When creating your estate plan, you have many options available to you that enable you to keep control over your assets after you pass away.
One of the main ways to accomplish the goal of controlling the flow of your assets is a living trust, sometimes referred to as an inter vivos trust.
A living trust is a legal document that you create while you are still alive. Once your trust is created, all of your assets will be titled in the name of your trust by you, the trust owner. Those assets are then used or spent down by you while you are living.
At the time you pass away, the beneficiaries who are designated by you in your trust, then get access to your remaining assets, and those assets will be managed by the trustee you’ve chosen to succeed you.
In this article, we are going to talk about trusts by contrasting irrevocable and revocable trusts. If, after reading this article, you have additional questions about the Florida living trusts and the different types of living trusts available to you, then we welcome you to contact the Palm Beach County lawyers at Doane & Doane, PA. Call today at 561-656-0200 or fill out our online contact form.
The Two Types of Living Trusts in Florida
The two types of Living Trusts are as follows:
Each type of trust has its own advantages and disadvantages which we will cover in detail below.
1. Revocable Living Trust
A revocable living trust is a document that you can create that can be changed anytime during your life. For example, you can change your beneficiaries, your assets, assigned trustees, and how your assets are distributed.
Additionally, you may decide that your revocable living trust no longer serves your interests, and you can revoke it altogether.
In order to change your revocable living trust, you can have an amendment drawn up and added to the original trust.
The Benefits of a Revocable Living Trust
Some of the main benefits of a revocable living trust are:
1. Probate Avoidance: If you have a revocable living trust in place, it doesn’t go through probate.
2. Protects Your Last Wishes: By utilizing a revocable living trust, you maintain complete control of your assets until you are physically or mentally no longer able to do so. If you have a history of Alzheimer’s or dementia in your family history, a revocable living trust can provide you with peace of mind.
3. Changes: You can change your revocable living trust at any time in the future.
The Disadvantage of a Revocable Living Trust
The main disadvantage of a revocable living trust is that it does not protect you from creditors or lawsuits. Because you have control of everything in your trust and have access to the assets, you can still be sued for liability.
2. Irrevocable Living Trusts in Florida
An irrevocable living trust is exactly like a revocable living trust except for one major difference – you cannot change an irrevocable trust at any time.
This means that you can’t change your assigned beneficiaries, trust successor, or who gets’s your grandfather’s pocket watch. Why? Because once those assets are in an irrevocable trust, they no longer belong to you, they belong to the trust.
The Three Most Common Types of Irrevocable Trusts
While there are many types of irrevocable trusts available to you, we have listed below the three most common types. They include:
1. AB Trust: An AB Trust is most often utilized by spouses with high incomes to avoid having to pay estate taxes. This means that when the first spouse passes away, the trust splits into Part A and Part B. The money in Part A will remain in the trust, and the money in Part B will go to the surviving spouse. When the surviving spouse dies, both Part A and Part B of the trust will be distributed according to the terms of the trust.
2. Life Insurance Trust: In this type of irrevocable trust, the owner of a life insurance policy will place the policy in the trust so it will not be included in the estate. This is done for tax purposes and will still allow you to dictate who receives that money.
3. Charitable Trust: These types of irrevocable trusts are established to allow you to donate all or part of your estate to the charity or charities of your choice after you pass away. There are two types of charitable trusts: one that will distribute to your heirs first and gives the balance of your assets to charity, or one that pays the charity first and then distributes any remaining assets to your heirs.
The Benefits of a Revocable Trust
Because revocable trusts are permanent, you need to ensure that the benefits outweigh the disadvantages. The benefits are:
1. Protection from Lawsuits: If your irrevocable trusts contains all your assets, then your trust actually owns your assets – not you. This means that any liability lawsuit cannot go after your assets in your revocable trust.
2. Estate Tax Reduction: Because you no longer own any asset in the irrevocable trust, it cannot be taxed when you pass away.
3. Gives You Access to Government Programs: In order to be eligible for some programs, if you have a disability or are a senior adult, there are strict rules about income levels for some government programs. If you have an irrevocable trust, it can actually lower your taxable income so you or a loved one can remain in the government program.
The Disadvantage of an Irrevocable Trust
The downside of an irrevocable trust is because you no longer own anything in the trust, if you want to change anything, you have to go through a legal process.
Work with Irrevocable and Revocable Trust Lawyers in Palm Beach
Knowing which type of trust is best for your individual situation is an integral part of planning for the future.
At Doane & Doane, we help you determine the best trust for you in order to plan for life’s eventuality. Let us help you. We at Doane & Doane combine big firm resources and experience with the personal touch of a small, boutique firm. We pride ourselves on offering the kind of one-on-one attention that clients at big firms often do not enjoy.
After almost two decades of practice, we have earned the reputation as one of West Palm Beach’s most prominent tax and estate planning law firms. In particular, we understand that estate and probate matters involve a great deal of emotion. We are privileged to help clients on such important matters, and we genuinely care for and support our clients and their families.
We hope that all of our clients, friends, and business associates enjoy the hospitality of our firm’s legal staff. Doane & Doane serves clients in the communities along Florida’s Gold Coast and Treasure Coast, including Palm Beach, Broward, Miami-Dade, Indian River, St. Lucie, and Martin counties. For a free consultation and to get to know our firm, please give us a call at 561-656-0200.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.