Florida Elder Law & Estate Planning Blog


Some Assets Do Not Belong In Your Living Trust

A trust can be an effective estate planning tool for clients who desire a level of control over their assets. A trust allows you to place various “qualifiers” and incentives on distributions to beneficiaries. You can direct your trustee to distribute an inheritance to a beneficiary at only certain times, or for certain purposes. For example, many of our parent and grandparent clients direct that the trustee should release funds to a child or grandchild when he/she graduates college, has been employed for a certain period of time, is a certain age, etc. Other clients who are concerned that a beneficiary will not handle a lump sum of money wisely will instruct the trustee to dole out monies only under certain circumstances or in certain amounts.

 

“Testamentary Trust” vs. Living Trust

 

A trust can be created within the terms of  your will – a “Testamentary Trust” – but there is a downside to this approach. The assets will have to go through Probate, which is costly, time-consuming, and sacrifices your privacy because the will becomes part of the public record that anyone can access. For most people, a better choice is a Revocable Living Trust. It does not go through Probate, and dealing with the estate is less onerous for your loved ones. Learn more about Living Trusts.

 

But…Not Every Asset Belongs In Your Living Trust

 

Despite the benefits to most people of establishing a living trust, do not assume that every asset you own belongs in it. Some assets need not go in, and some definitely should not go in. Some examples:

 

Maybe: It is true that an asset that has a designated beneficiaries or is jointly owned can avoid probate without being transferred into your living trust. However, it may be subject to the creditors of the joint owner, or who gets it may be inconsistent with your overall estate plan.

Yes: If you own real estate, it is generally prudent to retitle it in the name of your living trust.

Yes: Any real property you own outside the State of Florida should be placed in your trust. If you do not, This also goes for any property you own outside Florida. If you own property out of state, retitle that in the name of your living trust, too: if you skip this step, it will be subject to an ancillary probate in the other state.

No. Qualified plans such as your IRA and 401K should not be placed in your trust. Doing so will produce adverse tax consequences.

Not necessary: Life insurance owned by a decedent normally passes to the named beneficiary, which could be one or more individuals or your trust.

 

It is important to meet with an attorney to discuss your specific circumstances and goals and review your assets and family situation. The attorneys of The Karp Law Firm can help you figure out whether a living trust is the right tool for you, and advise you as to what assets do and don’t belong in it. Call us for a consultation at 561-625-1100.