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Florida Living Trust Checklist

July 08

Your Guide to Setting Up a Florida Living Trust

Written by Thomas Upchurch

Understanding Florida Living Trusts

A living trust can be a powerful tool for passing the benefit of your estate to loved ones on whatever terms seem most appropriate to you. But, most people have only a very general idea of what a living trust is, how it works, and how a living trust compares with a will.

A living trust is a trust created in the grantor’s lifetime to hold title to all of the property the grantor eventually plans to pass through the trust. During the grantor’s lifetime, he or she typically serves as both trustee and beneficiary, managing the trust assets for his or her own benefit. In practical terms, there is little difference between continuing to hold title to the property and housing it in a living trust. A living trust is revocable, meaning that the grantor can take the property back at any time. And, as both trustee and beneficiary, the grantor can buy and sell assets, spend money, and otherwise use and dispose of trust assets just as he or she would have before the transfer.

When the grantor passes away, the property remains in the trust and a successor trustee takes over, managing and distributing the assets for the benefit of the successor beneficiaries—the people the grantor has chosen to benefit from the assets after his or her death.

Though the basic operation of a living trust sounds simple, creating a trust document that achieves the grantor’s goals can be complicated. Seemingly small oversights and omissions can lead to serious problems, which may not be discovered until it’s too late to make changes. Thus, constructing a living trust is best undertaken with the guidance of an experienced Florida estate lawyer.

This quick and easy living trust checklist will help you decide whether a living trust might be the right solution for you and help you gather the information you’ll need for a productive discussion with an estate planning lawyer.

1. Understand the differences between a will and a living trust. Many people use a living trust in place of a will, while others use a combination of a will and a trust to pass property after their deaths. Your attorney can explain the pros and cons of wills and trusts in greater detail. As a starting point, some of the key distinctions are:

  • A will passes through probate and bequests become a matter of public record, whereas a trust is largely private
  • Bequests through a will are direct transfers of ownership, whereas a trust can provide for more regulated benefits—for instance, the grantor can specify the purposes for which trust assets can be used
  • A will does not take effect until the testator passes away, whereas a living trust takes ownership of assets immediately and only the trustee and beneficiary change upon the grantor’s death

2. If you’re married, talk with your spouse about whether you want to create a shared trust. There’s no one-size-fits-all answer to this question. as it will depend on the debts and assets of each party and whether the couple has jointly-titled property to pass through the trust.

3. Inventory your assets. It’s important to ensure that you are considering all of your assets and that you know how your property is titled and how it should be referenced in legal documents. Your estate planning attorney will ask questions to help make sure that you have identified all property that should be included in the trust, but making a thorough inventory in advance is helpful. Overlooking property can partially defeat the purpose of a living trust by forcing part of your estate into probate while the remainder is administered through the living trust.

4. Decide what assets you want to place in the trust. Generally, if you are using a living trust in place of a will, the trust will include property that would otherwise pass through an estate. Certain property may pass to a direct beneficiary or with rights of survivorship. Some common examples include joint bank accounts with rights of survivorship and retirement accounts with designated beneficiaries. But, property that isn’t otherwise provided for and isn’t included in the trust could end up passing through intestate. This not only forces those assets into the probate process, but may also result in property passing to someone you would not have chosen.

5. Decide who you want to succeed you as trustee, and talk with that person to make sure he or she is willing and able to take on that role. Of course, that means you’ll have to educate yourself about the structure of a trust and the role of the trustee. The basic set-up involves three parties: the grantor, the trustee, and one or more beneficiaries.

When a living trust is created the grantor typically plays all three roles. That’s because during his or her lifetime, the grantor will control the trust assets and will also benefit from their use. However, the trust document names a successor trustee—and, ideally, an alternate–and successor beneficiaries. When the grantor dies, the successor trustee takes over, and becomes responsible for managing the trust for the good of the beneficiaries. This includes not only making distributions according to the terms of the trust, but also managing assets responsibly to preserve value and generate income, and providing periodic accountings. So, you will want to choose someone who is both trustworthy and well qualified.

6. Decide who you want to benefit from the trust. This process is much like determining who will inherit through a will, but allows you a bit more flexibility, since you can limit the purpose or frequency of distributions rather than simply passing assets directly. In addition to family members and other loved ones, you may want to consider making charitable contributions through your trust. Some people with very large estates use a special type of charitable trust as a means of providing for loved ones, making significant charitable contributions, and managing tax obligations.

7. Determine whether any of your beneficiaries have special circumstances that may impact the terms of the trust or require creation of a separate trust. Of course, your attorney can explain the trust options and the circumstances under which a specific trust format or specific terms may be required. But, you know your loved ones. It’s up to you to think through issues like whether any of your beneficiaries have special needs that may make them dependent on public benefits, or others face challenges like drug addiction or judgments against them that may jeopardize their ability to benefit under a standard living trust.

In those circumstances, it may be necessary to treat those beneficiaries differently to ensure that assets aren’t lost to creditors or that your loved one doesn’t lose access to Medicaid or other necessary benefits.

8. Determine what type of instructions you want to provide for distribution of living trust funds. Assets placed in a trust may be transferred out of the trust to beneficiaries much in the same way that direct bequests are made under a will. But, the grantor of a trust has many other options. For example, trust assets may be distributed to the beneficiaries periodically over time, or distribution may be based on landmarks such as college graduation or a particular birthday.

The grantor can also decide whether the beneficiaries will receive core trust assets, or just earnings on those assets. And, the grantor can dictate the purposes for which trust assets may be distributed, giving the trustee broad discretion or limiting distributions to particular purposes such as educational expenses.

The ability to place these limitations is particularly useful when the grantor has a loved one who is deeply in debt, has a problem with drugs or alcohol, or would otherwise not benefit from a direct lump-sum distribution. Trust restrictions can also ensure that assets remain in the family, rather than being dissipated by events such as divorce.

9. Actively maintain your living trust. One pitfall associated with a living trust is that the grantor may forget to title newly acquired property to the trust, creating a smaller pool of assets that will have to pass through probate when he or she passes away. If you choose to use a living trust in place of a will, make sure any property you want to pass through the trust is properly titled as it is acquired. This includes routine purchases such as a new automobile, and simple transactions like the opening of a new savings account.

Similarly, you will want to periodically assess your trust terms to ensure that the successor trustee you’ve appointed is still willing and able to serve and the best choice for your purposes. And, of course, you may need to alter your beneficiaries as life changes such as marriage, divorce, birth and death occur.

If a living trust seems like the right solution for your family, or if you’re unsure about the best approach to estate planning and need more information, talk to an experienced estate planning lawyer. While the various legal structures available for estate planning may seem complicated and there are important technical requirements associated with each, an attorney who works regularly with estate planning clients can explain the options in plain English and help you take the next step toward protecting your loved ones.