Most people understand that they want their estate plans to avoid probate upon their death, but most people do not understand how to fully use their Revocable Living Trust. Merely having a Florida living trust will offer you and your family few benefits if you do not use it correctly. Worse yet, many attorneys fall short by either failing to advise clients, or improperly advising clients, as to how to implement and maximize the many benefits offered by a revocable living trust in Florida. This post will discuss five ways to “fine tune” your Florida revocable living trust in order to get the maximum protection and benefit from it.
First, you need to know that your Florida living trust is a contract between the person who sets up the trust, namely the “settlor” (or “grantor”), and the beneficiary. The settlor is typically the beneficiary during his/her lifetime. Upon the settlor’s death, the beneficiaries are those who are appointed in the Trust by the settlor. The settlor also appoints a trustee (a manager) to oversee the administration of the trust assets on behalf of the beneficiaries. Initially, the settlor is often also the trustee, followed by successors to serve if the settlor can no longer manage their own affairs.
So, if the trustee is responsible for the trust assets, the next question is whether the trust has any assets AND how does it own your assets? An unfunded Trust, which is often seen by Florida attorneys, will not accomplish your goals of avoiding probate upon your death. Funding a revocable living trust means that assets are appropriately titled in the name of the Trust so that the Trust controls the asset upon your death. For example, if the settlor owns real property, it should be transferred to the trust by a deed. Similarly, for bank accounts and other “non-qualified” accounts such as CDs, stocks or bonds, the assets must be placed into the trust with each financial institution. If these steps are not taken for all the settlor’s assets in some manner, there will be complications upon the death of the settlor and the advantages inherent in the trust will not be realized.
Second, a Florida revocable living trust can offer asset protection for beneficiaries. Trust planning often provides that, upon the death of the settlor, all of the assets will be distributed immediately to the beneficiaries. An important question to ask is whether this is the best use of a trust that can provide “asset protection” for the beneficiaries?
We live in a litigious society and there is a huge benefit in having assets reserved which are beyond the reach of creditors. A properly drafted Florida revocable living trust provides asset protection to beneficiaries upon the Settlor’s death. So if you want to protect your children’s inheritance on their behalf, your trust plan can do that for you. This means that their inheritance can be protected from ex-spouses, the nursing home, lawsuits and creditors, and more. Most Florida attorneys do not incorporate this type of planning into their own estate plan but we do through the Personal Asset Trust.
Third, a Florida revocable living trust with an added supplemental needs trust can allow disabled beneficiaries to maintain eligibility for public benefits. Estate planning often involves planning for one or more disabled beneficiaries, or planning for family members who may become disabled someday. Yet did you know that if a beneficiary receives a lump sum, they can be disqualified from certain kinds of disability benefits? A properly drafted revocable living trust can add a supplemental needs trust to assist your family upon your death, which protects your heir and can allow the beneficiary to continue receiving public benefits for disability. Sadly, this Trust benefit is also often missed by many estate planning attorneys.
True Story: I had a client with no children who wanted to provide for her sister upon her death. I did not draft her living trust but made a small modification to it. When my client died in her upper 80’s, her sister was sick and in the nursing home at the time and on Medicaid. Because my client’s revocable living trust did not have a “backup” supplemental needs trust, the bequest to the sister took her off of Medicaid and was spent very quickly. The older trust could have protected the inheritance for her sister’s benefit and made her sister’s life better in the meantime.
Fourth, a Florida revocable living trust can provide key estate planning protection for those in second marriages with children from prior marriages. With today’s divorce rates and increased life expectancy, it is a very common estate planning concern to plan for both a current spouse and children from prior marriages. Good estate planning, typically done through a Revocable Living Trust, can provide certainty that upon the death of the Settlor, the surviving spouse can be prohibited from changing the Trust and prevented from disinheriting the children of the first marriage. This way, you get to create a good estate plan and provide for your spouse but also provide for your children as well.
Fifth, your Revocable Living Trust can provide an IRA “stretchout” to your children and grandchildren. There is a lot to learn about here, but please feel free to download our Free Guide to IRA Inheritance Trusts to potentially provide your children a private pension upon your death.
In conclusion, your own Revocable Living Trust should probably be reviewed every 5 years to make sure the assets are properly re-titled, the trust is up-to-date and you are properly providing for your family upon your death.
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Also, if you want to learn more, please download a free copy of my book, the Top 20 Rules for Protecting Your Florida Estate.