If you have already created a Last Will and Testament, you have avoided one of the biggest estate planning mistakes people often make. While your will is extremely helpful in expressing your wishes to your heirs, there is a chance that you could save a lot of time, money, and frustration in the future by basing your estate plan on a revocable living trust instead.
What Is a Living Trust?
A trust is a legal entity that holds ownership of certain property. There are two main types of trusts: irrevocable and revocable. Once an irrevocable trust is established, it cannot be changed or terminated until the time specified in the trust. On the other hand, a revocable trust—also called a living trust—can be changed or terminated at any time by the person who creates it.
A living trust generally involves at least three parties:
- You. You are the creator, or settlor, of the trust. In the trust agreement, you will provide instructions on how the assets should be managed, who your beneficiaries are, and other vital information on trust administration.
- Your chosen trustee. Although you will act as the trustee during your lifetime, you will have to choose someone to fill the role once you are no longer able to do so. This person, called the successor trustee, holds and manages the property according to your wishes.
- Your beneficiaries. While the trustee has legal control over the trust property, the beneficiaries are entitled to certain payments and benefits specified in the trust.
What Are the Benefits of a Living Trust?
The primary benefit of a living trust is that it prevents your assets from going through probate. Simply put, probate is a court process required to distribute property after someone has passed away. However, since the trust is the “owner” of the assets, the “owner” is still alive, so the property in the trust is not subject to the probate process.
In addition to avoiding probate, a revocable living trust provides protection:
- During your lifetime. As the person creating the trust, you act as the settlor, the original trustee, and the beneficiary of the trust while you are alive. You maintain complete control over what is in the trust during your lifetime, and you can amend, revoke, or terminate the trust at any time. As the trustee, you can spend the money in the trust in any way you want.
- If you become incapacitated. If you become physically or mentally incapacitated, your chosen trustee will assume control of your personal and business affairs. This can include appointing guardianship for your children, paying your bills, or implementing a business succession plan.
- Upon your death. After you pass away, the person you have named as the successor trustee will immediately take over as administrator of the trust. Not only does this make your assets immediately available to your beneficiaries, but it also saves your heirs the cost of hiring an attorney to perform estate administration.
Can I Make a Living Trust Myself?
Anyone can make a will, and anyone can create a trust. However, until you actually move your assets into it, your trust is really just a piece of paper. If your assets are not properly transferred into your trust, those assets are not protected from the probate process—essentially making the trust document worthless.
Our estate planning legal team ensures that your trust is properly funded with a variety of assets, including:
- Life insurance proceeds. You may name the trust as a beneficiary on your life insurance or retirement accounts.
- Bank account balances. You may hold accounts at financial institutions under the name of the trust.
- Florida real estate. If your trust will own real estate, we can prepare the deed to consider the impact of existing mortgages, title claims, and homestead restrictions.
- Out-of-state real property. If you pass away owning real estate outside of Florida, your heirs will need to go through a separate probate in every state where your real property is located. If these properties are transferred into your living trust, they won’t go through probate anywhere.
- Non-marital property. Assets in a living trust are not co-mingled with marital property, preventing an ex-spouse from claiming these assets if you divorce.
At Yolofsky Law, we don’t just draft documents. We ensure that you make informed and empowered decisions about life and death, both for yourself and the people you love. As your Personal Family Lawyer®, we can help you articulate your wishes for your future care and legally protect your loved ones and finances for years to come. Give us a call today to discuss your options with our trusted advisors.