A Florida living trust is a trust that allows you to put your assets into a trust, still control them, and create a plan to pass along those assets without going through Florida probate court. It’s a way to make your estate plan easier in Florida.
Many Florida residents are already using living trusts as part of their estate plan. For those who want to ensure that their property is handled when they’re gone for their family, you should understand how it works.
In this guide, we will explore the mechanics of Florida living trusts: what they entail, how to set up a living trust in Florida, as well as the effect on Florida estate taxes. Let’s jump straight in.
What is a Living Trust?
You may know what a trust is. You may not. The Florida living trust is just one example of a trust you can use as a part of your estate plan. There are many more to consider, but let’s discuss. Let’s talk about what this is.
The Basics of Living Trusts
A revocable living trust — sometimes simply called a living trust, for short — is an estate-planning document that allows you to manage your assets during your lifetime. Often in a Florida living trust, the grantor is the trustee.
Florida living trusts are especially good for one thing: creating a seamless transition of your assets to your beneficiaries upon your death. Unlike a will that needs to go through probate, assets in a living trust can be distributed directly to beneficiaries without court proceedings.
You also can use Florida living trusts to keep your privacy. Trust documents generally do not end up in the public record. Anything that has to pass through probate can be accessed publicly. Trusts bypass probate and therefore the public doesn’t have access to the details of the trust or its beneficiaries.
Finally, Florida living trusts are beneficial for grantors who may become incapacitated. In that case, the trust allows a successor trustee to step in and begin managing assets in the trust.
Types of Living Trusts
Living trusts come in many types, each one serving a different purpose.
Revocable Living Trust:
This trust can be changed or wound up by the grantor at any time before death. This gives you a little flexibility in your asset management.
Irrevocable Living Trust:
Once the trust is created, it can never be altered or broken. This will protect your estate from taxes, creditors, and lawsuits. Particularly useful for individuals with high net worth.
Testamentary Trust:
It is established through a will but only starts to work after the grantor dies. Usually created for the management of assets for the beneficiaries, usually minors.
Special Needs Trust:
A trust created for the benefit of disabled beneficiaries to provide them with particular advantages. But the advantage is that the beneficiary doesn’t risk losing their government benefits like Medicaid.
Charitable Living Trusts:
Allows grantors to donate their assets to a charity, all while keeping some of the trust's benefits during their lifetime. This kind of trust offers substantial tax incentives, allowing deductions from income for charitable purposes.
Pros and Cons of Florida Living Trusts
Although there is a lot of information out there about Florida living trusts, we want to be as clear as possible about the advantages and disadvantages of this kind of trust. If we lay it out, it will give you a better idea if this is the trust that works for you.
Advantages Of a Living Trust
If you want a comprehensive estate plan, it’s easier if you use living trusts. Here’s why.
- Avoiding Probate
The main benefit of such an arrangement is the avoidance of the probate process which can be lengthy and expensive. - Efficient Asset Management
Use this kind of trust for smoother asset management, even if you become incapacitated. - Tax Benefits Of a Living Trust
Using a living trust allows you, in some cases, to reduce the taxable size of your estate. You can also set it up to reduce the estate taxes passed along to your beneficiaries. - Privacy
Because they are private documents and don’t pass through probate, trusts keep your estate details confidential, including the assets and beneficiaries named in the trust. - Control Over Distribution
This allows grantors to impose specific asset distribution terms, which often serve to stop conflicts among beneficiaries.
When parents establish a trust, they can be confident that their assets will secure the financial future of their children. For instance, you might make an arrangement where your children receive their inheritance only at certain ages or with instructions for where it goes and when.
If you’re setting up a trust in an advantageous state, you also might want to consider a living trust in Nevada, South Dakota, Wyoming, Texas, North Carolina, Massachusetts, Indiana, Oregon and California. For living trusts after death, these states offer similar protection and benefits for your assets.
Disadvantages of a Living Trust
Florida living trusts carry a long list of positives, however, there are also limits to them.
- Initial Setup Costs
Setting up a living trust could be more costly upfront than a basic will. - Maintenance Requirements
Assets need to be regularly updated. Reports need to be made. Paperwork must be filed. Depending on the complexity, a Florida living trust can be a long-term commitment. - Complicated Tax Consequences
You’ll probably need some advice about how to handle income distribution as well as asset taxes. In a revocable Florida living trust, the assets are still considered part of your estate, and you’ll need to include them with your personal tax submission. - Incomplete Estate Managament
Living trusts do not include everything you need for estate planning. For example, some assets like retirement accounts and life insurance may require beneficiary designations that are not part of the trust. It’s not the “one-size-fits-all” solution for your estate needs.
How to Set Up a Living Trust in Florida
Ready to move toward creating your own living trust? Here’s what you’ll need to consider.
Choosing the Right Trustee
One of the most important tasks in creating a living trust is choosing the right trustee. The trustee will then take care of the assets and act for the benefit of the beneficiaries. When choosing a trustee, you should follow these pointers:
Trustworthiness
Your trustee should be someone with an unwavering commitment to their job, even after you’re gone.
Financial Acumen
Your trustee should be able to handle the assets of the trust and be financially literate about how to make investments and distribute income.
Availability
The trustee needs to be able to give enough time towards the handling of your trust.
Distribution of Duties
If you have a complicated estate, you might want to consider an organization or team of trustees to manage your Florida living trust. In this way, you’ll get better oversight and management of your assets.
Transferring Assets Into The Trust
How you transfer your assets into the living trust is just as important as you creating it in the first place. This is the processing of what is known as “funding the trust”. The main steps of this process are as follows.
Identify Assets
Decide what you want to fund the trust—real estate property, bank accounts, stock and bond investments, and personal items.
Retitle Assets
If you have real estate, you’ll need new deeds. If you have bank accounts, you’ll need to retitle those accounts. Same goes for your business interests, investments, or any other asset you’ll include in the trust.
Update The Beneficiary Designations
Check that life insurance policies and retirement accounts have the trust listed as a beneficiary, where applicable.
Make sure you’re keeping detailed records of all the transactions and modifications you make. This documentation could prove to be incredibly beneficial in case there are disputes or questions down the road about the assets of the trust.
Finally, make sure you’re working with an estate planning lawyer to make sure all assets are transferred correctly, in compliance with Florida Law.
Living Trusts in Florida: What Are the Legal Requirements?
The establishment and operation of living trusts is governed by Florida law. There is no such requirement related to the filing of living trusts with the court, but there are certain legal stipulations they must satisfy:
- Capacity:
The grantor must be of legal age and have the capacity to create a trust. - Trust Structure:
The trust document should be specific with respect to the terms of trust, objective of trust, trustee powers, and beneficiary details. - Signature Requirement:
Both the grantor as well as trustee should attest by signature to ensure this is a lawful trust.
Necessary Legal Documents
There are several other legal documents in addition to the trust document that need to be prepared as supporting documentation as you go through setting up a Florida living trust:
- Property Deeds - Deeds must be completed to transfer real estate into the trust.
- Assignment of the Personal Property - An assignment of tangible personal property to the trust
- Power of Attorney - This document creates a party who can act for you in the event that you are incapacitated.
- Advance Healthcare Directive - This spells out what you want to be done with your health care if you’re unable to make those decisions yourself.
Please note that the trustee (maybe you if you’re still alive) must make sure that every single asset is titled in the name of the trust. This includes property as well as financial accounts, investments, and private belongings.
Additionally, Florida law allows for trust documents to contain special provisions that make them unique to particular family situations or preferences. For example, a grantor may opt to direct how assets will be distributed to minor children.
Estate Taxes in Florida Living Trusts
First off, you’ll have to consider that both at the federal and state level, you’ll have some form of estate taxes to consider.
Federal Estate Tax for Living Trusts
At the federal level, living trusts can reduce estate taxes. But this only works if your estate is large enough. While assets placed in a revocable living trust stay in the grantor's taxable estate, irrevocable trusts give you a greater tax advantage by moving assets outside of the taxable estate.
An irrevocable living trust can help those with huge and valuable estates that just need a little care and management to make sure that it minimizes estate taxes and will benefit your heirs in the long run.
Given the complexity of federal estate tax laws, we recommend that you consult a qualified tax planner or attorney specializing in estate planning. You can’t always keep up with every change to estate law. But you can hire someone to do it for you.
Professionals can help you stay on top of federal tax laws and advise you on the best way to manage your Florida living trust. Basically, they’ll keep your estate plan on track to be the most tax-efficient it can be.
Florida Estate Tax Approach
As of October 2023, Florida does not have an estate tax. This lack of estate tax is meant to attract investors and trusts to the state. Although a Florida living trust can be advantageous for estate management and probate avoidance, it does not automatically protect assets from federal estate taxes.
And even though you might save some money on your tax bill, consider the residency and trustee requirements for a Florida living trust. It doesn’t always make financial sense to chase down zero estate tax when you have disadvantageous side effects.
Are Florida Living Trusts Worth it?
In short, living trusts are a great estate planning tool that allows you to avoid probate, maintain your privacy, and still control your assets. But is that enough for you?
Because each trust is unique, you might need help deciding if a Florida living trust is your best choice. And if it is, do you choose revocable living trusts? Irrevocable? Should you act as your own trustee? Or hire outside of the family? And what terms should you include to shape your financial future?
There are a lot of questions to answer. And that’s why we’re here to help. Fill out the form below and we’ll reach out to help you figure out what’s best. We’ve even created our own special irrevocable trust that you can set up from any state, not just Florida. These living trusts are bulletproof against creditor attacks and frivolous lawsuits. We’ve even got the court documents to prove it.
Want to learn more? Fill out the form below and let us help design your very own bulletproof trust to safeguard your assets and protect your family for generations to come.
