Trusts are legal contracts and are valid in all 50 states. However, state laws can vary significantly, which may require updating your trust to ensure compliance with taxation and probate procedures, as well as property rights and other local laws. Sometimes, you may decide to forego updating an existing trust and instead create a new one. You might have new goals for a trust that the existing one does not meet. Alternatively, you may not have considered creating a trust until now. Fortunately, the laws are relatively clear about how to create, amend, and revoke trusts in Florida. At Roulet Law Firm, P.A., our knowledgeable Florida estate planning attorneys may be able to assist you with all your trust needs. Call our Florida office at (941) 909-4644 or our Minnetonka, Minnesota office at (763) 420-5087 to schedule a consultation and learn more about how a trust may benefit you and your estate. Or, you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
Understanding Trusts in Florida
Trusts establish certain relationships between particular people. One individual, who is the trust grantor or settlor, places assets in the trust. The trustee, who may also be the grantor or can be another individual, holds and manages the assets on behalf of the beneficiaries of the trust. The beneficiaries inherit or otherwise benefit from the assets in the trust. The trust grantor and the trustee can also be beneficiaries of some trusts.
The trust’s specific purpose and how the beneficiaries are able to use or access the assets will depend on the type of trust and how it is set up. If an individual has more than one purpose for a trust, they may need to consider creating more than one trust to ensure that all their intentions are adequately met.
Benefits of Establishing Trusts in Florida
When exploring Florida estate planning options, many people unfamiliar with estate planning wonder why they would need a trust. They plan to write a Last Will and Testament (or will) and assume that should be enough. While a will is one component of a Florida estate plan, trusts have several benefits that wills do not.
Consider the following benefits that individuals get from establishing trusts in Florida:
- Pass on assets at the end of their life without subjecting their beneficiaries to a lengthy probate.
- Create a plan for managing assets in case the owner of those assets becomes incapacitated.
- Set aside assets to be used for a child, sibling, or other dependent with special needs.
- Preserve assets to be used to care for minor children if the grantor dies.
- Establish beneficiary requirements that must be met before the beneficiary can access their inheritance or the assets in the trust.
- Reduce estate taxes beneficiaries will owe upon receiving their inheritance (at the federal level only, as Florida does not have an estate tax).
- Protect children or assets from creditors.
- Keep money in the family by protecting it from divorces, remarriages, etc.
Types of Florida Trusts and Their Benefits
Florida estate planning laws allow for a number of different trusts in Florida. Some are extremely unique and, therefore, may only be mentioned when an individual has specific needs that can be met by that particular trust. However, there are many common trusts that people often create and can give new Florida residents a good idea of what they may be interested in before speaking with an estate planning attorney at Roulet Law Firm, P.A.
Revocable vs. Irrevocable
Before going too deeply into the various trust options, one of the first things an individual should know is that most trusts are either revocable or irrevocable. This is important to understand because if an individual has any doubt about their trust’s purpose, their beneficiaries, or whether they may change their mind later, they may want to avoid irrevocable trusts. A revocable trust can be amended or revoked at any time, allows the grantor to keep control over the assets, and keeps the assets in the grantor’s estate for tax purposes. An irrevocable trust cannot be amended or revoked, requires the grantor to give up control over the assets in the trust, and removes the assets from the grantor’s estate for tax purposes.
Some trusts, such as a living trust, can be either revocable or irrevocable. Other trusts, such as charitable trusts, are only irrevocable. While the law does not require individuals to work with an estate planning attorney to create trusts in Florida, it is strongly recommended that they do. A Florida estate planning attorney may be able to guide individuals to the most appropriate trust to meet their needs, helping them avoid creating a trust that does not meet their needs and cannot be revoked.
Living Trusts
Living trusts can be revocable or irrevocable. These trusts allow the grantor to decide how the assets within the trust will be managed and distributed both during their lifetime and after their death. The grantor can also be the trustee and a beneficiary in a living trust. Living trusts in Florida avoid probate, may allow an individual to qualify for Medicaid, and allow the trustee (or successor trustee if the grantor is also the trustee) to seamlessly take control over the assets if the grantor is incapacitated. If the grantor owns tangible assets or real estate in another state, such as Minnesota, putting those assets in a living trust may also help them avoid probate in the other state.
Charitable Trusts
Charitable trusts are irrevocable, which means that once established, the trust cannot be revoked or changed. However, two types of charitable trusts may benefit individuals and the charitable organizations they support. A charitable lead trust provides an income stream to the charitable organization the grantor chooses for a limited period or for the grantor’s life; then, the remaining assets are returned to the grantor or distributed to their loved ones without being taxed. A charitable remainder trust does the opposite, providing the income stream to the grantor during their lifetime, then giving the assets to the charitable organization the grantor chooses.
Charitable trusts in Florida must benefit a charitable organization according to Florida’s definition of one. FL §736.1201(1) defines a charitable organization as an organization described in s. 501(c)(3) of the Internal Revenue Code as well as being exempt from tax under s. 501(a) of the same code.
Special Needs Trusts
Special needs trusts often play a role in Florida estate planning for individuals who have a child, sibling, spouse, or other person who has special needs. Special needs individuals often must rely on government benefits such as Medicaid, Supplemental Nutrition Assistance Program (SNAP), housing assistance, or Supplemental Security Income (SSI). Providing them with an inheritance, even a small one, could potentially make them ineligible for those benefits. A special needs trust allows the individual to provide for a special needs beneficiary without affecting their government benefits.
Generation-Skipping Trusts
Generation-skipping trusts allow individuals to transfer property to grandchildren or later generations without taxation. Taxation is avoided because the grantor uses their lifetime exemption to offset any taxes due. These trusts can be beneficial in cases where the individual wishes to leave an inheritance for later generations but may not want to leave one for their own children. For example, if their child has a gambling or substance abuse issue, a generation-skipping trust allows them to leave something for their grandchild while ensuring they do not enable their child’s issue by giving them an inheritance of their own or access to the grandchild’s inheritance. If the grantor chooses, they can provide access to the income generated by the trust to the skipped generation. Generation-skipping trusts in Florida are irrevocable.
Qualified Terminable Interest Property Trusts
Qualified terminable interest property trusts are trusts that allow an individual to provide for their surviving spouse to have income once the individual dies. When the surviving spouse dies, the remaining assets are distributed to other beneficiaries, but the trust does not have the unlimited marital deduction ability. This kind of trust can help maximize the generation-skipping tax exemption. Qualified terminable interest property trusts are also beneficial for those individuals in second or subsequent marriages. These trusts are irrevocable, but they can be useful in Florida estate planning.
Testamentary Trusts
Testamentary trusts are created in the individual’s will and become effective upon their death. These trusts are useful for protecting assets on behalf of the beneficiary by not providing them right away. They can protect the estate from lawsuits or claims by divorcing spouses. The will must go through probate before the trust is created, which is a potential drawback to these types of trust. While testamentary trusts are considered irrevocable, they are slightly different than other irrevocable trusts. Because they are part of someone’s will, if the individual changes their mind about the trust, they can simply write a new will without the trust or with the new terms they wish to use. However, once the individual is incapacitated or dies, the testamentary trust becomes irrevocable and cannot be changed or revoked.
Why Is a Trust Better Than a Will?
Wills are easier to write, while trusts can be quite complex. However, a trust is better than a will for several reasons:
- Trusts can keep assets out of Florida probate proceedings. A will must go through probate.
- In trusts in Florida, information regarding the estate remains private. A will goes through probate and becomes public record.
- The estate does not have to pay a probate attorney or any probate court fees for a trust. The estate will pay probate court fees and may need to pay a probate attorney to probate a will.
- The only interruption to a trust is when the new successor trustee takes over if the grantor was also trustee at their death. A will goes through probate, potentially lasting months, before anyone can access any assets.
Why Hiring a Florida Estate Planning Attorney May Benefit You
The trusts listed here are not the only available trusts in Florida. There are many different trusts, with different benefits, that an individual should consider before making a decision. A Florida estate planning attorney at Roulet Law Firm, P.A. may be able to help you explore your trust options and determine which one or ones may be more suited to your needs. The attorney may also assist you with establishing and funding the trust, future modifications to the trust, and ensuring that the rest of your Florida estate plan is in order. Call our Florida office at (941) 909-4644 or our Minnesota office at (763) 420-5087 to schedule a consultation and discuss your Florida trust and estate planning needs. Or you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
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