Estate planning for seniors, for parents who have children with special needs, and for anyone else includes considering the possibility of using a living trust. A living trust is something that is formed while the person who is distributing his/her assets is still alive. An irrevocable living trust means that changes to the trust cannot take place.
A revocable trust means the trust creator can change the trust terms including revoking the trust altogether. For living trusts, the creator of the trust can also be the creator. A successor trustee, such as a spouse, can act as trustee when the creator of the trust dies.
Living Trusts Help Avoid Probate
If a senior or anyone thinking about their assets uses a trust agreement, it may be possible to avoid probate and estate administration. Probate is used to validate a will and to determine who will be the executor or the will. If there is no will, then probate is a way to determine who will be the administrator of the decedent’s estate. Once probate is complete, the executor or administrator (both are personal representatives) must generally account for all the assets, pay all the taxes, and seek approval for the distribution of the assets.
More trust benefits regarding probate
With a living trust, there’s no will. With a living trust, the trustee or secondary trustee is appointed to handle the assets. When there is a trust, there’s no worry someone will seek to invalidate the will.
There are no probate court costs if the trust disposes of all the property that normally goes through probate. There is also no waiting period. Sometimes the wait between the person’s death and the transfer of the assets can take months or even longer – if the assets must go through probate.
Trusts are private where probate is public
Revocable living trusts generally just involve the creator of the trust, the people or organizations who are trustees, and the beneficiaries of the trust. Nobody will normally see the trust document. Unless there is a legal attempt to remove a trustee or to change the terms of the trust.
With probate, the filings are normally public. This means creditors, relatives, and strangers can access the court filings and documents such as the will. Trust documents do not generally become public record.
A living trust avoids the need for the appointment of a guardian or a conservator in case of incapacity. Essentially, if the trust creator cannot physically or mentally handle his/her own affairs, then the successor trustee takes over – without the need for probate.
The cons of using a revocable living trust
Trusts do require an upfront time and costs. The creator of the trust should review the reasons for the trust and the wording of the trust with their Florida trust lawyer. The trust document needs to be in writing and comply with relevant laws.
A trustee and successor trustee needs to be chosen and appointed. The creator of the trustee or the creator’s lawyer should review with the chosen trustees their approval to act as trustee. Trustees are normally chosen based on their ability to handle financial assets, invest them, and account for them.
When trusts are created to help others, such as someone with a disability, the trustee should be someone who understands the trust beneficiary’s needs.
Additional living trust disadvantages
The title to the assets that will be in the trust needs reviews. Deeds, insurance policies, vehicles, stocks, and other documents need to have the right legal information. This information generally includes the name of the trust beneficiary. Many times, the upfront work is the tradeoff for doing probate and estate work later.
When probate may be an issue even if there is a trust
Some assets may be able to pass directly to a beneficiary without the need for probate. For example, insurance proceeds are normally payable directly to the person who is the insurance beneficiary. Real and personal property may pass to another person who has a right of survivorship interest.
On the other hand, if assets are not properly titled or handled, and they are not part of the trust assets, then they will pass through probate. To avoid this scenario, some trust and probate lawyers use the concept of a pour-over trust. This is a will provision that allows assets to pour into the trust after the trust creator dies. The trustee can then transfer the assets immediately.
Additional trust versus probate considerations
Taxes. Your Florida trust and probate lawyer can explain how trusts can be used to minimize or even avoid the payment of federal estate taxes. Generally, the trust must be irrevocable, not a revocable one, to help save on the taxes.
Creditors. Trusts are a way to protect assets from creditors. Generally, assets that pass through probate can be claimed by creditors. Property this is placed in a living trust may be safe from creditors.
The best course of action is not to decide the pros and cons of your own. Review the advantages of disadvantages of trusts with a premier Florida trust and probate lawyer.