Considering a Living Trust? What You Need to Know

Mon Jul 31, 2023 | Estate Planning |

Many people think that a living trust is their best estate planning option without really knowing what it is or how it works. If you are considering your estate planning options, a living trust lawyer from Ellis Law Group can work with you to develop an estate plan that best suits your needs. 

What Exactly Is a Living Trust?

Sometimes referred to as a revocable trust or revocable living trust, a living trust is an entity that is created by a legal document that will govern the management of your assets during your lifetime and the distribution of any remaining assets upon your death. It is referred to as a “living” trust for two reasons: 

  1. The trust is a dynamic entity, meaning that it can be modified or revoked at any time; and
  2. The trust is created during your lifetime rather than upon your death. 

Because they are easily modified, living trusts are an attractive estate planning tool because they essentially allow the creator of the trust to retain possession of and control over any assets of the trust during their lifetime while also directing how those assets will be distributed upon the creator’s death. An irrevocable trust, on the other hand, is much harder to modify, which means that the creator of the trust gives up a certain amount of control over estate assets. 

Essential Ingredients of a Living Trust

As mentioned above, a living trust is created by a legal document – it must be in writing and properly executed. There is no such thing as a verbal or oral living trust. 

The creator of the trust, also referred to as the “settlor” or “grantor,” must sign the trust agreement. It must be signed in the presence of two witnesses, who must also sign the trust agreement. All signatures on the trust agreement must also be notarized. 

In addition to being signed, witnessed, and notarized, the trust agreement must contain the following: 

  • It must name a trustee. The trustee will take control of the trust assets and carry out the directions of the grantor. The trustee has a fiduciary duty to act in the best interests of the grantor and the beneficiaries of the trust at all times. With living trusts, the trustee is typically the grantor, but another party may be named. 
  • It must name a lifetime beneficiary. This is the person who will benefit from the trust during the grantor’s lifetime – typically the grantor of the trust. 
  • It must name a successor trustee. The successor trustee will take over after the death of the grantor and assume responsibility for managing and administering the trust. 
  • It must name a death beneficiary. This is the person or persons who will receive the remaining trust assets upon the death or incapacity of the grantor. 

Of course, the trust should also contain provisions that govern how the trust assets are to be managed and distributed. It also needs to clearly identify itself as revocable and what needs to be done in order to modify the trust. 

You can draft your own trust agreement without the assistance of an attorney. There are numerous forms available online. However, these form documents may not comply with Florida law and may have other issues that are not immediately apparent. A seasoned living trust lawyer can create a trust agreement that is drafted to meet your unique needs and is fully compliant with all legal requirements.   

Funding a Living Trust

The creation of a living trust does not end with drafting and executing the trust agreement. To become effective, you must fund the trust. This means that any trust assets must be legally transferred into the trust. For titled assets, such as cars or real estate, you must change the title to reflect the change in ownership. This will require having a new title created, and there may be filing fees and costs. 

For untitled assets such as furniture and jewelry, the process is easier in the sense that you do not have to have a title drafted and filed somewhere. However, you may want to consider having some documentation of their transfer into the trust, such as an assignment of ownership. This documentation should clearly identify the assets to be transferred so that there is no confusion as to which “jewelry” or “paintings” you were referring to in your trust. 

Any assets that you do not transfer into your trust cannot be distributed through the trust even though they may have been named in the trust. This often occurs with assets that are obtained after the trust is created. A living trust lawyer can help you make sure all trust assets are properly transferred into the trust once it has been created. 

The Advantages and Disadvantages of a Living Trust 

People are attracted to living trusts typically for one or more of the following reasons: 

  • A living trust avoids probate. The bulk of your assets can be distributed according to the terms of the trust without any involvement from a probate court. This expedites the administration of your estate and minimizes administrative expenses. 
  • A living trust can provide for incapacity. A will is only effective once you die. If you become incapacitated, important assets may go unmanaged, resulting in a depletion of their value or even their loss. With a living trust, the successor trustee can step in and begin managing your estate assets once you become incapacitated. 
  • A living trust provides privacy. Because you do not have to proceed through the courts, your trust agreement, the identity of your beneficiaries, or your estate assets never become a matter of public record like they would in a probate proceeding.

While these advantages are significant, a living trust is not for everyone. Some of the disadvantages of a living trust include the following: 

  • Transfer of title. This can be a cumbersome process and the grantor must make sure that all trust assets are properly transferred into the trust. Otherwise, any untransferred assets will have to pass through the probate process, thus undercutting the value of the trust. 
  • Additional costs. As mentioned above, transferring the title of assets into the trust could involve additional costs. These costs could be significant, particularly with regard to real estate.

It should also be noted that trusts do not offer any significant tax benefit that cannot be achieved through a will –  a common misconception. Regardless, a living trust lawyer can help you decide whether a living trust makes sense for you. 

Contact Ellis Law Group Today

To discuss how a living trust can help you meet your estate planning goals, contact us today by calling 561-910-7500 to schedule a consultation.