Revocable V. Irrevocable Trusts In Florida: What Are The Differences?
In addition to wills, trusts can effectively transfer assets and achieve specific goals for your beneficiaries. Unlike a will, trusts do not need to pass through the probate process, and their assets can reach your beneficiaries quickly and cost-effectively. Trusts also have certain benefits for tax and asset protection that other estate planning methods do not.
You may be familiar with two general types of trusts: revocable trusts and irrevocable trusts. However, each type has benefits and drawbacks depending on your situation and what your goals are.
What is a Revocable Trust?
A revocable trust in Florida is a trust agreement that you (the “Grantor” or “Settlor”) create to manage assets during your lifetime and distribute assets to beneficiaries upon your death. A trustee manages this trust and may manage, invest, or withdraw from the trust during your lifetime. The trustee is typically somebody that you appoint to manage the trust – preferably a neutral third party who does not have a financial interest in the trust’s assets. Having a trustee also helps if you become ill or incapacitated – they can continue to manage the trust’s assets and cover necessary expenses without the need for a guardian to be appointed.
Chapter 736 of the Florida Statutes sets out certain guidelines for revocable trusts in the state – including how and when trusts can be revoked or amended.
The main benefit of a revocable trust is implied in its title: it is a revocable agreement that can be modified or amended as needed during your lifetime. You are free to add or remove beneficiaries, make withdrawals from accounts, change investment strategies, and so forth.
Another key benefit is that assets properly funded within a trust belong to the trust, not the grantor. This means they are held by the trust, not by your estate, and do not need to go through probate. This helps assets pass along more quickly to your beneficiaries and avoid certain tax problems for your heirs.
A drawback to revocable trusts is exposure to creditors. During your lifetime, assets within a trust you’ve created are considered by creditors to be your own – since they can be returned to you at any time through revocation or amendment. As such, they are not protected from creditor claims. Financial liabilities such as tax liens and court judgments can create problems for you and your beneficiaries under a revocable trust. If you anticipate that creditor claims could be a problem, you will want to consider options available through irrevocable trusts.
What is an Irrevocable Trust?
An irrevocable trust is an agreement between the grantor, a trustee, and beneficiaries that cannot be revoked or modified during the grantor’s lifetime. Unlike a revocable trust, the irrevocable trust funds cannot be returned to you and are thus shielded from financial claims against you. For some, an irrevocable trust can be a savvy method to transfer assets to beneficiaries while avoiding creditor claims.
Irrevocable trusts in Florida are also addressed within Chapter 736 of the Florida Statutes, which contains important guidelines regarding creditor claims and spendthrift provisions in a trust.
A properly-planned irrevocable trust can also help you qualify for Medicaid coverage or nursing home care since it would reduce your liquid assets. Other benefits could include some exemptions from estate taxes. However, irrevocable trusts can be scrutinized or invalidated if they are not carefully planned in advance. They can also create issues during a review under Medicaid’s “look-back” period. Before starting the process on your own, you will want to discuss irrevocable trusts with an experienced Tampa trust attorney to see if this option can help you and your family.
The main drawback to an irrevocable trust is also implied in its title: it can’t be revoked. In addition, you also won’t be able to change beneficiaries or continue to manage the trust’s assets during your lifetime. Planning an irrevocable trust, therefore, requires careful planning.
Consult an Experienced Tampa Estate Planning Attorney’s to Discuss Trust Options that are Right For You
There is no “one size fits all” approach to planning your future, especially with regard to the different trust options available to you. The diligent Tampa trust attorneys at Strategic Counsel Law Group will carefully review your financial accounts and goals for the future to protect your assets and your family as well as possible. Revocable trusts and irrevocable trusts both have benefits and drawbacks, which we can analyze in detail with you. Call our attorneys at 813-286-1700 or schedule a consultation online today to start planning your future today.