The Revocable Trust in Florida

The revocable, or “living,” trust is often promoted as a means of avoiding probate and saving taxes at death. The revocable trust has certain advantages over a traditional will, but there are many factors to consider before you decide if a revocable trust is best suited to your overall estate planning needs and objectives. The experienced Florida estate planning lawyers and attorneys at the Coleman Law Firm can help you evaluate the appropriateness of a revocable living trust within the scope of your total estate planning needs.

The following frequently asked questions and answers will help you understand the advantages of the revocable living trust.

1.    WHAT IS A REVOCABLE TRUST?

2.    WHAT IS PROBATE?

3.    ARE ALL ASSETS SUBJECT TO PROBATE?

4.    HOW DOES A REVOCABLE TRUST AVOID PROBATE?

5.    HOW DO I KNOW IF MY ASSETS ARE PROPERLY TITLED TO MY REVOCABLE TRUST?

6.    CAN THE TRUST HOLD TITLE TO MY HOMESTEAD?

7.    DO I BENEFIT BY AVOIDING PROBATE?

8.    HOW ARE CREDITORS SATISFIED?

9.    DOES THE TRUST PROVIDE PROTECTION FROM CREDITOR CLAIMS?

10.    DOES THE TRUST PROVIDE PROTECTION FROM THE ELECTIVE SHARE?

11.    WHO PAYS FEDERAL INCOME TAX ON TRUST INCOME?

12.    DOES A REVOCABLE TRUST SAVE ESTATE TAXES?

13.    WHAT ARE THE TRUSTEE'S RESPONSIBILITIES?

14.    WHO MAY ACT AS TRUSTEE OR SUCCESSOR TRUSTEE?

15.    HOW DO I KNOW WHAT I NEED?


1.    WHAT IS A REVOCABLE TRUST?

A revocable trust is a document (the “trust agreement”) created by you or your estate planning attorney to manage your assets during your lifetime and distribute the remaining assets after your death. The person who creates a trust is called the “grantor” or “settlor.” The person responsible for the management of the trust assets is the “trustee.” You can serve as trustee, or you may appoint another person, bank or trust company to serve as your trustee. The trust is “revocable” since you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.

During your lifetime the trustee invests and manages the trust property. Most revocable living trust agreements allow the grantor (you) to withdraw money or assets from the trust at any time, and in any amount. If you become incapacitated, the trustee is authorized to continue to manage your living trust assets, pay your bills, and make investment decisions during your incapacity. This may avoid the need for a court-appointed guardian of your property in the event of your incapacity. This is one of the advantages of a revocable trust. To learn more about the reasons for avoiding a court-appointed guardian contact one of the Florida revocable living trust lawyers or attorneys at the Coleman Law Firm.

Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for filing a "Notice of Trust", paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. The trustee’s responsibilities at your death are discussed below.

Your assets, such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust. Assets that are not properly transferred to the trust may be subject to probate. However, certain assets should not be transferred to a trust because income tax issues may arise. You should consult with your Florida estate planning attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership. If you would like the assistance of a Florida revocable living trust lawyer or estate planning attorney, please contact the Coleman Law Firm so that we can assist you in making the determination of whether the revocable living trust is appropriate for your circumstances.  (Back to the Top)

2.    WHAT IS PROBATE?

Probate is the court-supervised administration of a decedent’s estate. It is a process created by state law to transfer assets from the decedent’s name to his or her beneficiaries. A personal representative is appointed to handle the estate administration. The probate process ensures that creditors, taxes and expenses are paid before distribution of the estate to the beneficiaries. The personal representative is accountable to the Florida probate court as well as the estate beneficiaries for his or her actions during the probate administration. For probate estates having less than $75,000 of non-exempt assets, Florida law provides a simplified probate procedure, known as summary administration. For answers to frequently asked questions about Florida probate and Florida probate lawyers, click here.  (Back to the Top)

3.    ARE ALL ASSETS SUBJECT TO PROBATE?

No, only assets owned by a decedent in his or her individual name require probate. Assets owned jointly as “tenants by the entirety” with a spouse, or “with rights of survivorship” with a spouse or any other person will pass to the surviving owner without probate. This is also true for assets with designated beneficiaries, such as life insurance, retirement accounts, annuities, and bank accounts and investments designated as “pay on death” or “in trust for” a named beneficiary. Assets held in trust will also avoid probate. However, the use of joint ownership and beneficiary designations may create other adverse consequences within the context of your overall estate plan. For instance, joint tenancy property, because it is automatically transferred to the surviving owner at the death of one owner, is not available for the decedent's estate tax exemption. For a couple with a taxable estate (over $2,000,000), having all of their property jointly owned, with rights of survivorship, could result in the beneficiaries of the estate incurring as much as $900,000 in unnecessary estate taxes. Before you rely exclusively on joint tenancy or beneficiary designations to avoid probate, please contact an experienced revocable living trust lawyer or estate planning attorney at The Coleman Law Firm to learn how it may impact your potential estate tax obligation.  (Back to the Top)

4.    HOW DOES A REVOCABLE TRUST AVOID PROBATE?

A revocable living trust avoids probate by effecting the transfer of assets during your lifetime to the trustee. This avoids the need to use the probate process to make the transfer after your death. The trustee has immediate authority to manage the trust assets at your death; appointment by the Florida probate court is not necessary.

The “funding” of a revocable trust is critical to successfully avoid probate. Those persons who do not fully fund their trusts often need both a Florida probate administration for the non-trust assets as well as a trust administration to completely distribute the assets. Because the revocable trust may not completely avoid probate, a simple “pour over” will is needed to transfer any probate assets to the trust after death.  (Back to the Top)


5.    HOW DO I KNOW IF MY ASSETS ARE PROPERLY TITLED TO MY REVOCABLE TRUST?

The account statement, stock certificate, title or deed will make some reference to the trust or to you as trustee. You might also elect to fund your trust by naming the trust as a beneficiary of life insurance or other similar arrangements. Your Florida estate planning attorney and financial advisor may assist you with the transfer of assets to your trust. If your trust will own real estate then it is important to have the deed prepared by an experienced Florida estate planning attorney or revocable living trust lawyer. The attorney will consider the impact of existing mortgages, title issues and homestead restrictions when the deed is prepared. A deed transferring real property to a trust should have special language not commonly found in deeds that will help ensure that the trustee can transfer the real property out of the trust in the future without creating title issues.  If you would like to have your existing revocable living trust reviewed by an experienced revocable living trust or estate planning lawyer or attorney, please contact the Coleman Law Firm to schedule an appointment at (904) 448-1969, or toll free at (888) 492-2468.  (Back to the Top)

6.    CAN THE TRUST HOLD TITLE TO MY HOMESTEAD?

In some situations your homestead property can be transferred to your trust. Most Florida counties have special requirements to maintain the homestead tax exemption and special language may be required in the trust agreement and the deed. Your Florida revocable living trust attorney can advise you on whether placing your homestead in your trust is appropriate, and if so, the requirements for a valid transfer.  (Back to the Top)


7.    DO I BENEFIT BY AVOIDING PROBATE?

Avoiding probate may lower the cost of administering your estate and time delays associated with the Florida probate process. However, many of the costs and time delays associated with probate, such as filing a federal estate tax return, will also be necessary with a revocable living trust. The administration of a revocable trust after death is similar to a probate administration. The trustee must collect and value the trust assets, determine creditors and beneficiaries, pay taxes and expenses, and ultimately distribute the trust estate. A trustee is entitled to a fee for administration of the trust, as is the personal representative of an estate. To the extent professional services of attorneys, accountants and estate liquidators are used to complete the process, the savings may be marginal.

On the other hand, avoiding probate in multiple states is a definite benefit. Because of the nature of real estate, probate is usually required in every state in which you own real estate. This can usually be avoided by transferring ownership of the real estate to your living trust during your lifetime.  (Back to the Top)

8.    HOW ARE CREDITORS SATISFIED?

Florida’s trust law does not have a specific procedure for identifying and paying creditors at death. The creditors have up to 2 years from the decedent’s death to file claims against the estate. The trustee may be reluctant to distribute the trust assets to the beneficiaries until he or she is satisfied that all claims have been paid, and 2 years is a long time to wait. For this reason, some clients choose to open a Florida probate estate in addition to the trust administration to take advantage of the probate claim process. The probate law limits the time for creditors to file claims against the estate (generally 3 months from the date of notice), and also provides a process for objecting to claims.  (Back to the Top)

9.    DOES THE TRUST PROVIDE PROTECTION FROM CREDITOR CLAIMS?

In Florida, the assets in a revocable living trust are not protected from the claims of your creditors. During your lifetime the assets in a revocable trust are treated as owned by you, and subject to the claims of your creditor as if you owned them in your personal name. If the revocable trust assets remain in trust after your death, the interests of the beneficiaries may be protected from their creditors by a “spendthrift” provision in the trust agreement. Florida law provides special protection for many types of assets, including assets owned by a husband and wife as “tenants by the entirety.” Consideration should be given to these assets when you decide how to fund your revocable trust. Your Florida revocable living trust attorney can advise you on the types of assets that offer creditor protection and the effect of funding your trust with them. If you would like to consult with an experienced asset protection attorney to determine whether you assets are protected from creditors' claims, please contact the Coleman Law Firm to schedule a consultation. If you would like additional information about asset protection planning to protect your assets from the unreasonable claims of creditors, click here.  (Back to the Top)

10.    DOES THE TRUST PROVIDE PROTECTION FROM THE ELECTIVE SHARE?

Florida law provides that a surviving spouse is entitled to a minimum portion of the decedent’s estate regardless of the provisions of the decedent's will or trust. This elective share is equal to 30% of the estate, including certain assets passing outside of probate. Generally, assets held in a revocable trust will be subject to the elective share. There are some exceptions to the elective share, and the right to receive an elective share can be waived by the spouse. You should consult with your Florida estate planning attorney or probate lawyer regarding the application of the elective share to your particular situation.  (Back to the Top)

11.    WHO PAYS FEDERAL INCOME TAX ON TRUST INCOME?

In most instances, the revocable living trust is ignored for federal income tax purposes during the grantor’s lifetime. The income and deductions are reported directly on your individual income tax return as if the revocable trust did not exist. The revocable living trust will use your social security number as its tax identification number.

A revocable trust becomes a separate entity for federal income tax purposes when it becomes an irrevocable trust at your death, or stops reporting income under your social security number for any other reason. The trustee is then required to file an annual fiduciary income tax return (Form 1041). Taxable income, deductions and credits are determined in much the same way as for an individual. Trusts are also allowed a deduction for distributions to beneficiaries. In this way, the trust passes on income and deductions to the beneficiaries to be taxed on their personal income tax returns. Income that is not distributed to the beneficiaries is taxable to the trust.  (Back to the Top)

12.    DOES A REVOCABLE TRUST SAVE ESTATE TAXES?

Revocable living trusts are often credited with saving estate taxes, but this is not entirely accurate. Your retained interest and power over the trust assets will cause the trust to be included in your taxable estate at death. The revocable trust can be drafted to minimize the effect of estate taxes, but the same estate planning techniques are available to persons who choose to use a will as those who choose a revocable living trust.  (Back to the Top)

13.    WHAT ARE THE TRUSTEE'S RESPONSIBILITIES?

Serving as trustee is no simple task. While very important, the prudent investment of trust assets is not a trustee’s only responsibility. Your trustee’s exact powers and duties will depend on the instructions in your trust agreement. But, in general, your trustee will:

• Hold trust property
• Invest the trust assets
• Distribute trust income and/or principal to the beneficiaries, as directed in the trust agreement
• Make tax decisions concerning the trust
• Keep records of all trust transactions
• Issue statements of account and tax reports to the trust beneficiaries
• Answer any questions you and the beneficiaries may have concerning the trust

Your trustee may have broad powers or very limited powers. In either case, your trustee is a fiduciary and must follow a strict standard of care when performing trust functions. An experienced living trust lawyer or attorney can provide counsel regarding the trustee's fiduciary duties.  If you would like additional information about trust administration involving a revocable living trust, click here.  (Back to the Top)

14.    WHO MAY ACT AS TRUSTEE OR SUCCESSOR TRUSTEE?

The choice of a trustee is extremely important, and may have tax consequences. You can name almost anyone as your trustee. Unlike the appointment of a personal representative of a probate estate, a trustee does not have to live in Florida or be related to you. You can name yourself or any other individual (subject to tax considerations), or a corporate trustee, such as a bank or trust company. The individual trustee can be a family member, friend or professional advisor. Many individuals appoint family members or friends as successor trustee, to assume responsibility for the trust management and distribution after their death. When a family member or friend is chosen, consideration must be given to the person’s qualifications, the potential for friction with other beneficiaries, and the potential burden you are placing on that individual. The trust agreement should allow these individuals to hire qualified professionals to assist them in their duties, such as attorneys, accountants and financial advisors.  (Back to the Top)

15.    HOW DO I KNOW WHAT I NEED?

This information is intended to give you a basic understanding of revocable living trusts, but it cannot substitute for a thorough review with your Florida estate planning attorney or revocable living trust attorney. A revocable trust must be implemented as part of an overall estate plan. Ownership of assets must be coordinated between the individual and the living trust. Decisions must be made as to what assets are appropriate to fund the trust, the transfers must then occur, and the asset allocation should be periodically reviewed. Tax considerations must be discussed with qualified professionals. The living trust agreement should reflect your family, economic and tax goals. A revocable trust can help you accomplish these goals when properly prepared and implemented with the assistance of an experienced estate planning attorney.

If you would like a complimentary initial consultation with an experienced revocable living trust, asset protection, or estate planning lawyer or attorney to explore how a revocable living trust may assist you in achieving your estate planning goals, please contact the Coleman Law Firm to schedule your consultation.  (Back to the Top)

The estate planning lawyers and attorneys with the Coleman Law Firm are experienced in the design, drafting and implementation, including funding, of the revocable living trust and offer their services as estate planning, probate, elder law, Medicaid planning, asset protection planning and guardianship lawyers and attorneys primarily in the Northeast Florida area including the following counties, towns, and cities:  Duval County - Jacksonville, Jacksonville Beach, Atlantic Beach, Neptune Beach; St. Johns County - St. Augustine, Ponte Vedra Beach, Nocatee, St. Augustine Beach; Clay County - Orange Park, Middleburg, Green Cove Springs; Nassau County - Amelia Island, Fernandina Beach, Yulee, Callahan; Flagler County - Flagler Beach, Palm Coast, Bunnell; Baker County - Macclenny, Glen St. Mary; Putnam County - Palatka, Interlachen; Columbia County - Lake City, Fort White; and in other parts of Florida as requested or necessary.  We are a participating attorney in the AARP Legal Services Network by GE.