As the new year goes forward, your estate planning questions arise. Are you considering a trust? Are you wondering what kind of trust you should include in your Florida estate plan? Did you know that trusts are one of the estate planning tools created for the management of assets, both during your life and after your death? However, be mindful, there is not just one type of trust but several used in estate planning. Because a blog on trusts would be quite extensive, for our purposes, we will divide trusts into two categories in order to make them easier to understand. The two categories for trusts in this blog are either revocable or irrevocable. This means they can either be changed or canceled after they are created or they cannot (without great difficulty). Be very aware that there may be important legal implications in choosing between a revocable trust or an irrevocable trust.
A revocable trust:
• the creator of the trust is called a trustor
• the trustor remains the beneficiary until death
• when the trustor dies the trust passes on to the successor trustee and beneficiaries
• married couples often use this estate planning tool and may both be co-trustees and co-beneficiaries until death
• upon the death of the married couple, their adult child becomes successor trustee
• other children and even grandchildren may become successor beneficiaries
• there are NO tax benefits during the trustor’s life with this trust because this trust can be revoked or changed before the original trustor’s death
• is often created to distribute assets to beneficiaries to avoid probate
An irrevocable trust:
• most importantly, once created this trust cannot be changed, except under limited circumstances
• be aware that when the assets are put into the trust, they are no longer considered the property of the trustor, instead, they are the property of the trust
• may LIMIT or ELIMINATE income and/or estate tax and usually cannot be reached by trustor’s creditors
• often used as a long-term planning tool
• because the assets are not owned by the trustor, they ARE NOT considered when determining whether the trustor is eligible for government programs, such as Medicaid, provided that for Medicaid purposes a lookback period has been satisfied
• often used as a special needs trust for an adult disabled child
• when the parents of a disabled adult child pass away, the special needs trust, which is irrevocable, will enable the disabled child to REMAIN ELIGIBLE for government programs
Our estate planning law firm takes a very different approach from what you might have come to expect. Our goal is to create lifelong relationships with each of our clients, to guide and manage your legacy for the rest of your life. Please contact our offices in Stuart and in Palm City to get answers to your estate planning questions.