Florida Revocable Living Trust - Initial Answers
What is a Revocable Living Trust?
A trust created while a person is still alive is called a Living Trust. The Living Trust is created when one person, a Grantor, places property into the trust. The property is held by a Trustee in the name of the trust and managed by the Trustee for the benefit of a Beneficiary. You can be the Grantor and Trustee of your own living trust, and retain management control over your own property while continuing to receive the benefit from the property.
How does a Revocable Living Trust work?
When a trust is created, a Trustee must be appointed to manage the trust. With a Revocable Living Trust, you (the Grantor) are almost always the Trustee as well as the initial beneficiary as long as you are alive. When you (the Grantor/Trustee) die, then the duties and obligations of managing the trust shift to the Successor Trustee. At the time of your death the trust is no longer revocable and the terms of the trust can no longer be changed.
Does a Living Trust help avoid taxes?
No. A well structured Living Trust is no different than a well structured Last Will for minimizing taxes. Income earned by property in the Living Trust will be taxable annually as income tax in the name and social security number of the grantor (Thats you). In addition, when you die, estate taxes may also be payable depending on the value of your estate. If the fair market value of your estate is greater than the available unified credit (currently $1,000,000) then you should consult a qualified lawyer in your jurisdiction to help you minimize your estate tax burden. The value of your estate will include the fair market value of all assets, the value of any previous gifts plus the proceeds of any life insurance policies. ( s. 733.607(2) )
So what is the benefit of a Revocable Living Trust?
After you die the assets of the trust can pass directly to your beneficiaries without the expense or delay of probate. Usually your beneficiaries will have unrestricted and uninterrupted access to income and assets after your death. The details of your financial holdings will also remain private and not be subject to a public probate court. In addition, in the event of disability, your Trustee can immediately take over your financial affairs for the duration of your illness or disability.
A Living Trust is not a method to avoid taxes or escape outstanding debts. After your death, a probate court can reach into any Living Trust you have created to resolve outstanding debts. A living Trust works best if you set aside enough assets so that a probate court can resolve all your debts without having to put any restrictions on your Living Trust.