What is a Trust? In Particular, What is a Living Trust?
A trust is a legal document that outlines an agreement that is made between a trustee and a beneficiary. A trustee holds legal title to property for the beneficiary or beneficiaries. A trust may be created or “come into being” while a person is alive, or after they are deceased (according to their will). The person who creates a trust is called the grantor, and in some legal systems, such as Florida, the person who creates the trust is referred to as the settlor. A living trust, also referred to as a revocable trust or an inter vivos trust in latin, is a trust that is created while a person, the settlor, is alive. The purpose of a living trust is to manage the settlor’s property or assets during their lifetime, as well as to transfer any additional remaining property once the settlor has passed. Many people choose to create a living trust as a means to bypass the probate process, and also as a way to save on taxes at death.
Chapter 736 of the Florida Statutes is called the Florida Trust Code, and consists of the majority of statutes to which an Estate Planning Attorney refers when creating a trust. According to Florida Statute 736.0601, the capacity requirements of the settlor, (also known as the grantor), to create a living trust are the same as the capacity requirements needed of a settlor to create a will. The capacity requirement is not only necessary for the creation of the trust, but also for the ability to revoke the trust, amend it, and to add property to the living trust. Furthermore, according the Florida Statute 736.0601, if the settlor wishes to “direct the actions of the trustee” of a living trust, they must also have the capacity to do so.
At any time, if you are the grantor or settlor of a living trust, you may choose to terminate that living trust. That is why a living trust is also called a revocable trust, because the trust can be revoked by the settlor. Another step in the creation of a living trust is determining who will act as trustee for the trust. There are multiple situations where a person, meaning the settlor or grantor of the living trust, may choose someone to act on their behalf as their trustee. However it is possible to be the trustee of your living trust. In addition, a settlor may choose a bank or trust company to be their trustee. Meeting with an Estate Planning Attorney will help you determine what the best route is to take depending on your specific circumstances.
One of the main duties of the trustee is to manage the trust property. This includes investing the trust property. If the settlor of the trust chooses not to be the trustee this will not necessarily preclude them from having any access to funds that may be a part of the trust. As a matter of course, many settlors are allowed access to financial assets, such as money, as long as the living trust specifies. One of the advantages to a living trust is if you, the settlor, becomes incapacitated, then the trustee may make decisions based on your behalf for the purposes of the trust. This includes paying bills, investing the trust, and managing all aspects of the trust property.
How Do I Create a Living Trust?
The best way to set up a living trust in Florida is with the assistance of an Estate Planning Attorney. Although many “boiler plate” or standard documents are available online for perusal, without the advice and insight of an Estate Planning Attorney, mistakes and misunderstanding are likely to be plentiful. With the help of an Estate Planning Attorney, you can create a living trust, which starts with a legal trust document that specifies who the trustee and beneficiaries will be. This legal document will need to be signed in the presence of two witnesses. As stated earlier, you may choose to be the trustee of your own trust.
What Are Some of the Benefits of a Living Trust?
A living trust may enable you to save on taxes at death, and bypass the probate process upon your death. A living trust may help you circumvent probate by mere fact that your assets have already been distributed to the trustee. During the probate process, assets are transferred to beneficiaries. However, prior to the distribution to the beneficiaries, any creditors and taxes must be paid. If you legal property is already distributed to the trustee, then there would be no need for probate court to assign someone to distribute your assets. Furthermore, by speaking with a qualified Estate Planning Attorney, your living trust may be drafted in a manner to help reduce estate taxes. This is similar to the way in which a well drafted will may help you do the same.
Many people incorrectly associate the legal concept of a “trust” with Rockefeller wealth. This could not be further from the truth. As you know, the John D. Rockefeller is considered one of the, (if not the), wealthiest Americans that ever lived. Equating the legal concept of a trust, or a trust fund, with massive amounts of wealth is doing many people as disservice. Do not underestimate the benefits of creating a trust. Individuals without insurmountable amounts of wealth should not automatically preclude themselves from the idea of creating a trust.
At Bret Jones, P.A. we encourage clients to take the every opportunity to help themselves and their families by comprehensively explaining any options that are available to them. We are available to answer any questions you may have regarding the trust process. Keep your estate affairs in order at the law offices of Bret Jones, P.A., where our dedicated staff understands the important of thorough and comprehensive trusts.
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