While this article concerns a Florida revocable living trust (AKA “inter vivos trust”), the concept is very similar from state to state. Taking the term “living trust” or “revocable living trust” down to its component parts means that the first question is what is a trust, and then what does “living” and “revocable” say about that trust.
What is a revocable living trust?
A trust is an agreement that is entered into by the person who creates the trust (the settlor, grantor or trustmaker) AND the beneficiaries (those who benefit from) of the trust.
This contract will regulate what happens to the assets (such as personal property and real property) that are held OR “titled” in the trust and this can include planning to avoid probate, plan for disability, reduce estate taxes and preserve medicaid benefits.
The origin of trust law began in England during the time when the ecclesiastical courts ruled the probate court system and was intended as an alternative to the probate process. This same basic purpose of revocable living trusts holds today, as probate in Florida continues to get more complicated and expensive; however, there are many other purposes and advantages to doing your Florida estate planning with a revocable living trust.
Florida Revocable Living Trusts vs. Other Trusts
A revocable living trust is one that is created during the lifetime of the trustmaker rather than forming upon the trustmaker’s death.
In contrast to a revocable living trust, a testamentary trust in Florida is one that is formed upon the death of the trustmaker. Often, testamentary trusts are used as part of a last will and testament to provide that assets may be held in trust for underage beneficiaries. Importantly, testamentary trusts DO NOT avoid probate and are NOT effective for disability planning or some of the other side benefits of revocable living trusts.
A revocable trust is one that can be revoked by the trustmaker at any time rather than one that is irrevocable and cannot be undone. In contrast, an irrevocable trust in Florida cannot be changed or terminated after it is created. Irrevocable trusts, although they also may avoid probate, are often used for very different purposes such as Florida asset protection OR sophisticated estate tax planning such as multi-generational planning.
How a Florida living trust avoids probate in Florida?
When a revocable living trust in Florida (hereafter “trust” for purposes of this section) is properly in place, and property (AKA assets) are properly titled in the trust, then a probate will likely not be required.
Personal property vs. Real Property and Other Titled Assets
It is important to understand how to categorize assets for estate planning in Florida.
As an overview, the difference between personal property items such as guns, knives, stamps, coins, jewelry, art, furnishings AS OPPOSED TO real property and other titled assets such as bank accounts, stocks, bonds, life insurance, and qualified financial accounts, to name a few. A vehicle is also a titled asset and yet is sometimes treated more like personal property.
Real property, AKA real estate, is treated very differently from personal property because real property has ownership recorded in the public record and must be transferred accordingly to strict legal procedures. Thus, real estate must be transferred by deed into a revocable living trust as does other kinds of assets with a titled owner.
A process known as trust funding in Florida is basically a fancy way of referring to putting the name of your trust on all non-qualified titled assets.
By non-qualified accounts I am referring to all assets that are not held in a qualified retirement account (i.e. IRA, 401(k), 403(b), as these accounts cannot be re-titled in the trust. Instead, you can direct the beneficiary designations for these accounts to the revocable living trust if it makes sense for your Florida estate plan.
By “titled in the trust” I mean that, instead having an individual name on assets, one can have “Tom Jones, Trustee of the Jones Family Living Trust” on the title to the assets. In this case, a private trust administration could then take the place of the public probate administration process.
Personal property is handled in a less formal way, usually by either designating certain items for certain beneficiaries the revocable trust OR better yet, doing a memorandum of personal property distributions that provides instructions as to who will receive these personal items. Believe me when I tell you that these items often create more confusion and grief than the larger “titled assets”. Best practice is to have the memorandum of personal property referenced in the Florida revocable trust as well as the Florida last will and testament. An assignment of personal property in Florida is often used as a way to assign ALL non-titled assets to a revocable living trust in Florida so that the Trustee will have full authority to distribute them to designated beneficiaries.
Why is avoiding probate in Florida a good idea?
When someone passes away without a trust, that person’s assets must be re-titled and the only way to do that is through the probate court system. Probate in Florida is a public process that is time consuming and expensive.
The judge must carefully sort through assets of the probate estate and all heirs must be identified and this becomes very “involved”. Legal fees can soar under this system and assets can be contested by creditors, heirs and beneficiaries alike.
When someone passes away with a properly funded Florida trust, a private trust administration in Florida replaces the alternative of probate.
Initial and Successor Trustees in Florida
A trust administration, to be discussed, in many respects replaces the probate judge with your designated trustee to handle the distribution of your estate. When you set up a Florida revocable living trust, you may decide to serve as your own initial trustee and appoint a successor trustee to serve on your behalf if and when you’re unable to do so.
Upon the trustmaker’s death, your successor trustee will handle the distribution of your trust assets AND thus they should be selected after careful consideration. A successor trustee may be a professional entity, such as a trust officer in a banking institution OR a competent and trust friend. Often, larger estates are more appropriate to consider a corporate trustee based upon costs and complications of the estate, although this is NOT required.
Florida Trust Administration
A trust administration refers to the process that involves your hand-picked trustee notifying all beneficiaries, conducting an accounting of the assets, and privately distributing assets to the beneficiaries in accordance with the specific terms of the trust. The trustee may be assisted by professionals and may even receive reasonable compensation for serving as trustee.
Trust administration may be completed in days or weeks rather than months at a fraction of the cost of probate. Also, creditor issues or disputes that can often occur in probates may be entirely avoided by using a revocable living trust. Additionally, a trust can afford protection for you and your beneficiaries on a number of other fronts, which may include estate tax protection, disability planning, divorce protection and creditor protection.
Revocable living trusts in Florida can also be used for estate tax planning. There was a trend for many years to create separate revocable trusts for husbands and wives as an estate tax planning strategy. The current trend is to create joint revocable trusts in Florida, and I will address why at the end of this chapter.
There are all kinds of other special provisions that can and should be included in your revocable trust if they are applicable to your estate. For example, qualified Subchapter “S” provisions, special needs beneficiary provisions, homestead provisions, Florida HIPAA provisions, Florida Medicaid planning or other unique provisions may be warranted based upon the circumstances of your particular estate.
There are also special kinds of revocable trusts for unique purposes such as IRA trusts and NFA gun trusts. The important thing is that now you have the framework to identify your specific area of concern and make sure that it is addressed in your estate plan.
It is worth noting that another method of avoiding Florida probate is through joint titling of assets. While this can be an effective strategy, it is not often recommended due to the issues that can arise and the superiority of using a Florida revocable trust for identical planning purposes.
An especially common approach is to jointly title assets with adult children. Putting your adult child’s name on your assets may seem like a good estate planning option, yet there are some very serious drawbacks because young adults are likely to be less responsible than their parents, and this exposes the adult’s assets to numerous risks. For more insight about this issue visit why to avoid titling your assets with adult children.
An adult child is also vulnerable to many life changes that create risk to your assets such as divorce, bankruptcy, IRS problems, problems with the law, injuries and illness. Worse yet, when someone’s name is titled (with yours) on an asset, this cannot be easily reversed.
The risks with any kind of ALTERNATIVE TITLING strategy are:
1. Divorce
Divorce can financially devastate the participants and generally splits the estate assets in half between you and your spouse, so at least ½ of an adult child’s assets are in jeopardy including any jointly titled assets with the parents.
2. Bankruptcy
Similar to divorce, a bankruptcy places all the adult child’s assets at risk only, this time, the pursuer is an aggressive bankruptcy trustee.
3. IRS
Young adults often face tax problems, and this triggers the sweeping powers of the IRS and the possibility of tax liens on all assets.
4. Legal Problems
Accidents due to DUIs and civil and criminal judgments could result in judgment liens upon all assets.
5. Health Concerns and Injuries
Young adults may be subject to injuries due to an active lifestyle or may experience medical emergencies such as heart attacks, and medical bills can pose a substantial risk to all assets.
TOD & POD
Another estate planning strategy is using transfers upon death (“TOD”) OR pay on death (“POD”) designations and can be used for accounts of all types in order to avoid probate in Florida.
Although this strategy can be useful, there are still major limitations with this approach, the foremost of which is that people can forget all about TODs and PODs and if the circumstances change then the designation is worthless.
For example, if the transferee dies, the TOD/POD is no good. If the transferee becomes disabled, they could be disqualified from government benefits by a direct transfer upon death. If the transferee falls out of favor and the testator forgets, the entire estate plan is destroyed.
Why does a Florida Revocable Living Trust solve these problems more effectively than ANY other strategy?
Revocable trust planning in Florida, thoroughly done, solves all the above problems with a level of flexibility that other methods simply CANNOT accomplish.
Remember that a Florida last will and testament does NOT avoid probate but rather only helps make it easier. The revocable trust allows you to title the assets in the name of the trust rather than individuals, and numerous trust provisions can then govern how the assets are distributed, thereby avoiding probate entirely.
A revocable living trust can provide a surviving spouse with a relatively easy transition following the traumatic loss of a deceased spouse. The trust makes things simpler because everything may have been titled in a Florida joint revocable living trust, so there is no need to retitle assets or open a probate for any singularly titled assets.
An adult child may still be a beneficiary of the trust, and yet there is no risk that the assets will be exposed to any of the beneficiary’s creditors. A trust also provides asset protection for beneficiaries so that your kids can be protected from creditors even after your death.
A trust may also be the transferee on a TOD or POD account, and the trust can never die or become disabled so the estate planning purposes will be preserved and managed in a simpler fashion than having multiple POD or TOD accounts or jointly titled assets all over the place.
Additionally, the trust can include “special needs trust” provisions so that no disabled beneficiary would be disqualified due to the trust having received a transfer due to a TOD or POD.
Of course, above are just examples because the kinds of issues that can arise in an estate are as unique as the individual who make up the family AND the random circumstances that are part of life.
So, the rule of thumb in an uncertain world is to create planning with as much flexibility as possible AND this the basis for effective estate planning with a revocable living trust.
Also, remember that a Florida revocable living trust should be accompanied by a sworn affidavit that is notarized by a Florida notary and also attested by 2 witnesses. These formalities are used for Florida revocable living trust in the same way that is required for a last will and testament in Florida.
Get more information about maximizing the effectiveness of your Florida revocable living trust (fine tune) AND learn 5 key ways to use your Florida revocable living trust effectively (can my trust do that?).
Steven J. Gibbs, Esq.
When should a Florida revocable living trust be set-up -before acquiring the real estate or after it has been purchased?
Hi Rajah, great question. In general, I usually recommend before just to avoid the hassle of having to do another deed when the trust is created. However, sometimes for financing, the real property needs to be outside of the trust and then deeded after the fact. Let us know if you’d like a more detailed analysis of your situation.
Best,
Steve Gibbs, Esq.
I am looking for the code that goes with Florida law about a balance in an account. Bank says I have to have my deceased father’s name on the check. I have been told otherwise, that the remaining funds can be put in a check with my name only. I am the Trustee to his revocable trust. This is the last item to complete in what was my father’s revocable trust.
Hi Leaynn,
Based upon a brief review of your question, it appears you may need more than a code section and it honestly isn’t clear to me which section you would benefit from because there are a few that may apply. I suggest you can start by searching the Florida trust code and looking for the heading that applies to your account. If you need more specific guidance, feel free to connect with Gene, our paralegal-legal director, to schedule a consultation.
Thanks for reading and best wishes to you.
Steve Gibbs, Esq.
What is pro and con using lady bird deed for your real estate instead of revocable living trust?
Hello Regina, thank you for reading and your insightful comment. To be sure, a lady bird deed has its uses, the pro being it’s simplicity and the cons being that it does not address contingencies or offer the flexibility of a revocable living trust. For example, if the beneficiary of the lady bird deed predeceases the grantor or becomes disabled and is getting need based assistance, the lady bird deed falls short. A trust would address these scenarios whereas the lady bird deed would be headed straight for Florida probate in the first scenario or could cause a disqualification from benefits in the second. I hope this offers some clarity. Feel free to reach out to Gene at admin@gibbslawfl.com for further information or to schedule an individual analysis offering more detail.
Best, Steve Gibbs, Esq.
When funding your trust with your primary residence which has a Florida Homestead Exemption and Save Our Home Homestead Exemption, what is the affect on the property taxes ? Is the trust allow to have the Exemption?
Hello Victor, thanks for reading and your insightful comment. The short answer is yes, all exemptions are allowed within a revocable living trust and although the asset protection issue has been subject to some debate under FL laws, it appears to have been resolved making it a non-issue to title a homestead residence in a revocable living trust. Let us know if you would like some assistance with this.
Best,
Steve Gibbs, Esq.
Am successor trustee of a small trust in Florida – less than $40,000 and all is in cash in a bank account., There are 4 heirs. All creditors have been paid. Can I just distribute the funds to the heirs as described in the trust agreement? Each of the heirs has been sent an accounting of the funds and asked to sign an agreement that they understand and approve the distribution of the funds. One has not returned the agreement although has indicated by text message that he will. Do I have to wait for his agreement or can I distribute the funds to the three and hold his in the trust until I receive his signed agreement?
Hello David, thanks for reading and commenting. As a successor trustee, you have liability to the beneficiaries and thus are well advised, even with a small trust, to get expert legal advice before making distributions…this would require a review of the trust. Trusts generally authorize hiring experts and this covers you from backlash in the event of making a mistake.
Best, Steve Gibbs, Esq.
Hi, we put our home in a revokable trust for Estate planning however now we want to sell the house. Do we need to switch it back to us personally so we get the one time $250K pp exclusion?
Hello Jaymi, thanks for reading and commenting. A revocable trust functions as an alter ego (to you) in a sense and FL has attempted to clean up confusion on this issue with a FL homestead, so you shouldn’t need to move it out to maintain your exemption for capital gains (which is what I believe you’re talking about?). Not sure what pp exclusion means or the one time thing? Anyway, some banks require moving the real property out of trust to refinance and it may be a good idea to transfer it to you if you’re selling. I would suggest talking to a real estate attorney about it to be sure because I can’t comment about trusts I haven’t seen or deeds that I haven’t reviewed or offer legal advice in a blog comment.
I wish you the best in your sale.
Steve Gibbs, Esq.
Wanting to find out the best way to write up a real estate deed for deceased parents home between two married couples to attain equal equity in said home. Thanks TK
Hello Tim, thanks for commenting. As is often the case, I can’t offer feedback without knowing more about the deed in question. For example, a probate in FL may be required to even get to the deed phase unless the real property was in trust or was received by right of survivorship by at least one of the members of the 2 couples. Deed conveyances are tricky and easy to mess up, resulting in potential expensive title issues. Here is an article about asset titling that may provide some basic information; however, I strongly advise you to get professional assistance: https://www.gibbslawfl.com/titling-assets-florida/. Feel free to reach out to Gene Ross at admin@gibbslawfl.com or call 239-415-7495.
Best,
Steve Gibbs, Esq.
Can a revocable Florida trust be Modified by a lawyer in Pennsylvania?
Hi Alicia, thanks for commenting. Yes if you’re intending to become a PA resident, it could be “restated” there to comply with PA law and add any changes.
Best, Steve Gibbs, Esq.
I recently established my residency in Florida. I have a revocable living trust set up in Michigan (1995).
Q1-Is the MI trust good and acceptable by Florida?
Q2-Are there any additional Florida requirements that I should consider to avoid probate?
Hello Ernesto, your MI trust is valid in FL; however, there are many FL provisions that should be added to assure it will function properly in FL such as homestead and Medicaid provisions among others. I recommend a restatement in FL to most folks who intend to be FL residents. To learn more, schedule a consult with Gene at info@gibbslawfl.com.
Best, Steve Gibbs, Esq.
I have a home in FL that was my homestead with my deceased husband, it was paid off years prior to his death and is not subject to a mortgage. I remarried without a prenuptual agreement to a man living in PA where he owned a property that was his homestead. Two years ago he gave up his homestead tax status in PA but we claimed the FL homestead. Since that time we build a new home in PA and live there most of the year and I am going to give up the homestead tax status. That said, i would like to sell the home to my son (it is the family home), do I need my husbands signature to do so? Secondly, if not, can I just put the home in a revocable trust for the benefit of myself and husband and then to my son, without my husbands consent? I have a will already that “leaves” the home to my kids, but that appears to be subject to some probate issues. Any advise would be great!
Hello Andrea, great questions. Without reviewing all details it is tough to comment on everything. Also, understand that you need actual legal advice and in a blog comment setting I can only offer general feedback for “educational purposes”. In general, if you give up homestead status and exit FL as your home state, that property should become freely saleable and devisable to “whomever” by you if only your name is on the deed. This could also apply to putting this property in your trust. However, again, I’ll caution you. FL homestead laws are very tricky and this should be looked at specifically to ensure you’ll accomplish your goals.
Best, Steve Gibbs, Esq.
In FL can you amend a revocable living trust to an irrevocable trust? And how is it done?
Hello and thanks for your question. Upon the settlor’s death, your revocable trust would become irrevocable. To advise you, I would need to learn more about your goals. Generally, revocable and irrevocable trusts are used for very different planning purposes. If you would like to schedule a consultation, you may do so on our website home page or by calling our office at 239-415-7495.
Best, Steve Gibbs, Esq.
How long after someone dies, who has set up a revokable trust, does the trustee have to notify the beneficiaries of the trust? What can be done if the trustee doesn’t notify the beneficiaries?
Hello Kim, the short answer would be within a reasonable time. If there is little action, you may need to hire legal counsel to advocate for you. Let us know if you need assistance.
Best, Steve Gibbs, Esq.
15 years ago, my wife and I set up separate trusts. As you stated earlier, I guess that was the trend at that time. We funded the trusts with our real estate but left our brokerage account as Joint Tenants with Rights of Survivorship. We would like to place the brokerage account into our trusts but with separate trusts we’re not sure how to handle that. The investment firm recommended a Tenancy in Common but would this path avoid probate and would it work within our trusts. Thanks for your response.
Hello Michael, in general, a tenancy in common does NOT avoid probate. Investment firms should not give legal advice:)
Best, Steve Gibbs, Esq.
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