As experts in estate planning, LCO Law LLC understands that many people have questions about trusts. In this FAQ, we will answer some of the most common questions we receive. You can find out more HERE.
Q: What is a trust?
A: A trust is a legal arrangement in which a person or entity (the trustee) holds and manages assets for the benefit of another person or group of people (the beneficiaries). A trust that intends to be testamentary (for the purpose of estate planning) must be in writing.
Q: What are the benefits of a trust when used for estate planning?
A: Some of the benefits of a trust include:
Avoiding probate and the associated costs and delays
Providing for the management of assets in the event of incapacity or disability without having to open a guardianship court case
Providing for the care and support of minor children or family members with special needs
Protecting one or more beneficiary’s assets from creditors and lawsuits
Allowing for greater control over how and when assets are distributed to beneficiaries
Maintaining privacy in the distribution of assets
Creating generational wealth
Reducing income, estate, and gift tax consequences
Q: What are the different types of trusts?
A: There are hundreds of trust structures, some of which are available for Florida residents, and others which are not. Trusts can be revocable, irrevocable, grantor-retained, third-party controlled, living trusts, testamentary (created after the death of the grantor), charitable, special purpose (such as Special Needs Trusts or Land Trusts), business, and personal.
Q: What is the difference between a revocable and an irrevocable trust?
A: A revocable trust can be changed or revoked by the person who created it at any time during their lifetime. An irrevocable trust cannot be changed or revoked once it is created and can have immediate gift tax and income tax consequences for the creator.
Q: How do I fund a trust?
A: To fund a trust, assets must be transferred from the individual’s name into the name of the trust. This typically involves changing the title on property, bank accounts, and investments.
Q: Do I need a lawyer to create a trust?
A: While it is possible to create a trust without a lawyer, consulting with an estate planning attorney can ensure that the trust is legally binding, does what you intended it to do, does not have adverse legal or tax consequences for you, and covers all necessary elements. An attorney can also advise you on the best type of trust for your unique circumstances. There is no one-size-fits all trust, especially for estate planning.
Q: Can a trust be changed or updated?
A: A revocable trust can be changed or updated by the person who created it at any time during their lifetime so long as they are competent. An irrevocable trust cannot be changed or updated by the creator once it is created, that is why it is especially important that irrevocable trusts are drafted to allow for some flexibility in the management of assets and in management of tax consequences to the trust.
Check out this Trust video from our YouTube Channel!
At LCO Law LLC, we can help guide you through the estate planning process and advise you on the best type of trust for your unique circumstances. Contact us today to schedule a consultation at 813-480-2106.