The flexibility of your living trust is something that impacts your estate and your loved ones in a huge way. This flexibility either prohibits or empowers your fiduciaries and loved ones to make choices concerning your estate. If you’ve completed your plan and issue of the flexibility of your living trust has never been addressed, I suggest that your plan should be reviewed ASAP.
The question of estate planning flexibility is one that is seldom given enough consideration and a large part of this concern relates to your living trust flexibility in Florida or wherever your home state is. This is a Florida estate planning question as it relates to revocable living trusts in Florida. However, if you’re not in Florida, this concern will most likely apply in your home state as it relates to legal concerns that are mostly universal.
Florida Living Trusts and the Benefits of Flexibility
1. A Living Trust May Either Be Changeable (Amendable) Upon the Death of a First Spouse or Not Changeable.
As you might imagine, this is one of the biggest issues that that arises concerning the flexibility of your living trust, occurs with married couples. If a married couple established a joint living trust in Florida, then the surviving spouse may naturally wish to make changes upon the death of a first spouse. The precise language of the trust will govern whether a surviving spouse has the right to make such changes. This issue is especially important where a couple is in a second marriage and the deceased spouse had children from a first marriage.
Couples need to determine whether they want to give the survivor of them the option to disinherit the children from the first marriage. If the appropriate provisions aren’t included to limit the surviving spouse’s flexibility, then they may have inadvertently allowed the surviving spouse to do just that! On the other hand, if the couple is a first marriage with no children from previous relationships, flexibility is often highly preferable in order to allow the surviving spouse to make any changes necessary to simplify the estate following the first spouse’s passing.
2. The Appointment of the Successor Trustee or Trustees Can Be Definite and Inflexible or Permissive and Adaptive to the Needs of the Estate.
The role of successor trustee is determined by the appointment of the trustmaker/s at the time of the formation of the living trust. In my experience, larger estates are often more strict and inflexible when it comes to the role and appointment of the successor trustee in Florida. In larger estates, often “corporate trustees” are utilized and sometimes may be assigned to serve as a Co-Trustee with one of the family members.
With smaller estates, some living trusts are very specific about who will serve as successor trustee while others offer greater flexibility and even provide that all qualified heirs may serve as the trustee of his/her own trust or may do so with the appointment of another co-trustee. Flexibility concerning successor trustees may be very helpful and it can be beneficial to allow heirs to serve as their own individual trustee if the circumstances dictate; although, this question can only be answered after a detailed analysis of the specific estate circumstances.
3. The Administration of the Trust Assets Can Be Either Very Strict or Very Flexible Based Upon the Preferences of Beneficiaries.
The way that the trust assets (a/k/a the assets that are titled in the trust through Florida trust funding) are distributed to the beneficiaries may also be very flexible or very rigid depending upon the specific living trust provisions. For example, certain items of personal property, real property or financial accounts may be designed for specific heirs or, alternatively, the entire trust estate may be appointed to be divided equally between specified beneficiaries. Often, a personal property memorandum is used to designate who gets the personal items; however, a more flexible approach (which may or may not be advisable) is just to say that all personal property is to be equally divided between the heirs. Similarly, living trusts may dictate whether all or some trust assets must be sold and the proceeds distributed or whether the heirs may agree upon the distribution so that there is more flexibility if some assets (such as a vacation home) are requested by certain beneficiaries as part of his/her share of the trust estate.
4. Third Parties Such As the Power of Attorney or Trust Protector May or May Not Be Empowered to Change the Living Trust and This Adds Flexibility.
A standard form durable power of attorney in Florida in most jurisdictions in the United States will provide that the power of attorney may amend a living trust. Remember, a power of attorney dies with the person, so this is only applicable in the event of disability. With that in mind, the trustmaker gets to decide whether to give his/her power of attorney appointee the ability to amend the trust, and this is key consideration when thinking about flexibility of your living trust. Similarly, a trustmaker may designate a “trust protector” or “trust advisor” (often the attorney) who is allowed to amend the trust and otherwise make changes as needed to protect the trust estate. This is an option that provides additional flexibility in the event of unforeseen changes in the law, the trust estate or the heirs.
Bonus Tip: there are other areas of flexibility that can be added to your Living Trust protection such as planning for special needs beneficiaries in Florida in your or planning for elder care in Florida and Florida Medicaid possibilities.
Ultimately, all of the above is part of the decision making process of the trustmaker/s, and it is all very deserving of careful consideration. Anyone who has established a living trust should ask whether all of the above was carefully considered during the estate planning process? If none of the above was considered, I recommend that you schedule an estate planning review ASAP. Yes, it’s that important.
Steve Gibbs, Esq.
This is an updated version of an original post dated January 21, 2016.