What Is a Trust, and How Will It Help My Family After I’m Gone?
When most people envision how they want their property divided following their death, that vision does not include their relatives spending months, maybe years, in probate court amassing legal fees and likely irreversible resentment among family members. Even simple wills require some involvement by the probate court to settle the estate, which unavoidably generates legal bills and delays the time when the heirs of the deceased will receive their share. One mechanism used in estate planning that is intended to avoid court involvement is something called a trust, which will hold and distribute property according to the creator’s instructions, similar to a will, but without the intervention of the probate court and the associated costs. There are several different types of trusts, allowing each individual to choose the one that best fits their circumstances and goals.
What Is a Trust and How Can I Create One?
Essentially, a trust is a document that creates a relationship where an individual or entity holds the creator’s property, subject to certain duties and obligations, for the benefit of someone else. There are three essential parties in every trust: the settlor, the trustee and the beneficiary. The creator, or settlor, can designate how the property in the trust should be used and whether it should be distributed during his/her lifetime or after death. The person who holds the property, the trustee, has the ability to control and manage the property in the trust but cannot benefit from it. Finally, the beneficiary is the person the trust is supposed to benefit, usually through regular interest payments during the settlor’s life or full transfer of property into the beneficiary’s name after the settlor’s death. It is important to note that the settlor’s property must be transferred into the trust prior to death in order to operate as intended.
Florida law has specific requirements that each trust must satisfy in order to be legally recognized and effective. First, the settlor must be competent and intend to create a trust. Second, the trust must have a definite beneficiary. However, this requirement does not apply to charitable trusts, pet trusts or trusts that permit the trustee to designate the beneficiary, provided certain rules are followed. Finally, the trustee must have duties to perform, and the same person cannot serve as trustee and be the sole beneficiary.
This type of trust, also known as a living trust, allows the settlor to manage and use the trust assets during his/her lifetime and distribute any property remaining in the trust upon death. The settlor can also serve as the trustee and has the option to modify or completely revoke the trust at any point during his/her lifetime, provided there is not an issue of mental capacity. Additionally, this kind of trust typically permits the settlor full access to withdraw money or assets in the trust at any time. One of the largest benefits of this type of trust is that the trustee can take over management of the settlor’s financial affairs if he/she becomes incapacitated and potentially avoid the need for a court-appointed guardian.
Terminating or Modifying a Revocable Trust
In most cases, the settlor can unilaterally revoke or amend any term in the trust agreement, but if there is more than one settlor, like in cases where spouses jointly created a revocable trust, then changes to the trust agreement are a little more complicated. If the trust contains property owned by both spouses, either can individually revoke the trust, but any modifications must be made jointly. For property that is owned separately by the spouses, any revocation or modification of the trust is limited to the property owned by each separately.
Speak with a Lawyer
Determining how to manage your assets during and after your lifetime is based on lot of considerations, like tax consequences, the type of property owned and where the property is located. These decisions are best made under the guidance of estate planning attorney who has the knowledge necessary to make designations that will effectively execute your needs and wishes. The Tampa law firm of Bubley & Bubley, P.A., has an established estate planning practice and is available to assist you. Contact us to schedule an appointment.