What are Trusts?
Understanding trusts in Orlando, Florida can be confusing. We are here to help! In the Orlando estate planning arena, the definition of a trust is the right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds the legal title; a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary). Basically, you are assigning or transferring property into a bucket, called a trust. This bucket is then for the benefit of someone or something and can have many “rules” in who, what, or how someone can stick their hands in the bucket to get what’s inside.
Trusts are one of the most powerful tools for protecting assets. They are very flexible in their creation and can achieve many different goals. They can help avoid creditors, protect your heirs from mismanaging their inheritances, and can specify exactly when and how assets are passed to the beneficiaries.
Trusts in Orlando, Florida can be used to plan for:
- Long-term care
- Potential mental disabilities or incapacitation
- A surviving spouse
- Non-marital life partners
- Disabled children
- Special needs children
- Charitable donations
- Future generations
Trusts can be irrevocable or revocable (aka living trust). Revocable trusts allow the grantor to control the assets in the trusts during their lifetime while irrevocable cannot be altered after they have been executed. Each has different tax characteristics as well. Upon the grantor’s death, revocable trusts generally become irrevocable. The Florida bar has a consumer pamphlet on The Revocable Trust In Florida.
Types of Florida trusts include:
- Bypass trust
- Charitable trust
- Charitable lead trust
- Charitable remainder trust
- Discretionary trust
- Generation-skipping trust
- Grantor retained annuity trust (GRAT)
- Gun trust
- Irrevocable life insurance trust (ILIT)
- Marital trusts
- Qualified terminable interest property trust (QTIP)
- Spendthrift trust
- Testamentary trust
- Totten trust
When is the best time to create a trust in Florida?
Call me crazy, but the best time to plan for your death is before it happens. Creating a trust in Florida might be something you need to do NOW! Not only will the prices be going up as baby boomers continue to get older, but it’s inevitable unless you are willing to accept the consequences of not doing so.
Not everyone should create a trust so don’t let an Orlando estate planning attorney talk you into it if there is no need. You should look into making a trust if there are other people that depend on you. This could be when you are married, have children, or have parents who are getting older.
You don’t know the peace of mind you receive from this type of planning until you take the time to do so.
The benefits of a trust are that they:
- Allow conditions to be put on how and when the assets are distributed
- Can reduce estate and gift taxes
- Avoid the probate process which saves money on court fees, estate taxes, and attorney fees
- Allow beneficiaries to get access to their inheritances faster
- Offer better protection of your assets from lawsuits and creditors
- Can allow you to name a successor trustee who can manage the trust if you are unable to and who will do so after you die
Drafting your own trust:
Time and time again individuals try and draft their own legal documents. Sometimes it works out; sometimes it doesn’t. The interesting thing about Orlando estate planning is the person who does this doesn’t have to deal with the negative consequences because they are usually dead or incapacitated. It’s the family members that suffer, not only emotionally, but monetarily as well because they will have to hire expensive attorneys ($500/hr) to fight for their rights or just advise them through the process, especially if the trust or will is contested.
Trusts can be very complicated. An estate planning attorney in Orlando should supervise the execution process. Many people believe they have properly set up the trusts, but sadly most of the time, the trust is not valid for various reasons, such as language, execution issues, and most of all, the funding requirement. Your Orlando area legal professional should help educate you on the topic, providing you with the education you need to make an informed decision.
The legal and monetary consequences of not setting your trust up properly can be very costly, resulting in:
- Destroying the family harmony by having siblings sue each other and drain the estate’s funds
- Not functioning in the way you intended it to
- The trust not being valid, pushing the estate through the probate process
- Assets not in the actual trust and thus subject to the probate estate
How to create a trust in Orlando, Florida:
For a trust to be valid, it must have property (funded), reflect the settlor’s intent, and be created for a lawful purpose. A trust arises as a result of a conscious intent to create it and controls only the property owned by the trust or property that names the trust as the beneficiary. There must also be two witnesses and a notary who are there during the execution pursuant to specific rules that guide this process. The trust becomes effective when it is signed and executed, assuming everything is done correctly.
Who should be my trustee for my trust?
A trustee can be any person or entity or even a combination of the two. The trustee holds legal title to the assets in the trust for the beneficiaries. In an Orlando revocable living trust, many testators ( the person creating the trust) name themselves as the trustee and designate one or two successor trustees for when they become incapacitated or die. The trustee should be someone you trust and feel comfortable with. Remember, this will be the person in charge of your estate when you no longer have the capacity to do so yourself.
Some trusts are complicated, and thus professional trustees are recommended. An example would be the non-profit AGED. They assist seniors and disabled individuals for various trust matters. When it comes to qualifying & maintaining government benefits, reducing medication costs, and preserving assets, professional trustees are essential. If you have a special needs or disabled loved one, you should be working with an Orlando attorney who has discussed these professional services. Your loved one is who suffers so work with a non-profit like AGED to ensure they are cared for properly.
Once the trust is created, what now?
Assuming the trust has initially been funded correctly, anything you want in the trust needs to be renamed. This includes deeds to land, cars, life insurance policies and more. Additionally, your Orlando estate planning attorney should advise you about creating a pour-over will. The purpose of the pour-over will is to capture anything else that isn’t specifically mentioned in the trust or put into the trust. This could include assets you acquire after the trust but have not yet renamed, new bank accounts, gifts, inheritances…etc. The pour over will is a great tool so be sure to take advantage of it.
While most law firms just draft your documents, collect their fee, and send you off, The Finity Law Firm assists you in renaming all of your assets. Our philosophy on this is much different. Consistent with our mission, we want to make sure your plan is effective, accurate and drafted with precision.