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Everything You Need to Know About Trusts

What Is a Trust?

A trust is something you set up to manage your assets during your lifetime. Upon your death, the trust immediately transfers to the trustee, whereupon assets are then distributed as defined within. There are many significant advantages of creating a trust. Trusts allow you to protect your legacy and are flexible instruments that provide tax benefits, avoid costly and time-consuming probate and, most importantly, protect your assets and wishes. The experienced attorneys at Every & Stack can advise you and tailor the best strategy.

There are many different types of trust you can set up; as a “grantor,” you assign a “trustee” who will be responsible for the management of trust assets. Here, you have the flexibility to amend, change or terminate while you are living. We recommend updating annually or after major life events such as new partnerships, having children, or if any new laws are passed that provide additional advantages.

Benefits of a Trust

When set up correctly, trusts don’t just protect your assets; they also provide huge advantages which save valuable time and money. Should something happen, your estate immediately transfers and will be managed by the trustee. A trustee cannot act outside the parameters of the trust, guaranteeing your finances and assets are still controlled by you after your death. You will have the freedom to stipulate conditions for an inheritance, distribution of assets, and continued management of your estate.

Trusts are also harder to contest than wills, as they are managed while you are alive and follow strict rules. Revocable trusts can be modified or terminated anytime during your lifetime, as long as you are not incapacitated. An irrevocable trust cannot be modified or terminated without the trustee’s consent. Every & Stack can tailor a tax-advantaged strategy to protect your investments and minimize liabilities.

  • Finances are controlled after your death
    • Designate beneficiaries and avoid a court-appointed conservatorship
    • Outline milestones/conditions for children to inherit (graduation, drug test, age)
    • Delay distributions
    • Protect small children or loved ones with a disability
    • Direct care for a pet
    • Limit trustee control to prevent them from disinheriting children
    • Asset protection; against creditors
  • Avoid probate, which is a court-supervised process for distributing assets.
    • Probate can take several months, even years, to resolve
    • Trusts define beneficiaries who are not subject to probate
    • Trusts are harder to fight, as they are set up and managed while you are alive
    • Avoid probate costs, which can be very expensive
    • PRIVATE: A will is a public record; therefore, everything within becomes public unless you have a trust which is private to the parties involved
    • Transfer of assets immediate
  • Estate Management if you become ill or incapacitated
    • Assign guardianships for minor children
    • Appoints a successor to keep company operations running smoothly without interruption
    • Assets can be managed from generation to generation
    • Investment & retirement management
  • Tax exemptions: If set up correctly, a trust is ‘invisible’ to the IRS
    • Avoid estate tax
    • Contributions are considered a “completed gift,” making them tax-exempt
    • You can utilize a trust to take advantage of strategies that minimize your tax burden, investments moved to tax-exempt or tax-deferred
    • Grantors are subject to taxes. However, the non-grantor trust’s income is taxable to the trust.

Which Trust is Best for You? 

We can also help you select the type of trust that addresses your legacy concerns. Trusts are very flexible, and depending on your financial circumstances, we can tailor a strategy that will work for your family so your heirs can keep more of what you bequeath to them.

  • Revocable Trusts: As a grantor, you can retain control of your assets and may revoke or revise the trust at any time.
  • Irrevocable trusts: Once you establish this kind of trust, its assets no longer belong to you, and you can’t amend the trust without your beneficiary’s consent. However, appreciated assets are not subject to estate taxes.
  • Credit Shelter Trusts: Also called a bypass or family trust, this allows a grantor to place enough wealth in the trust for heirs that the remainder which the grantor passes on via a will does not trigger estate tax. The assets in the credit shelter trust are also not subject to estate tax.
  • Generation-skipping trusts: Also called a dynasty trust, this enables a grantor to transfer a substantial amount of tax-free money to beneficiaries at least two generations your junior. It’s an excellent way to provide a legacy for your grandchildren.
  • Qualified Personal Residence Trusts: A QPRT prevents the value of your primary residence or vacation home from being added to the grantor’s estate. It prevents real property which may appreciate in value from triggering the estate tax.
  • Irrevocable Life Insurance Trust: This trust removes a grantor’s life insurance from the taxable estate. It’s an excellent way to leave a tax-free legacy to loved ones.
  • Qualified Terminable Interest Property Trust: A QTIP trust helps grantors in second marriages provide for the lifetime needs of a second spouse while preserving a legacy for children from the first marriage.

Florida Requirements for a Trust 

According to the Florida Statues Chapter 736: Florida Trust Code, there are specific requirements that clearly define requirements for the creation, modification or termination, and even execution of trusts.

  • The settlor has the capacity to create a trust
  • The settlor indicates an intent to create the trust
  • The trust has a definite beneficiary or is a charitable trust, a trust for the care of an animal, or a trust for a noncharitable purpose
  • The trustee has duties to perform
  • The same person is not the sole trustee and sole beneficiary

Getting Started

Here are a few basic things to consider and collect before setting up a trust.

  • What assets do you want to include in the trust?
  • Who are your beneficiaries?
  • Do you want any special conditions set for distributions?
    • Example: Children may have to graduate college before their inheritance is released. If a beneficiary is an addict, they may have to prove sobriety for ten years. You may even specify that the second wife cannot disinherit the first wife’s children and stipulate precisely how assets are distributed. You may also limit the control that the trustee has.
    •  You have a lot of freedom over the parameters you set.
  • Consult an experienced attorney who will guide you through the process and create a trust document, which will need to be notarized.
  • Change assets/properties titles to reflect they are “Property of trustee of trust.”

Conclusion: Contact Every & Stack for Assistance with Estate Planning 

It is recommended to have a will, especially if you must designate a guardian for minor children or have property not included in your trust.  The experienced attorneys at Every & Stack can advise you on the best ways to address your legacy concerns, including the transfer of financial and real property assets, estate tax avoidance, guardianships for minor children, and support for philanthropic causes. We draft a precise will that reflects your desires and establishes various types of trusts to serve your estate planning needs.  Call today to schedule a consultation at our Daytona Beach office, 386-255-1925, or contact us online. We serve clients in Daytona Beach and throughout Florida. 

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