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Trusts offer many advantages, both during the grantor’s lifetime and as an estate planning tool. However, one aspect that is often overlooked is the responsibility placed on the trustee. When a grantor who has been serving as trustee during his lifetime passes away or a trust is created by the grantor’s will and a trustee appointed, the duties may be daunting and confusing to the newly appointed trustee.
Florida residents may use many different types of trusts to protect and manage property during their lifetimes and to pass property upon or after their deaths. The most common type of trust employed in estate planning is known as a living trust. The grantor places his property into the trust and, during his lifetime, serves as both trustee and beneficiary, using the property as he chooses. When he dies, successor trustees and beneficiaries are appointed, and the beneficial use of the property passes to those the grantor has selected.
Some other Florida trusts include:
Charitable Remainder Trust: A charitable remainder trust may be created during the grantor’s lifetime or may be created by the grantor’s will. This type of trust has significant tax benefits. A charitable remainder trust pays out either a flat amount or percentage of the trust assets to the beneficiary at intervals over a period of up to 20 years. When the beneficiary passes away or the pre-determined period expires, the remainder of the trust assets are transferred to a designated charity.
Charitable Lead Trust: A charitable lead trust operates similarly to a charitable remainder trust, except that the payouts are reversed. The trust makes periodic payments to a designated charity over a pre-determined number of years, then the remaining balance of the trust is paid out to non-charitable beneficiaries such as the grantor’s descendants. This type of trust also offers significant tax advantages.
Domestic Asset Protection Trust: This type of trust is designed to secure assets from creditors. Although Florida law generally will not allow a grantor to retain a beneficial interest in a trust and still enjoy protection from creditors, this type of trust can be used to great advantage in a situation where leaving a direct inheritance to a child, grandchild or other loved one would be likely to result in seizure of the asset by the beneficiary’s creditors.
Grantor Retained Annuity Trust: This type of trust allows the grantor to receive regular distributions over a period of years, after which the remaining trust assets are transferred to a designated beneficiary. One key advantage of this type of trust is that the assets are valued at a discount for federal gift tax purposes.
Qualified Domestic Trust: The primary function of a qualified domestic trust is to allow a non-citizen surviving spouse to enjoy the same opportunity to defer estate taxes until his or her death that is available to surviving spouses who are U.S. citizens.
Although the exact responsibilities of a Florida trustee will vary depending on the type of trust and the terms of the trust, every trustee has certain obligations. Some, such as the requirement that a successor trustee appointed as a result of the death of the grantor must file a Notice of Trust in the appropriate court, are simple but technical. Others, such as the obligation to identify creditors and to manage trust assets responsibly for the good of the beneficiaries, can be complicated.
The trustee plays a fiduciary role, which means that he or she can be responsible to the beneficiaries of the trust if the assets are not managed properly. It is often in the best interests of the trustee to retain the services of an experienced trust administration attorney.
Avoid unnecessary stress and prevent costly mistakes by getting the guidance you need from the beginning. Fill out the form at the bottom of this page or call 386-320-6169 to learn more about how we can help you manage your responsibilities as trustee.