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What Are Trusts?Trusts are one of the most important parts of estate planning law. Put simply, a trust is similar to a treasure chest. It’s like a locked safe, holding valuable items and agreements for your family. You and your estate planning attorneys set up the trust, selecting what to place inside and lock it. Of course, in reality, there is no treasure chest. Instead, a trust is a legally binding document. A trust can only be accessed by ‘trustees.’ For this reason, the initial Trustee is typically you individually, while successor trustees often include your close family members, children and/or your closest friends. The current acting trustee can access the trust, change the assets within it and distribute the contents as per the conditions laid out in the trust. Successor Trustees are granted these privileges only at the time they are designated to serve. This is typically upon your death or incapacity. Trust planning can play a crucial part in shaping the future of your family. They can ensure your guidance, vision and support for your loved ones are still alive even after your death.
Types of TrustsThere are two basic types of trust – living trusts and testamentary trusts. Regardless of whether you’re the grantor, trustee or beneficiary, it’s crucial to be able to know the difference between the two. If you need further guidance, then contact an estate planning attorney.
Revocable Living TrustsLiving trusts, also referred to as revocable trusts, are set up during a person’s lifetime. The creator (known as a ‘grantor’) can make changes at any moment while they’re living, including dissolving (“revoking”) it, adding or removing beneficiaries and buying or selling assets. When the grantor dies, a living trust becomes irrevocable as the grantor is no longer alive to make changes to it.
Testamentary TrustAlthough Trusts and Wills are commonly believed to be mutually exclusive, the reality is that sometimes they can work together. A testamentary trust doesn’t come into play until after the grantor’s death. The grantor has the right to cancel the trust at any moment and make adjustments for their after-death planning. It is important to keep in mind that since this Trust is created by a will, probate is required prior to administration. That being said, there are numerous advantages regarding testamentary trusts, particularly with asset protection and special needs beneficiaries.
What Is the Difference Between a Trust and a Will?Wills and trusts are areas of estate planning law that help protect your assets and ensure they pass on to your heirs. A will is a written document that expresses a deceased person’s wishes, including naming guardians for children, granting cash and objects to family and friends. A will only become active after one’s death. However, a trust is active the day you create it and a grantor can list the distribution of assets before their death – unlike a will. Wills must go through a legal process called probate, which has an authorized court administrator review them. Probate can be lengthy and cause family tensions, so it’s always best advised to use the support of an estate planning attorney. Trusts, however, are not required to go through probate when the grantor dies – they cannot be contested.
Why Set up a Trust? – The Benefits
Remain in ControlTrust planning allows you to maintain control over selected assets. Up until your death, you can make changes to a revocable living trust. Once you pass away, your decisions stay in place. This allows you to dictate where your assets go, ensuring nobody can interfere with your plans. You can also choose to have your success trustee make distributions periodically. Estate planning attorneys often recommend successor trustees to make income distributions for circumstances such as health, education and financial support. Some people may choose to have a trustee hold the assets until their children turn 35 or some other age, ensuring they get support and assets at suitable moments and events in their lives. For another example, let’s look at a person entering a new marriage but has children from their previous marriage. They may want to ensure any assets or money shared with their new spouse pass down to their children from the first marriage – a trust may allow them to do this.
Tax BenefitsTrust planning can be used to minimize estate taxes, ensuring financial support for generations further down the family tree.
Avoid Florida Probate CourtWith the help of an estate planning attorney, you can help your family and loved ones avoid Florida probate court when receiving assets after your death. By making the asset no longer under your name, but the name of the trust, you can avoid probate court, which is often complicated and emotionally taxing for those involved.
ProtectionTrusts are a popular type of estate planning as they allow beneficiaries a means of protecting assets. For example, if a beneficiary goes bankrupt, then a family gift could go missing. But if the gift was received through a trust, then the gift may be protected.
Ongoing TransfersEstate planning attorneys can help use trusts to transfer large sums of money. For example, by establishing a trust that buys a life insurance policy on the grantor. When the grantor dies, the insurance proceeds would be distributed to the beneficiaries.
Trusts Protect Special Needs Individuals or Medicaid RecipientsIf you have a child with special needs or if you’d like to help provide support after your death for someone receiving Medicaid, then a Florida living trust is essential. An individual with special needs receiving government benefits such as Medicaid could see their parents’ inheritance be counted against them to qualify for benefits programs. Thanks to trust planning, you can ensure the trust supplements those benefits.This is an important strategy to ensure your child is supported sufficiently. If your child receives government benefits for their disability, contact an estate planning attorney to ensure they’re supported even after your death.
Key Takeaways – What Are Trusts?
- A trust is a special type of legal document that holds assets for beneficiaries to receive after the trust creator’s death.
- There are the parties involved in trusts: grantors, trustees and beneficiaries.
- Trusts set rules on when and how assets are distributed.
- Trusts ensure your wishes are retained, even after death.
- Trusts can remove the need for probate.