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Questions and Answers on Florida Revocable Living Trusts
Q: Does a Living Revocable Trust Allow you to Avoid Probate?
A: A Revocable Trust may spare your family the trouble and expense of dealing with the Probate Court. This is of particular importance to Florida residents, since Florida's probate system can be cumbersome and family members often live at great distances.
However, Florida law provides that revocable trust is liable for the estate debts of the decedent; and there is a 2 year statute of nonclaim. In other words, if someone dies with a revocable trust, at least theoretically the trust is on the hook for 2 years after the person dies for any debts or claims against the person who died, and if the trustee distributes, or passes out the money to the beneficiaries before the 2 years is up, and that results in the trust not having the money to pay creditors, the trustee is liable to the creditors until the 2 years is up. However, there is an exception to this: if a probate is brought, and the estate is advertised, then the period the trust is liable is limited to 3 months after the first date of the advertisement of the estate. From a practical viewpoint, it may make a great deal of sense to bring a probate, and to close out creditors claims to 3 months after the advertisement, at least if there aren't a lot of bills to pay.
Q: How does a Living Revocable Trust protect against the need for a Guardianship?
A: This is an advantage of using a Revocable Living Trust that's often overlooked. Why subject your loved ones and your property to the restrictive rules of guardianship or conservatorship when you can easily avoid it with the use of a fully funded Revocable Living Trust? After following the trust provisions for determining your incapacity, your loved ones will be able to take over control of your trust assets without interference by a judge.
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Florida Revocable Living Trust
A revocable trust is a document (the “trust agreement”) created by you to manage your assets during your lifetime and distribute the remaining assets after your death. The person who creates a trust is called the “grantor” or “settlor.” The person responsible for the management of the trust assets is the “trustee.” You can serve as trustee, or you may appoint another person, bank or trust company to serve as your trustee. The trust is “revocable” since you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.
During your lifetime the trustee invests and manages the trust property. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amount. If you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. This is one of the advantages of a revocable trust.
Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. The trustee’s responsibilities at your death are discussed below.
Your assets, such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust. Assets that are not properly transferred to the trust may be subject to probate. However, certain assets should not be transferred to a trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.