired unlike a basic Florida will (one that does not contain a testamentary trust) it does not need to immediately pass to the beneficiaries. An important benefit of a trust is also that if properly funded Florida Trusts can achieve Florida probate avoidance.
Someone may have a child who is just 21 years of age when they pass on but instead of receiving all the property at that time and potentially squandering the money due to youth and inexperience it may be put into a trust to delay the distributions to specified ages such as 1/3 at 25 1/3 at 30 and the remainder at 35 or some other appropriate ages that the grantor determines or the
While a trust is not legally required to be funded it definitely should be since it will act no differently then a regular will in the event of death or disability where it can pass the property to the desired beneficiaries but if the trust is not funded it will not help avoid probate in Florida or avoid an ancillary probate elsewhere. By doing it while the grantor is living and has capacity it ensures continuity of management and care of the grantor, should he or she become disabled as well as helping to achieve a Florida probate avoidance.
Funding a trust during a grantor?s lifetime requires re-registering securities, real property, and other assets in the name of the trust in favor of the trust as the beneficiary of those benefits. Re-registration of property is not required in trusts funded at death where the probate estate is simply “poured over” into the trust. However, funding a trust at death does not avoid the necessity of probate.
2. What are the general advantages of revocable trusts?
Continuity of Management During Disability
Creating a Florida revocable trust is probably the best way to ensure that your property remains available to be used for your benefit, should you become physically or mentally incapable of managing your own affairs. While continuity of management is also possible when a durable power of attorney is signed, third parties such as banks, brokers, and transfer agents often have more difficulty in dealing with a durable power of attorney than with a trust and do not always accept the authority of the agent.
If you become disabled and you have neither a revocable trust nor a durable power of attorney, (power of attorneys are controlled in Florida by the Florida Durable Power of Attorney Statute 709.08 an expensive, lengthy, and potentially embarrassing court proceeding is generally required to appoint a guardian before your property can be used to benefit either you or your family. Even after a guardian has been named, continued court supervision over the management of investments and disbursements is usually required. This can include annual bond fees, annual accounting, and additional legal, accounting, and other professional fees. It was also require a restricted depository account in which the court must approve of the transactions from.
Using a funded revocable trust may allow you to name unrelated, out-of-state individuals and out-of-state trust companies to act as the primary administrator of your property at death. Without a trust, Florida and other jurisdictions limit your flexibility in this regard. To serve as a non corporate Personal Representative in Florida a person must be a Florida resident or a close family member (as defined by Florida Statute) of the Florida decedent
Avoiding Florida Probate
Because Florida probate can be costly and time-consuming, the avoidance of probate in Florida is often cited as one of the primary benefits of a revocable trust. Depending on the assets that are funded in the Florida Trust may determine how great a benefit avoiding probate may be. If you own real estate in more than one state such as in Florida, California and Pennsylvania you can avoid multiple probate proceedings. If the decedent was a Florida domicile and owned property in Southern California, another piece of real estate in Philadelphia, and also owned real estate in Manhattan New York for example then putting the real estate in the trust can help avoid a California Ancillary Administration, avoid New York Ancillary Probate as well as helping to avoid Ancillary Probate Administration for the Pennsylvania property. The property can be distributed to the beneficiaries in a quicker manner and with far less administration costs.
Availability of Assets at Death
Assets in a revocable trust at the grantor?s death are available to raise cash to pay estate taxes, expenses of administration, and debts immediately after death without waiting for a probate order from a court or issuance of letters of administration. If the trust is funded prior to death, the property in the trust remains in the trustees name before and after death and is immediately available for liquidation should the need arise. If the trustee were the decedent then the property would just pass to the successor trustee.
No Interruption in Investment Management
One of the benefits of creating a revocable trust is the ability to provide uninterrupted investment management if the grantor should become disabled, as well as after the grantor?s death.
Assuming the assets were previously transferred into the trust?s name as they should be there is no need to re-register securities after death unless there will be an outright distribution to the beneficiaries. In addition, depending on the cash needs and investment objectives of the grantor?s estate, there may be no need to develop a new investment strategy.
3. What Are some disadvantages of Revocable Trusts
Re-Registration of Property and Changes to Beneficiary Designations
In order for the trust to ensure the continuity of management of the assets and Florida probate avoidance
the trust must be funded through a process of retitling assets of the estate.
Increased initial costs
The costs to initially prepare a trust is more then a will given it is typically a more complicated and extensive document although the ultimate costs of having the trust and saving administration and other expenses is less.
4. What are the general myths about revocable trusts?
“Revocable Trusts Save Taxes.”
Revocable trusts do not save income taxes or estate taxes. Typically during the life of the grantor the tax id of the grantor is used and any tax flows through to the grantor at his rates. Following the death of the grantor if the trust continues and is not immediately distributed outright to the beneficiaries it must then get a tax identification number and the retained income is taxed to the trust which has a more compressed rate schedule often resulting in a higher tax rate then if the individual beneficiaries were paying. This is not a potential problem until after the passing of the grantor though and then with proper planning the income can be distributed to the beneficiaries and there will be no adverse tax issues.
“Revocable Trusts Protect Assets from Creditors.” – Myth
This is generally not correct as it relates to the grantor themself. Creditors may reach the assets of the grantor. Some asset protection could be achieved for other beneficiaries though. A Florida trust attorney could further help explain the details of how a trust could help with asset protection for other beneficiaries.
The primary benefit of creating a revocable trust is that it allows for continued management and preservation of your assets, should you become disabled. It can also help avoid probate and set forth all of the dispositive provisions of your estate plan including delayed distributions to beneficiaries if desired and professional management of such assets.
5. How do you name a trust?
A revocable trust usually includes the following information:
(1) The specific name of the trust,
(2) The date that the trust was executed/created,
(3) The name of the trustee,
(4) The title of the word trustee
An example is: the Shaq Q. Public Revocable Trust dated February 2, 2005, Shaq Q. Public Trustee.
At least one or more successor trustees should always be included in a revocable trust.
Names of irrevocable trusts are similar to the revocable trusts. A primary difference of the names is the name of the trust itself, which typically indicates its purpose and would typically have a different trustee then the grantor. or example, Sam Van Gundy could create an irrevocable life insurance trust (ILIT) that would be named as follows: Steve Van Gundy, as Trustee of the Sam Van Gundy 2005 Irrevocable Life Insurance Trust dated July 1, 2004.
The year is especially important in naming irrevocable trusts because one can create several trusts of the same type. For example, Ben Gordon could create two charitable remainder unitrusts (CRUTs) to accomplish charitable tax planning objectives in successive years: (1) the Ben Gordon 2004 Charitable Remainder Unitrust, XYZ Bank, Trustee; and (2) the Ben Gordon 2005 Charitable Remainder Unitrust, XYZ Bank, Trustee.
The more significant distinction between the revocable trust and irrevocable trust are the tax consequences and flexibility. A revocable trust as its name states can generally be altered or amended at any time during the life of the grantor while they retain the capacity to do so. An irrevocable trust cannot although in some circumstances there are ways to essentially revoke the trust such as having the trustee stop paying the premiums on an irrevocable life insurance policy.
An irrevocable trust needs to get an independent tax identification number. For income tax purposes the trust is at the highest income tax rates after reaching a much lower amount of income then if it were earned by individuals. An Irrevocable Trust could help with estate tax planning though by getting property out of a decedents estate. The appreciation of the assets subsequent to the creation of the trust would also be sheltered from the estate tax. The Estate tax starts at 41% and rises to nearly 50% well above the top income tax rate. The current estate tax exemption amount a taxpayer has is $1.5 million in 2005. Under current law this will rise to $2 million next year through 2008 then rise to $3.5 million in 2009 and be repealed in 2010 only to return to $1m in 2011 when the prior law sunsets. However, President Bush is pushing to make a permanent repeal to estate taxes and do so more quickly then 2010. Although there is some support in Congress for this he would need to reach 60 votes and with mounting deficits and other priorities of the war and social security reform it is unclear what will happen with this. Some attorneys and tax commentators think it is likely that the estate tax exemption will be increased but not repealed prior to 2010 although until it happens one can only plan based on the current law and with the knowledge that there may be subsequent estate tax reform on the horizon of the next few years.
A testamentary trust does not come into existence until a person dies.
It does not help if someone becomes incapacitated although hopefully that person will have a power of attorney to handle their financial affairs otherwise a guardianship would likely be required. A testamentary trust does not avoid probate. It would need to go through probate and after all costs and delay of probate had been wrapped up and all valid creditor claims had been paid then the trust could be funded and operate.
Florida Trust Litigation and Florida Trust Disputes
Florida Trusts can be contested or disputed for some of the same reasons for pursuing a Florida Probate Dispute or Florida Will Contest. Just as it can be appropriate to hire a Florida Probate Litigator to pursue an estate dispute for lack of testamentary capacity, undue influence or lack of proper execution formalities of a will the same rules apply to a Florida Trust.
A person cannot merely bring a Florida Trust Litigation case because they are not happy that they think the grantor whether it be a parent or other should have provided more for them it is appropriate if the grantor or person who was making the trust lacked capacity necessary to know what was going on, who the natural objects of their bounty (their heirs would be) and have some general idea re their financial situation at the time of execution because of advanced age, illness (such as alzheimers) or other reason such as medications then the document can be challenged when the document is no longer revocable typically after the death of the grantor.
Another frequent reason to contest a Florida Trust and pursue a Florida Trust Litigation case in probate court is undue influence. This is when a person in a position of trust and confidence with another pressures them to provide for them more significantly than they would otherwise do and the disposition because not the grantors intent but that of the person exerting undue influence who then benefits with a larger share. This is more likely to occur when the grantor has diminished capacity as well or others have greater ability to coerce the grantor. If this happens to you or someone you know they should speak to a Florida Trust and Estate Attorney and get information re whether they have a Trust and Estate Litigation case and if so hire an attorney to seek justice in Probate court. (Florida Probate Courts hears trust dispute and litigation cases).
A revocable trust can be a helpful estate planning tool. It retains flexibility while the grantor is alive and has capacity and allows for them to name a trustee who will handle their affairs if they were to loose capacity or when they die and helps avoid probate. The technique is not for everyone though and you should discuss the various estate planning options of a will to pass on your property, a revocable trust and in large estates that would be subject to estate taxes possibly additional irrevocable trusts and other estate planning techniques would also be appropriate. With full knowledge of your specific facts and what you would like to do with your property after meeting with a trust attorney they can help advise regarding your situation and which documents would be most appropriate for you.
The Estate Planning Law Firm, P.A. is available to assist with Florida Revocable Trusts in Broward and Miami Dade County Florida. The firm and Florida Trust Attorney, David S. Luber can be reached at:
BROWARD REVOCABLE TRUSTS
FLORIDA TRUST LAW
Fort Lauderdale Sun-Sentinel
Palm Beach Post
Broward County Probate Wills and Revocable Trust Law
Broward County Law # 954 920-2886
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