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The Florida Revocable Living Trust
What is a revocable Living trust
A Florida revocable living trust is a legal fiction. While you are alive, the trust and yourself are the same person. Meaning that the trust files income taxes under your social security number and it does not provide asset protection because you and the trust are treated like the same person.
A revocable trust allows you to change title from your own individual name to the name of the trust. The creator of the trust is called the “grantor” or “settlor,”and the person who administers the trust is called the “trustee.” Therefore, when we title an asset under the trust it would be named as John Doe, as the Trustee of John Doe Revocable Living Trust.
Requirements of a Florida Revocable Living Trust
The revocable living trust’s requirements is governed by Section 736.0402 of the Florida Trust Code. In order to create a valid revocable trust in Florida, the following elements have to be present:
- The settlor must have capacity to create the trust;
- The settlor indicates an intent to create a trust;
- The trust must have definite beneficiary;
- The trustee must have duties to perform; and
- The same person is not the sole trustee and sole beneficiary.
The element that most estate planning attorneys concentrate on is the first element, the capacity to create the trust. The capacity to create a revocable trust is the same capacity required to create a last will and testament in Florida.
In Florida, any person 18 years or older with a sound mind may create a last will and testament. The capacity to create a last will and testament or a revocable living trust must be there at the time that the document is executed. A person is of sound mind if the person generally understands the nature and extent of the property to be disposed of, the relation between the person and those who would naturally claim a benefit from the last will and testament, and the nature and effect of the testamentary act. In re Wilmott’s Estate, 66 So. 2d 465, 467 (Fla. 1953).
To put it in simpler terms, you must have general knowledge of the assets you own and their values, you must understand who stands to inherit under your last will and testament, and understand the purpose of the testamentary act.
Purpose of a florida revocable living trust
The Florida revocable living trust serves multiple purposes, both during your lifetime and after you are no longer with us. During your lifetime, a revocable living trust is used for probate and guardianship court avoidance. When you pass away, the revocable living trust is used to provide for your beneficiaries through determined distributions, pay debts and expenses of your estate, and in limited circumstances provide for asset protection for your beneficiaries.
A florida revocable living trust is used to avoid probate & guardianship court
When the revocable living trust is properly funded, meaning that the assets are transferred and/or re-titled into the trust, the revocable living trust can serve as a vehicle to avoid probate and guardianship court proceedings.
In Florida, assets that you own under your individual name without a beneficiary designation pass through probate court at the time of your passing. The Florida revocable living trust avoids probate court because by transferring the assets into the trust, the assets are no longer owned by you individually but the trust.
Under Florida law, a notice of trust is filed with the probate court when you, the grantor, pass away. The reason for this is that the revocable living trust remains liable for your debts and obligations to the extent your estate is insufficient. It is recommended to speak to a probate attorney to set up a proper strategy.
In addition to avoiding probate court, the revocable living trust could be used to avoid guardianship court in the event you are incapacitated. A revocable living trust avoids guardianship court if substantially all your assets are funded into the trust. This is because a successor trustee listed under your trust, will administer the trust assets on your behalf, based on the instructions listed under the revocable living trust. If combined with a Health Care Surrogate, then guardianship court could potentially be avoided completely. Sometimes guardianship is a good option, specially if the incapacitated person is a vulnerable adult or child, but it is based on the totality of the circumstances.
A florida revocable living trust gives you control over distributions
With a Florida revocable living trust you have control over the disposition of the assets within the trust. You can either have the successor trustee distribute the assets outright when you pass away, or have the trust last for a number of years.
When you pass away, your Florida revocable living trust becomes irrevocable and then some of the assets protection features start kicking in. Your trust is liable for the debts and obligations of your estate to the extent your assets in your estate are not sufficient. After your creditors are properly noticed, and the time period to file claims has passed, then the assets in the trust are shielded if drafted properly.
Provisions can be added to the trust to prevent the trustee from making distributions to your beneficiaries if they are dealing with creditors of their own. As long as the trustee is not required to make distributions, creditors are typically not entitled to force distributions or have access to the trust assets.
The Florida revocable living trust is an essential document in the arsenal of most estate planning attorneys. The revocable living trust is used primarily for probate avoidance, but it provides control of distribution when you pass away, this is particularly important if you have young children, or you are worried that your assets or your business will not be administered correctly after you are no longer here.
Hope you find this information useful, and I look forward hearing from you.