Trusts
Trusts serve many different purposes, from avoiding probate to asset protection to ensuring public benefits like Medicaid are not interrupted. Whether you need help setting up a trust, funding a trust, administering a trust, or just want to know if a trust is right for you, I can help.
What Is A Trust Or Trust Agreement?
A trust is created when one person holds property for the benefit of another. The person who gives the property is called the settlor or grantor; the person who receives the property and maintains it for the benefit of another is the trustee; and the person who ultimately benefits from the property is the beneficiary. Sometimes the settlor is also a trustee and beneficiary, but there must also be another beneficiary–maybe one that receives the property after the settlor dies—in order for there to be a valid trust.
Trusts come in many varieties, but generally fall into three categories: revocable, irrevocable, and testamentary.
Different trusts are used for different purposes. While most people who want to establish a trust will want a revocable trust, irrevocable trusts can be useful for tax planning, asset protection, or to ensure that a beneficiary continues to qualify for public benefits, such as Medicaid. Since everyone’s situation is unique, you should consult with an estate planning attorney to determine if a trust makes sense for you.
What Are Different Types of Trusts?
Revocable Trusts
A revocable trust is one that the settlor retains the right to amend or revoke until a certain event (usually the settlor’s death). Most trusts are revocable to give the settlor the most flexibility, as beneficiaries and the way assets are distributed can be changed based on changes in the settlor’s life. A living trust attorney can guide you.
Testamentary Trusts
A testamentary trust is one that is created under a person’s will and only takes effect after they die. Some trusts, such as a qualifying special needs trust (a trust created for one’s spouse to prevent Medicaid disqualification), should only be established by testamentary trust due to federal and state law.
Irrevocable Trusts
An irrevocable trust is one that cannot be amended or revoked by the settlor, though there are steps that can be taken to permit some modification, like nominating a trust protector (a third party who makes sure the trust is administered according to the settlor’s wishes and can exercise certain powers given by the settlor) who can change beneficiaries based on certain circumstances.
FAQs About Trusts
What Is Funding A Trust?
Funding a trust is the process of actually transferring property into the trust. Different types of property require different steps–real estate requires a new deed, while bank accounts require either retitling the accounts or changing beneficiary designations. Without this important step, a trust agreement may just be an expensive stack of papers and your property may still have to go through probate after you pass away.
Many attorneys will draft a trust and then leave it to the client to figure out how to fund it, which usually ends badly. At Merhar Law, I help you each step of the way, from initial planning through funding, so there are no unwelcome surprises for your beneficiaries down the road.
What Is A Trust Settlor or Grantor?
A trust settlor or grantor is the person who establishes and funds a trust with his or her property. Settlor and grantor both refer to the same person–different states just use different terms. A trust can have one or more settlors/grantors.
What Is A Trust Beneficiary?
A trust beneficiary is a person who “benefits” from a trust, which usually means he or she receives money or other property from the trust or can use trust assets, such as having a right to live in a home owned by a trust. For most revocable trusts, the initial beneficiary is the settlor, and then after the settlor passes away, the settlor’s spouse or children. A trust agreement will determine what rights each beneficiary has to the trust property.
Who Can Serve as Trustee?
Any person 18 years of age or older can serve as a trustee of a Florida trust, unless the trust instrument says otherwise. This includes corporate fiduciaries. In Florida, the qualifications to serve as a trustee are much lower than those to serve as personal representative, even though both trustees and personal representatives are fiduciaries and perform largely similar functions. Also note that a trustee of a Florida trust does not have to be a resident of Florida, even if the trustee is not a family member of the settlor. But remember that even though the standard to serve as trustee is low, trustees are given a lot of power and are often required to put in a lot of work to make sure your wishes are carried out, so you should only nominate someone you trust completely.
What Is Trust Administration?
Trust administration refers to the process of actually managing a trust. Depending on the type of trust and a settlor’s goals, this can look very different from trust to trust. But, generally, it involves distributing trust property to beneficiaries, prudently investing property that will remain in the trust, hiring and firing professionals to assist the trustee (attorneys, accountants, financial advisors), completing accountings of trust assets, filing trust income tax returns, and paying trust expenses. This can be a lot of work, so if you find yourself the trustee and do not know what to do, it is a good idea to contact a Florida estate planning attorney for guidance.
What Is A Trustee?
A trustee is the person(s) in charge of managing a trust. The trustee is a fiduciary, which means he or she has to put the interests of the beneficiaries first and always act in their best interest. Florida law determines some of a trustee’s responsibilities and powers, but a trust agreement can change many of these, so it is important to talk with a Florida estate planning attorney about what you want your trustee to be able to do.
Do You Need a Trust?
Most likely, no—few people need a trust. However, trusts are a useful estate planning tool in a wide variety of situations. For many people, a revocable trust can serve as a means to consolidate their assets and distribute them to loved ones outside of probate after they die. This will likely help avoid the costs and time associated with probate, but will be more expensive up front than just executing a will. Other times a trust may be appropriate are if you own property in multiple states, it is likely a minor will receive assets, you want to establish limitations on how assets are distributed to beneficiaries, or you want to protect assets from creditors.
How Do You Change a Trust?
To change a revocable trust, you execute an amendment, which will state the additions, deletions, and modifications you wish to make. For more substantial changes to a trust that has already been funded, you may need to execute a modification and restatement of trust with a revocable living trust lawyer.
Schedule a Free Consultation
If you would like help creating an estate plan tailored to your unique situation, or are looking for help updating your existing plan, please reach out to us to schedule a free consultation.