What is Considered a Trust in Florida?
A trust is an agreement between a settlor and a trustee, which directs the trustee to hold the settlor’s assets for the benefit of the settlor’s beneficiaries. In simple terms, an individual will establish a trust to hold their assets for their beneficiaries. The person establishing the trust, or the settlor, can create a trust agreement where he is both the settlor and the trustee and place all of his assets in the trust.
Trusts are most often used to avoid the process of probate after the settlor’s passing, to protect the assets inside the trust, and to keep the trust and its beneficiaries confidential. A trust also allows the settlor to provide detailed instructions on how he would like his assets to be distributed after his passing.
What is the Difference Between a Revocable and an Irrevocable Trust?
A revocable trust allows the settlor to maintain ownership over assets placed inside of the trust. Additionally, a revocable trust may be changed by the trustor as long as he remains alive. If the owner of the trust acquires new assets that he would want to place in the trust or decides to change his beneficiaries – he can do so simply by executing a trust amendment. Through such an amendment, the settlor can make as many changes as he wants.
By contrast, generally, an irrevocable trust cannot be changed after it has been signed. Moreover, the settlor no longer has control over the assets that have been placed into the trust because he effectively gives up ownership of those assets.
One of the benefits of an irrevocable trust is that it allows estate taxes to be minimized on the assets inside of the trust. Another benefit is avoiding capital gains tax on anything inside of the trust. This is due to the fact that the individual who set up the trust is no longer the owner of the assets held inside the trust. Rather, the trust becomes the owner of the assets. A transfer of assets into an irrevocable trust is, however, subject to gift tax.
What Kind of Trust Do I Need in Florida?
One reason an irrevocable trust could be a good idea for someone is to minimize the individual’s tax burden. Another reason could be to shield those assets placed into the trust from creditors, while still passing them to beneficiaries named in the trust agreement.
A revocable trust could be a good fit for someone who wishes to remain in control of the assets inside the trust until he or she would become mentally incapacitated or pass away. When the revocable trust owner passes away, the trust becomes irrevocable.
There are many scenarios where an irrevocable trust would be better suited than a revocable trust and vis versa. Trusts can be uniquely tailored to the individual and the circumstances at hand. It is very important that you consult a Trust and Estates associate to discuss your unique circumstances and create a plan that would tailored to you.