Most of our clients and friends who are Florida residents know that a Florida revocable living trust is a useful family document and can be important for avoiding probate in Florida. However, while a Florida revocable trust is an ideal option for avoiding probate, there are many additional benefits that may be extremely useful for your estate depending upon the circumstances and the needs that arise. This article provides an overview of 5 FLORIDA LIVING TRUST BENEFITS that CAN and SHOULD be included in your well drafted trust document.
5 Florida Revocable Living Trust Benefits
1. Your Florida living trust benefits include protecting disabled beneficiaries.
Under the current social security and Medicaid rules, if a disabled person who is receiving need based disability benefits (SSI), they can be disqualified if they suddenly are offered an inheritance. In fact, even if the decide to turn down (or disclaim) the inheritance, they still can be penalized and lose SSI benefits for a period of time depending upon how large the inheritance share was.
However, a properly drafted revocable living trust can include a Florida special needs trust by adding “special needs” or “supplemental needs” trust language in it, can provide a way for that disabled person to RECEIVE the inheritance in a separate account AND utilize the funds for “non-Medicaid” covered needs WHILE still continuing to collect the benefits.
If you have an adult child receiving SSI, this kind of a provision can be spelled out in your revocable living trust OR it can (and always should) be included as a general clause just in case a beneficiary eventually becomes disabled and qualifies for need based disability benefits. To avoid confusion, SSI is different from SSDI which is not “need based” and therefore not affected by an inheritance.
Also, if the disabled person is an adult dependent living in your home, such as an adult child or aging parent, your revocable living trust should address what would happen to this individual in the event of the estate holder’s death and a “lifetime interest” in certain trust assets can be arranged.
2. Your Florida living trust can help manage federal estate taxes.
If your “gross estate” is over a certain size then it may be exposed to the federal estate tax or death tax. This “exposure” is nothing to take lightly as it averages around 45% of the amount owed and usually needs to be paid within 9 months of the estate owner’s death. This tax has put many a family business OUT of business. A properly prepared revocable living trust can be designed minimize estate taxes, particularly where a couple is married and an A-B trust strategy is adopted or other charitable giving strategies, such as a charitable lead trust, are included in the trust.
The key is that the revocable living trust can provide tools for the trustee to allocate the estate into various buckets that are tax advantaged.
3. Your living trust can protect your children born from a first marriage.
A revocable living trust may be utilized to make sure that the children of the first marriage are provided for by either placing assets in a separate trust only controlled by the biological parent or limiting a second spouse’s right to change or cancel a joint revocable trust upon the biological parent’s death.
In truth, second marriages are hotbeds for legal battles because it is all too common for a second spouse to clash with the biological children from the first marriage. It this is a potential concern, the revocable living trust can AND should manage this scenario by spelling out what the surviving spouse can and cannot do. One option in a Florida revocable living trust is to include what we call an “elective share trust” for the surviving spouse. This tool essentially prevents the surviving spouse from trying to override the trust at the expense of the children from the first marriage. For this reason, an extremely important part of your Florida revocable living trust plan may be an elective share trust in Florida.
4. Your living trust can protect your BENEFICIARIES from creditor attacks.
You may be aware that revocable trust asset protection does NOT extend to the trustmaker. However, a revocable living trust may be used to offer creditor protection for beneficiaries following the trustmaker’s death. The reason for this difference is when the trustmaker of a revocable living trust dies, the revocable living trust becomes irrevocable and thus becomes asset protected against creditors seeking to attach judgments and/or liens.
A revocable living trust is also useful to provide asset protection for your IRA beneficiaries through implementing an IRA Beneficiary Trust within your revocable living trust. A couple years ago, the IRS decided not to uphold asset protection for the beneficiary of an IRA. Thereafter, it became very popular to designate a revocable living trust as the beneficiary and allow with the spendthrift protection of the trust to protect the beneficiary. This strategy has remains a viable alternative to provide asset protection for IRA beneficiaries.
5. Your trust can be a useful Medicaid planning tool.
When legal novices decide to moonlight in estate planning, they often forget about pre-Medicaid and elder law planning issues. I’ve often written about this issue because the planning goals for long term medical care often conflict with other estate planning concerns.
For example, if an aging couple has a large estate, the attorney or accountant may recommend “gifting” to younger beneficiaries as a way to reduce the estate and limit exposure to estate taxes. This is mostly sound advice under the current tax laws, because you can gift $14,000 per beneficiary without any gift tax ramifications. However, under Medicaid rules, gifting includes a 5-year lookback and the possibility of penalties for doing it.
Of course, one may object and say that most people who are gifting to limit estate taxes may not be Medicaid candidates. Again, a mostly sound objection; however, because the Medicaid laws in Florida allow someone the ability to transfer all assets to a well spouse without penalties AND THEN elect a refusal of support…the failure to consider Florida Medicaid planning can be a costly mistake.
When transfers to a well spouse are made, your revocable living trust, combined with other tools such as a Florida Medicaid Will, can include conditions to make sure that the spouse on Medicaid is not disqualified. This is done through provisions such as an “elective share trust for Medicaid planning”.
The important thing to remember is that all these strategies are not considered in your basic online forms and must be implemented by an experienced licensed Florida estate planning attorney.
Steven J. Gibbs, Esq.
This is an updated version of an original post dated January 13, 2017.
With a revocable living trust, would my home in Florida be protected against non bankruptcy claims ? It is my principal home with no other homes ? Thank you.
Hi Steve, in general, Florida law now provides that a homestead in a revocable trust has the same asset protection as one owned individually (or jointly in marriage). Let us know if you’d like to discuss in more detail and thanks for checking in.
Steve Gibbs, Esq.
My husband just died yesterday. I found out that his granddaughter and daughter and friend had him sale his life insurance and made another trust. I have a joint revocable living trust but my husband had dementia and I was he health care surrogate and Preneed guardian the nursing home he was in would not listen to me about letting him go out which in turn led to a heartache and ultimately his death. Now they were instructed not to let those people around him because they abused him in the past a broken ankle , stole money, etc. And they did not listen. Now I am stuck I don’t know where to go from here. Please help. Thank you Mrs. Ost
Mrs. Ost,
I’m sorry for your loss and the difficulties you’ve experienced in your situation. It sounds like you have some serious questions to answer and unfortunately they go beyond what I can comment about in a blog comment as there are many blanks to fill in in order to offer advice. Please feel free to call Gene in our office to set up a consultation to discuss your concerns.
Best to you.
Steve Gibbs, Esq.
I am really wanted to know that, does a perfect estate planning keep the probate away? If yes, then I am very much interested to create an estate planning. I am not fully aware of revocable trust. Though I am willing to fix a meeting with my local estate planning lawyer to discuss on probate. After reading your I have gathered little knowledge about revocable living trust. Recently I have bought a big property. I am little worried about the tax.
Hi Kate, thanks for reading and offering your comment. The short answer is yes. A “perfect” estate plan would ideally avoid the probate process in most cases, although there probably has never been a perfect plan. I encourage to contact an experienced expert in your area who should be able to walk you through revocable trusts, real property and tax issues.
Best to you.
Steve Gibbs, Esq.
Why did my attorney, who helped draw up my will, power of attorney, and living will, advise me NOT to create a revocable trust? He cited the size of my estate. I live in Florida, unmarried, two adult daughters, one grandson who is autistic..Thanks.
Thanks for your comment. It is difficult to comment on what another attorney advised without a thorough review of your circumstances. That said, in my experience many attorneys are too quick to dismiss trust planning for smaller estates because a simple trust is often beneficial for smaller estates, particularly where there is a disabled beneficiary or other issues that lend themselves to trust planning. Let us know if you’d like to discuss in more detail by e-mailing Gene at admin@gibbslawfl.com.
Best, Steve Gibbs, Esq.
My mother and I are on the mortgage and deed to our homesteaded house. My mother recently declared bankruptcy, but remains on the deed and the mortgage unless I refinance, which is not a great idea at the moment. She will be 75 next year and is worried that some day she will need to go into an assisted living facility paid for with her SS benefits. My husband and I live there and make all of the mortgage payments, but we were told if she were to go into an ALF, SS could take it away from us to pay for the ALF because she is on the deed. Will putting the house in a living trust protect it from SS seizure?
Hello Sandi, this is a complicated situation to discuss in a blog post comment. The short answer is no, the transfer to a living trust would offer no protection and this is a common situation that we advise folks about when they are considering joint asset titling. My immediate suggestion is locate a good bankruptcy attorney to help protect the assets as all other transfers will not be effective given the fact that bankruptcy has already been declared.
Best of luck to you and your mother.
Steve Gibbs, Esq.
I live in Florida and have a revocable living trust in Florida. My wife , who lived in Pennsylvania, died and left her home to me. Can I put the Pa. house in my Florida trust and if so, are there any disadvantages?
Hello Richard, thanks for reading and commenting. Yes you absolutely can title out of state real property in a Florida trust and the advantage would be to avoid probate in that state. There are a few more questions that should be discussed in a confidential consultation, so please feel free to reach out if you’re interested in continuing the discussion.
Best,
Steve Gibbs, Esq.
we have a living trust in California, My father has passed my mom is the main beneficiary. she lives in California. We have purchased property in Florida. Can we move the trust to Florida? If so Can we avoid state tax on the trust from California?
Hello Jacqueline, thanks for reading and commenting. If you’re a CA resident, than it wouldn’t be advisable to move your living trust to Florida as there is wouldn’t be a rational basis to do so, notwithstanding the fact that you purchased real property there. However, if you are going to be a FL resident then you would be advised to move the living trust and also do a FL last will, powers of attorney, medical and guardianship documents. In other words, the situs of your revocable living trust would normally follow your state of residency rather than your assets. Let us know if you are considering a change of residency, by e-mailing Gene at admin@gibbslawfl.com, as we may be able to help in your transition.
Best,
Steve Gibbs, Esq.
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Hi – I am a Florida resident and have a Florida revocable trust. I am thinking of moving out of state or out of the country for retirement (still haven’t decided which). Would I need to move the situs of the trust if I move my residence to another state? And what if it is another country?
Thanks!
Hello Maria, assuming the situs of your trust can be changed, and this is typically the case, you would be able to move it. If another country, you may just end up doing a new trust.
Best, Steve Gibbs, Esq.
My uncle (who is a Florida resident) had his attorney update his Legal plan recently and the attorney had them execute 2 separate Rev Trusts for my uncle and aunt. How should they be titling their property? 50-50 into each trust?
Thanks!
Hello, that question is impossible to answer without a through review of the estate details.
Best, Steve Gibbs, Esq.
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