How Living Trusts Help You Avoid Probate In Florida
A living trust is a widely used and highly flexible type of estate planning trust. In evaluating the most appropriate options for establishing their living trusts Florida residents may wish to consider consulting with an estate planning attorney who can walk them through the process for setting up a trust and help them consider the terms they wish to include in the necessary legal documents. Many Florida families have questions about how to avoid probate with trust management, and talking with an experienced attorney may be helpful in finding practical answers tailored to your particular circumstances. Call Loughin Law, P.A. at 561-559-6214 today to schedule a consultation with a member of our team.
What Is a Living Trust?
A living trust is any trust that is set up to take effect while the grantor (the person who forms the trust) is still living. Also known as an inter vivos trust (a Latin term that translates roughly to “between the living”), a living trust is so called to distinguish this kind of arrangement from other types of trusts, most notably testamentary trusts, that are designed specifically to take effect upon the death of the grantor (also known as the trustor or settlor).
A living trust may be either revocable or irrevocable. Either type may be used to avoid probate with trust transfer of assets, so in many cases the choice between revocable vs. irrevocable trusts Florida residents may wish to evaluate how well the advantages and disadvantages of each type – apart from avoiding probate – align with their circumstances and estate planning priorities.
Revocable vs. Irrevocable Trusts
A “revocable” trust is just what its name suggests: a trust that can be “revoked” at any time by its grantor. An irrevocable trust is the opposite: Once the trust instrument (the legal document used to establish a trust) has been signed and the grantor or settlor has transferred assets into the trust, the trust cannot usually be dissolved, nor its terms altered. Any revocable trust automatically becomes an irrevocable trust upon the grantor’s death.
Grantor Trusts
Often but not always, a living trust will be established as a grantor trust. As the Internal Revenue Service (IRS) explains, in a grantor trust the grantor or trustor retains discretionary control regarding certain aspects of trust management. The ability to “revoke” or dissolve a trust requires full control, so all revocable trusts are grantor trusts by definition.
Some irrevocable trusts may also be set up to function as grantor trusts. In this instance the trust will need to meet certain criteria specified under 26 U.S.C. §§ 671-679 (a portion of the federal tax code that covers a number of provisions regarding income generated by, or received from, trusts). Structuring a living trust as a grantor trust can offer significant convenience advantages, but also means that the IRS will disregard the trust as a separate tax entity, and all income from the trust will be taxed to the grantor. A member of the Loughlin Law, P.A. team may be able to help you determine whether establishing your living trust as a grantor trust makes sense for your personal estate planning goals.
Grantors, Trustees, and Beneficiaries: Trust Roles
The United States Treasury Department explains that a trust’s grantor, trustee, and beneficiary may all be the same individual as far as federal law is concerned (some states apply criteria limiting the circumstances under which the same individual may occupy all roles), but that each role is regarded as a separate legal “entity” for the purposes of establishing a valid trust. There are three required roles for any trust, as follows:
Grantor, Trustor, or Settlor
Living trusts Florida residents set up will often have a single grantor. One fairly common exception is for married couples who choose to jointly create a living trust. Generally the goal in this scenario is to craft a comprehensive estate plan that provides for the financial future of each of the spouses and puts measures in place to facilitate the transfer of property to other parties (often but not always the couple’s children) once both spouses have passed away.
Trustee
Generally speaking, if a grantor is also a trustee then the trust document will need to name either a successor trustee, to assume the trusteeship once the grantor has passed away, or a co-trustee, who will share in the trustee’s responsibilities immediately. Many trusts have multiple trustees, and it is very common for grantors to designate an attorney or financial adviser to take part in the trusteeship, especially if the assets placed in an estate planning trust require complex management.
Beneficiary
Multiple beneficiaries are even more common than multiple trustees. Often an individual setting up a living trust to avoid probate will designate themselves as the present beneficiary, and designate another individual or group of individuals to automatically assume the beneficiary role once the grantor (and previous beneficiary) passes away.
Seek Advice From an Estate Planning Lawyer
In considering living trusts Florida residents have a number of factors to keep in mind. These trusts can keep assets out of probate, but whether they also help to protect assets during the grantor’s lifetime will depend in large part on whether they are established as revocable vs. irrevocable estate planning trusts. To seek advice from an experienced Florida attorney regarding how to avoid probate with trust formation, consider scheduling a consultation with Loughlin Law, P.A. Call 561-559-6214 to speak with a member of our team today.
