A trust can be an effective way to avoid probate and transfer assets seamlessly to heirs, reduce estate taxes and give a family privacy. However, there are some things Florida residents need to take into consideration before they set up a revocable or irrevocable trust.
A revocable trust has the most benefits for people who are not very wealthy. By setting up a revocable trust, a person retains control over their assets while they are capable of making their own decisions. If they become incapacitated, though, the trustee can take over control and make decisions on behalf of the estate. With a revocable trust, a person can rewrite the terms and change the trustee at any time. When a person with a revocable trust dies, the trust converts to an irrevocable trust and the trustee follows the directions provided by the grantor to distribute the assets.
An irrevocable trust cannot be changed after it is set up and has fewer benefits for people who do not have a substantial amount of assets. For very well off individuals and couples who may owe estate taxes when they die, irrevocable trusts may have some tax advantages. Assets in irrevocable trusts are controlled by the trustee and the terms cannot be changed. This kind of trust may also provide protection of assets against liens and collection activities if the person who sets up the trust plans in advance for future financial difficulties.
Trusts can be complex estate planning tools but it is important to understand the level of control over assets may change after they are added to a trust. A lawyer who has experience helping clients plan their estates may recommend a revocable or irrevocable trust in some circumstances.
Source: US News, "How to Choose Between a Revocable and Irrevocable Trust", Joanne Cleaver, June 19, 2014