If you are actively planning your estate, then you are doing something very smart for you and your family. In the process of estate planning, you are likely weighing a number of different options. To name a few examples, you need to consider who will be the executor (under Florida law, called the personal representative) for your last will and testament, you will be deciding on what assets go to which beneficiaries, and you might be considering certain advance directives.
You also may be considering whether to create a trust, which is a financial vehicle in which you can place a certain portion, or all, of your estate assets depending upon your circumstances. When creating a trust, you as the trust creator (called a “grantor” or “settlor” under Florida law) have a choice whether to go with a revocable trust or an irrevocable trust. Of course, you should be making this choice with the sound advice of an experienced estate attorney. But there are some things that you need to understand about each.
Accordingly, in this article, we will focus on an irrevocable trust, giving you the pros and cons regarding whether it is the right choice for you. If, after reading this article, you want to create a trust for your own estate, then we welcome you to give us a call at Doane & Doane, PA.
At Doane & Doane, PA, we are passionate about giving our clients the personalized legal counsel they need to appropriately take care of many major life and death decisions, such as estate planning. So, to answer your Florida irrevocable trust law questions after you read this article, we welcome you to consider contacting us at Doane & Doane, PA for estate planning advice and services. You can contact us today at 561-656-0200 or fill out our online contact form.
Revocable vs. Irrevocable
The first order of business when it comes to trust is to understand the difference between revocable and irrevocable trusts. As the names suggest, a revocable trust can be revoked or easily changed, whereas an irrevocable trust is meant to be permanent. Thus, the key difference is the grantor’s control over the trust.
Indeed, revocable trusts the terms of the trust – i.e., the instructions you place on the management of the trust – can change at any time. Thus, you can change beneficiaries, add new beneficiaries, and alter the instructions on how the assets in the trust are managed.
By contrast, an irrevocable trust normally cannot be changed after it is created. Also, unlike a revocable trust, the grantor of the trust loses all right to ownership and, essentially, all control of the assets in the trust. Only in rare circumstances can a grantor make changes to an irrevocable trust.
The Good: Why You Would Want an Irrevocable Trust
With the loss of control over the assets you place in a trust, the logical question is: why would anyone ever want an irrevocable trust? There are, however, a number of real benefits of an irrevocable trust over a revocable one.
1. The first, and likely most attractive benefit is tax savings. Because the grantor loses control over the assets in an irrevocable trust, the IRS views those assets as no longer part of the grantor’s estate. Accordingly, the irrevocable trust is instrumental in greatly reducing or eliminating estate taxes.
2. Another benefit is for seniors in Florida. Because long-term care for seniors in Florida is always increasing, many people are in the “rock and a hard place” situation of being unable to afford long-term care but are not eligible for Medicaid assistance. An irrevocable Miller trust or Qualified Income Trust in Florida can be the tool that helps seniors pull assets from their estate into the trust, and thus become eligible for Medicaid help, while also ensuring that their heirs can inherit assets.
3. Finally, irrevocable trusts can be used to capitalize on tax incentives for charitable gifts. Specifically, a Charitable Remainder Trust in Florida, allows the grantor to receive distributions from an irrevocable trust during his or her lifetime, and then the remainder goes to a designated charity.
The Not So Good: Concerns with Irrevocable Trusts
Of course, there are pros and cons to most things. So, some of the cons to irrevocable trusts include:
1. The grantor loses direct control over any property that is placed in the trust. Also, the grantor is generally barred from reclaiming assets once placed in the trust.
2. While the grantor is no longer responsible for taxes on the assets in an irrevocable trust, the trust itself must still file a tax return, usually handled by the trust’s named trustee.
3. Finally, the transfer of assets into an irrevocable trust might still be subject to a gift tax.
All of the above are important considerations to keep in mind when deciding whether to use an irrevocable trust for a portion of your estate. It is highly recommended that you get the assistance of seasoned estate planning attorneys who can explain Florida irrevocable trust law.
Look to Doane & Doane for Help with Your Estate Planning Choices under Florida Irrevocable Trust Law
Founded in 2003 by husband and wife legal team, Randell C. Doane and Rebecca G. Doane, Doane & Doane provides legal and financial services to families, individuals, and businesses throughout Southeast Florida.
Estate planning is about much more than just giving away property. It is an act of love and kindness, with the ultimate goal of providing for the future financial security of your loved one. At Doane & Doane, our Wills and Trusts Attorneys West Palm Beach help people plan for retirement, make provisions for loved ones, figure out future child support, and minimize tax liability. Experienced wills and trusts attorneys know which tools to use to get the best results for their clients. Our lawyers can help you determine which tools are best suited to your specific circumstances.
When it comes to probate matters, such as the formal administration of an estate, Florida fiduciaries seek the assistance of the attorneys at Doane & Doane, P.A. to administer and manage their trusts and estates. Notably, the founding partners of Doane & Doane are board-certified West Palm Beach Probate Attorneys. With the additional advantage of certified public accountancy in their backgrounds, they present a unique combination of skills and experience which enables them to effectively settle, administer, and manage clients’ trust and estates.
Call us at Doane & Doane, P.A. to help you if you are faced with a probate matter, or if you would like estate planning services in Florida. You can reach us at 561-656-0200. Call us today.