Many individuals who have estate planning documents in place are familiar with a testamentary will and related documents, such as a power of attorney and advanced medical directive. However, estate planning and other financial planning documents can extend far beyond those parameters. One such legal tool available to those interested in them are trusts. Trusts offer a legal way for an individual, known as a grantor, to place property into a separate entity, which will be held for the benefit of a third party, also known as a beneficiary. Any type of property can be placed in a trust, and when it is, the property is considered to be owned by the trust. Trusts can be as simple or complex as the trustee wishes, and can achieve a variety of goals.
Benefits of a Trust
There are several distinct advantages to executing a trust. Trusts can not only provide for the grantor’s beneficiaries after his or her death, but it can provide for the grantor during his or her lifetime, as well. Trusts can also be useful in cases where a beneficiary has a health issue, a mental disability or incapacitation, and other scenarios that would prevent the beneficiary from being capable of managing the property on their own.
In their testamentary capacity, trusts can usually be administered without the need for the estate to be turned over to the Probate Court, since the property was transferred into the trust prior to the grantor’s death and cannot be considered part of his or her estate. In that way, the contents of the trust are also kept private.
Trusts also serve as protection of assets for trust beneficiaries, and offer a wide variety of options in creating them to suit different needs. The grantor can decide how the assets of a trust will be used and the time when the property can be distributed to a beneficiary, in addition to other terms and conditions. This may become particularly useful for parents who wish to set up a trust for the benefit of their minor children, in the event the parents become deceased prior to their children turning 18 years of age.
Revocable vs. Irrevocable Trusts
There are two main types of trusts for estate planning purposes – revocable trusts, and irrevocable trusts. As can be expected, they operate in slightly different ways. Revocable trusts can be changed at any time. To do so, the creator of the trust would generally modify the terms of the trust through an amendment. Or, if the grantor wishes to revoke the trust in its entirety, they can do so. Any assets contained within a revocable trust are considered the grantor’s assets and will be treated as such for tax purposes and if creditors exist.
On the other hand, an irrevocable trust is not able to be changed once it is executed. It is imperative to take appropriate measures when executing an irrevocable trust in order to ensure the grantor’s estate is properly protected and their wishes and needs are being properly addressed, since the property contained in the trust can no longer be controlled by the grantor once it is transferred into the trust. Benefits associated with irrevocable trusts include the possibility of decreased or eliminated estate taxes and a high degree of asset protection.
Drafting a Trust
If you are interested in executing a trust in the state of Florida, the knowledgeable attorneys at Hoffman, latin & Agnetti, P.A. can discuss your matter with you and advise you of the best options available in light of the facts surrounding your case. Please feel free to contact us today to schedule a consultation. We serve clients in Dade, Broward, and Monroe Counties.