The Different Types of Trusts in Florida

Many people create a trust as part of the estate planning process. A trust is a legal document into which property is transferred. Trusts also have beneficiaries, who are the people who will inherit the property in the future. Trusts are separate legal entities from the people who create them and so, they are a great tool for those who want to help their loved ones avoid probate.

Creating a trust is not always a straightforward endeavor, though. There are many different types of trusts and it is important that you choose the right one so you reap the many benefits. Below, our New Port Richey trusts lawyer explains about the different types you can create.

Revocable Trusts 

A revocable trust, also known as a revocable living trust or just living trust, is a document some people create to manage assets during their lifetime and to distribute them to beneficiaries after their death. This is the most common trust created and more likely than not is the trust you are envisioning for estate planning purposes.

The person who creates the trust is known as the settlor or grantor. This individual(s) is also the person who typically manages the assets in the trust and the same individual who serves as the trustee. As a result, the trust effectively serves as an extension of the settlor while the settlor is alive. As the trust is a “revocable” trust, this type of trust can be amended or revoked at any point during the person’s lifetime. By contrast, many other types of trusts, known as irrevocable trusts, cannot be altered.

Crucially, during the creation of the trust, a successor trustee is named. That person steps into the role of trustee when the original trustee passes away or becomes unable to serve due to incapacity of some type.

The settlor’s assets are then put into the trust, a process known as funding it. Once that is done, the trustee has access to and can manage all of the assets in the trust as if they were in the person’s name–buying or selling property, withdrawing money from bank and brokerage accounts in the name of the trust, and the like.

Charitable Trusts 

Charitable trusts are irrevocable, meaning they cannot be terminated or modified after they are created. There are two types of charitable trusts and they are charitable remainder trusts and charitable lead trusts. While these two types of trusts differ slightly, both allow you to donate your property to your favorite charitable organizations while also reaping some tax benefits.

Grantor Retained Annuity Trust (GRAT) 

GRATs are irrevocable trusts that are intended to lower the taxes on larger financial gifts to family members and beneficiaries. GRATs have short durations. When the trust is created, you must pay taxes on it. However, you will receive an annual annuity payment during the life of the trust. After the term of the trust expires, the beneficiaries will receive the residual assets.

Irrevocable Life Insurance Trusts 

Generally speaking, life insurance policies do not have to pass through probate. Still, many people create life insurance trusts for tax purposes. A trust also allows beneficiaries to receive the property quickly after the settlor, or person who created the trust, passes away. Since these trusts are irrevocable, you cannot make changes to the beneficiaries once you have created the trust.

Spendthrift Trusts 

These trusts are created for beneficiaries who do not have good money management skills. The property within a spendthrift trust does belong to the beneficiary, but they cannot withdraw from it however they choose. Instead, the trust will stipulate when the beneficiary can receive funds, and how much they can receive. A spendthrift trust can also stipulate how the money is to be spent, such as only on school tuition.

Special Needs Trust 

A special needs trust allows a beneficiary with special needs to inherit property without interfering with certain government benefits they may receive. For example, you may have a child with special needs who receives Medicaid benefits. These are need-based benefits and a large inheritance could otherwise make them ineligible for the Medicaid benefits they will still need. A special needs trust can prevent this from happening, as the assets in the trust belong to the trust and not the individual.

Our Trusts Lawyer in New Port Richey Can Advise You of Your Options 

You have many options when creating a trust and the above are just a few of the most common types. At Messina Law Group, P.A., our New Port Richey trusts lawyer can review the facts of your situation, advise you of your options, and help you determine which one is right for you. Call us now at (813) 492-7798 or contact us online to schedule an appointment in New Port Richey, Wesley Chapel, Tampa, or Dunedin.

Source:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/0736.html