ESTATE PLANNING LAW

TRUSTS

ENSURE YOUR BETTER LEGACY

Trusts are not only for the wealthy.

Not everyone needs a trust, but for some the creation of a trust is a crucial part of a complete and effective estate plan.

There are different types of trusts for different purposes, some of them revocable and others irrevocable. Some trusts are created while a person is alive (living or inter vivos trusts) while others are created upon a person’s death as set forth in that person’s will (testamentary trusts).

TESTAMENTARY TRUSTS

A testamentary trust is created according to the terms of a person’s will.

Testamentary trusts only come into being after the testator has passed away and are governed by the terms of the will. The testamentary trust can be used to deal with estate tax matters as well as issues that can also be addressed in a revocable living trust, but its benefits are more limited than those of a living trust. There are many factors that play into the decision to use a living trust instead of at testamentary trust.

LIVING TRUSTS

A living trust is an agreement between you (the settlor, grantor or trustor) and an individual or entity (the trustee) made during your lifetime.

The trust agreement determines how assets placed in the trust will be managed and distributed. Trusts can be revocable or irrevocable.

A living trust can provide numerous benefits for asset protection and management:

The trust provides for management of your assets during your lifetime and names someone to assume responsibility for them if you become incapacitated. This can often eliminate the need to go to court to arrange for appointment of a guardian or conservator.
You determine how your assets will be managed by giving written instructions in the trust.
Under certain circumstances and with special planning, trusts can be used to help plan for reducing the costs of long-term health care associated with catastrophic illness.
In states where probate is lengthy and expensive, you may avoid delay and expense because the trust contains instructions for distribution of your assets after death without court proceedings (if all of your non-retirement account assets are owned in your trust).
If you transfer ownership of out-of-state real estate to your trust during your lifetime, this usually will avoid the need for a probate proceeding in the other state(s).
A living trust can provide an alternative to guardianship for persons who may have a disability that prevents them from managing their own financial affairs. With careful drafting, a living trust can assure that a trustee you have selected manages assets for you and that your preferences for how they are managed are carefully set out in the trust agreement.

REVOCABLE LIVING TRUSTS (INTER VIVOS TRUSTS)

The revocable living trust is the most common form of living trust and has many uses in completing an estate plan.

The revocable living trust helps in avoiding probate administration and guardianship administration of the property of an incapacitated person.

It provides for professional investment management and for control and management of the trust after the death of the creator (grantor) for the benefit of minors, incapacitated beneficiaries and spouses of second marriages.

A revocable living trust will not protect the assets of the grantor from judgment by creditors of the grantor.

In order for a revocable living trust to provide the benefits for which it is designed, such as avoiding probate administration and avoiding guardianship administration of the assets of an incapacitated person, the grantor must transfer legal title of his or her assets to the trustee of the revocable living trust.

Specific language should be used to designate the owner of real estate, bank accounts, brokerage accounts, certificates of deposit, stocks, bonds, life insurance policies and annuities.

The revocable living trust is created by a written agreement between the grantor and a trustee. Under Florida law an individual can be both a grantor and trustee.

A revocable living trust should be created only after careful consideration of the grantor’s individual circumstances and concerns and only with the assistance of an attorney who is thoroughly familiar with the issues involved.

IRREVOCABLE LIVING TRUSTS

Although less common than the revocable living trust, an irrevocable living trust can be used in a number of situations.

An irrevocable living trust can be created to own a life insurance policy, to provide liquidity for estate taxes, or to provide for the care of beneficiaries after the death of the insured. Additionally, an irrevocable living trust can be used to fund charitable giving, to deal with a second personal residence, to provide for grandchildren, or to protect assets in the event of a judgment creditor. There are a number of contexts in which an irrevocable living trust would benefit an individual’s estate plan more fully than a revocable trust.

There are a wide variety of irrevocable trusts that can be used depending on your unique situation. A brief list of some of the possible trusts is as follows:

Credit shelter trust
Marital deduction trust
Generation-skipping trust
Trust for benefit of minors
Life insurance trust
Charitable remainder trusts
Charitable lead trusts
Qualified personal residence trusts

Certain complex irrevocable trusts, such as grantor-retained income trusts, grantor-retained annuity trusts and grantor-retained unit trusts can provide estate tax savings by reducing the deemed value of gifts made to children and grandchildren.

However, because the consequences of an irrevocable trust are not alterable, the irrevocable living trust must be created only with the advice of a highly skilled attorney experienced with the significantly complex matters involved.

Your estate plan is the box that carries your entire life savings.

Your better legacy depends upon the accuracy and completeness of your estate plan