what is a trust
What Is a Trust? Understanding a Few Different Types of Trusts in Florida

Have you ever wondered, “What is trust?” No, we’re not talking about the warm and fuzzy feeling of believing in someone. Instead, we’re talking about a legal concept that can help protect and manage your assets. 

In this blog post, we’ll guide you through the basics of trusts and highlight some of the most common types in Florida. Whether you’re an aspiring grantor, trustee, or beneficiary, understanding the ins and outs of trusts can be the key to securing your financial future. 

What is a Trust? 

It is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. This legal tool can be arranged in many ways and specifies how and when assets pass to heirs. One key benefit is avoiding probate, allowing beneficiaries faster access to assets. 

In Florida, a living trust is a popular option, allowing for the transfer of assets while still using them and distribution to chosen beneficiaries after death. Working with an experienced estate planning attorney can help you determine which type is right for you and your unique circumstances.

What Are The Different Types Of Trusts In Florida? 

Revocable Living Trust 

This is a type of trust agreement created during the grantor’s lifetime and provides for the grantor during their lifetime and then for other beneficiaries after their death. One of the primary benefits of this type is that it allows assets to pass to beneficiaries without the need for probate, which can be a lengthy and expensive process. In Florida, a revocable it is governed by Chapter 736 of the Florida statutes, which is known as the Florida Trust Code.

To be valid in Florida, a revocable living trust must meet five basic requirements:

  • Revocable: The grantor can change or revoke at will.
  • Trustmaker, Grantor, or Settlor: This person establishes and designs the provisions of the living trust agreement.
  • Trustee: The trustee takes legal title to the assets and ensures that the directions are carried out. The trustee has a fiduciary duty to the grantor and the beneficiaries to carry out the grantor’s intentions fairly and reasonably.
  • Lifetime Beneficiary: The lifetime beneficiary of is usually the grantor. The lifetime beneficiary has full access to income and principal during their lifetime.
  • Death Beneficiary: It establishes who will benefit from the remaining income and principal of the trust upon the grantor’s death.

Irrevocable Living Trust 

A Florida irrevocable trust can aid persons subject to the federal estate tax in lowering estate taxes in addition to the advantages outlined above. Furthermore, it is simply amendable, and for the large majority of clients who are not subject to the tax, the previously necessary limits for conventional irrevocable trusts are no longer necessary.

Any assets transferred into it after it has been established by the settlor become its property, and it can only be changed or revoked following the conditions. However, many irrevocable trusts have appointment rights that allow for adjustments.

The primary benefit of a Florida irrevocable trust is the ability to protect assets from creditors and, over time, make the assets exempt from Medicaid. This is because the trust is irrevocable, and any assets placed in it are safeguarded from creditors.

Special Needs Trust 

A Florida Special Needs Trust is a unique type of trust that offers life-enhancing services, care, and equipment beyond what the government provides for individuals with disabilities. Whether created as an Irrevocable or Revocable Trust, it is a valuable tool for safeguarding the beneficiary’s eligibility for government “needs-based” benefits such as Medicaid, Supplemental Security Income (SSI), vocational rehabilitation, and subsidized housing. 

How to Set Up a Trust in Florida 

A living trust is commonly used for estate planning purposes, which can be either fully or partially revocable. When the trustmaker is alive and mentally competent, they can amend any part of it and withdraw property from it. However, upon the trustmaker’s death, it becomes irrevocable, and the beneficiaries or successor trustees cannot alter its provisions.

In Florida, creating a living trust involves six key steps: 

  • Deciding between a single or joint trust for married couples
  • Selecting a successor trustee
  • Determining the beneficiaries
  • Drafting the document
  • Executing it with two witnesses and a notary
  • Transferring ownership of the assets 

Unlike other legal documents, a living trust is private and does not need to be filed or recorded with any government agency. When the grantor is alive and serving as the trustee, a revocable living trust in Florida does not require its tax identification number. Instead, any taxable income or losses generated by the trust assets flow to the grantor. 

However, if it includes testamentary instructions, in that case, it must be executed with the same formalities as a will, which means it needs to be signed by the grantor before two witnesses and a notary.

If it has been executed correctly in the laws of the state where it was created, Florida recognizes its validity, even if the grantor has moved to Florida. This means that people who move to Florida do not need to redo it for it to be enforceable under Florida law.

Drop Us a Line

At Casal & Moreno, we understand that setting up a trust can be overwhelming, especially if you’re not familiar with the legal jargon or the steps involved. That’s why we’re here to help!  With our help, you can rest assured that your trust will be properly executed and valid under Florida law. Contact us at [email protected] or 305-476-5080, and let us help you navigate the process.