Florida Revocable Living Trust

Our clients typically ask for an estate plan that avoids probate at their death and takes care of them during their lifetime. We usually advise forming a living trust for the benefit of the client and their descendants. In this article, I will explain how a living trust is the foundation of your estate plan.

What Is a Revocable Living Trust in Florida?

A Florida revocable living trust is a trust created during your lifetime that allows you to use your assets while you are alive and to avoid probate upon your death. You can amend or revoke your trust at any time. A revocable living trust is used for testamentary estate planning and avoiding probate.

Living trusts are governed by Chapter 736 of the Florida statutes, known as the Florida Trust Code.

How Living Trusts Work in Florida

A living trust is created by a grantor, controlled by a trustee, and distributes assets to a beneficiary.

Probate Avoidance

The most important reason to get a living trust is to avoid probate. When you die, most of your assets go through probate before they go to your heirs. Probate is a legal procedure that validates the deceased’s will, pays all debts, and administers the distribution of assets to designated heirs.

Probate can be time-consuming, costly, and public. However, assets held in a living trust are not probated, and trust assets are distributed to your named beneficiaries quickly and privately.

Living Trusts Do Not Provide Asset Protection

While it avoids probate, a living trust doesn’t offer the same asset protection as other trust types, particularly irrevocable trusts. During your lifetime, the assets within a revocable living trust are legally your property, meaning they are subject to creditors and income is reported on your personal income tax return.

Creating a Living Trust

To create a living trust, you should:

1. Choose between a single or joint trust.
2. Pick a successor trustee to take over upon your death.
3. Determine who will benefit from the trust after you’ve died.
4. Draft the trust document.
5. Formally execute the trust document with two witnesses and a notary.
6. Transfer title to the trust.

Living Trust Requirements

Here are the requirements for creating a living trust in Florida:

1. Deciding on the type of trust. You can have an individual trust or, for married couples, a joint trust.
2. Living trust agreement. Florida does not recognize oral trusts for assets meant to be transferred after your death.
3. Legal Capacity. The person creating the trust (often called the “settlor” or “grantor”) must be of sound mind.
4. Name the beneficiaries. A living trust must have a definite beneficiary unless the trust is a charitable trust, a trust for the care of an animal, or another non-charitable trust with a specific purpose.
5. Proper Purpose. The trust must have a lawful purpose. A trust won’t be valid if its purpose is illegal or against public policy.
6. Trustee. The trust must have a named trustee. This can be the person creating the trust (for a living trust) or another individual or entity. The trustee must accept the responsibility, and there must be some duties for the trustee to perform (no “honorary” trusts). If a trustee is not named or the named trustee declines to serve, a court may appoint one.
7. Funding the Trust. While not a requirement for the living trust’s creation, for a living trust to be effective, it needs to be “funded.” This means that assets (like real estate, bank accounts, or other property) must be legally transferred into the living trust. If assets are not transferred to the trust, they will not be governed by its provisions.
8. Proper Execution. For a revocable living trust to be valid in Florida, it needs to be executed with the same formalities as a will. This means the settlor must sign the trust document, and the signing must be witnessed by two witnesses, all being in the presence of each other. The execution must also be notarized.
9. Court Approval Not Needed. Unlike some legal agreements, a living trust doesn’t need court approval to be valid. However, certain notifications may need to be provided after the settlor’s death, and if there are disputes among beneficiaries, a court might become involved.

Pros and Cons of Establishing a Living Trust

Benefits of Living Trusts

Here are the key benefits of establishing a Florida living trust in your estate plan:

1. Avoids Probate: One of the primary benefits of a living trust in Florida is avoiding probate. Living trusts assets can be distributed to beneficiaries upon your death without going through probate.
2. Adds Privacy: Since probate is a public process, all documents, including the will and the list of your assets, become part of the public record. On the other hand, a living trust remains private, ensuring that details about your assets and your family remain confidential.
3. Allows Asset Management During Incapacity: If you become mentally incapacitated due to illness, injury, or other reasons, a named successor trustee can manage your assets in the trust without needing a court-appointed guardian or conservator.
4. Provides Flexibility: A living trust can be revoked or modified during your lifetime. This flexibility allows you to make changes in response to life events such as marriage, divorce, births, deaths, or other changes in your personal or financial circumstances.
5. Avoids Ancillary Probate: For Florida residents who own real estate or tangible assets in another state, transferring those assets to a living trust can avoid ancillary probate (probate in another state).
6. Can Provide Tax Benefits: Revocable living trusts don’t offer direct tax advantages, but they can be structured to maximize estate tax exemptions, especially for married couples. Additionally, they can be paired with other estate planning tools that offer tax benefits.
7. Can Protect Beneficiaries: Living trusts can be structured to include provisions for beneficiaries who might not be ready or able to manage their inheritances directly, such as minors, individuals with special needs, or those who might be financially irresponsible.
8. Streamlines Process: With a living trust, the administrative process after your death can be simpler and more streamlined than a will, so your heirs get their inheritance faster.

Disadvantages

A living trust in Florida can have certain drawbacks. The main ones are:

1. Higher initial setup and maintenance costs compared to a will.
2. Requires ongoing management and funding of the trust.
3. Offers no specific income tax benefits or asset protection during the grantor’s lifetime.

What’s Been Our Experience?

When clients ask us for our suggestions in designing their living trust we typically recommend the following based on our experience:

• Design a trust that continues after your death as one or more irrevocable trusts. The continuing trust helps protect their estate from their heirs’ own creditors and former spouses.
• Think carefully about appointing joint successor trustees, where both trustees must sign all trust documents. Being a successor trustee is not an honor—it’s a difficult job with large responsibilities and risks. 

Frequently Asked Questions