In the so-called information age, many Florida residents are aware that the use of trusts can be helpful in an estate planning context. There are several reasons one might wish to use a trust instead of, or in addition to, traditional styles of estate planning, such as a last will and testament. The question then becomes: which kind of trust should be used?
While there are a myriad of trust types that are geared toward specific goals, there are to basic types of trusts: irrevocable and revocable. A traditional reason to use a trust is to avoid the estate tax that applies to certain bequests. In Florida, however, only a very few individuals need to worry about that aspect of their estate, considering that Florida has no estate tax. Irrevocable trusts also can, in certain circumstances, protect the trust assets from creditors. An irrevocable trust, as it’s name implies, grants power over the trust assets to the trustee, with the founder of the trust having very little control over them once the trust documents are executed.
Revocable trusts, on the other hand, can be changed or revoked at any time after the trust is set up. They do not protect assets from creditors or estate taxes, but they do allow the assets in them to be distributed confidentially and without the need for probate. Revocable trusts are also often set up so that assets can be controlled by a trusted person in the event of incapacity.
Every individual’s situation is different, and should be treated as such. It may be a good idea for anyone considering using a trust in their estate plan to consult a professional to determine if, and what kind of trust, is the most beneficial in that person’s case.
Source: US News and World Report, “How to Choose Between a Revocable and Irrevocable Trust,” Joanne Cleaver, June 19, 2014