An Introduction To Revocable And Irrevocable Trusts For Florida Estate Planning

Looking after those you love comes with a number of important decisions you will have to make during the creation of your estate plan. One of these is whether to use one or more trusts and, if so, which ones. This article serves as an introduction to the two main types, revocable and irrevocable trusts; it explains:

• The advantages of revocable and irrevocable trusts.
• Some of the risks or disadvantages of each type of trust.
• The tax implications of choosing either type of trust for your Florida estate plan.

What Is The Main Difference Between An Irrevocable And Revocable Trust?

Trusts work by having you, the grantor, hand over assets or properties to the ownership of the trust (funding the trust) to be managed by a trustee, according to your instructions. There are many different types of trusts, though most are either categorized as revocable or irrevocable.

How Does A Revocable Trust Provide Flexibility In Estate Planning?

In a revocable trust, you can modify its terms, add or remove assets, and even change the trustee relatively easily while you are alive. This gives you greater control over the trust and its assets but protects them less than an irrevocable trust.

One type, a revocable living trust, allows for flexibility during your lifetime, as you can make adjustments to the trust in the form of amendments or restatements as your needs and goals change. In fact, the document can change up until you die or become incapacitated.

How Does An Irrevocable Trust Protect Assets?

In an irrevocable trust, assets and terms are fixed upon its creation, which then becomes quite independent and nearly impossible to modify. This reduces control and flexibility but improves the protection provided by the trust.

There are many different types of irrevocable trusts, but as a general rule, by putting more legal distance between yourself and the assets held by the trust, they provide significant protection from creditors and liability. So, if there is a third party that is seeking to collect assets that belong to the trust, under Florida law, that asset is not considered available to a creditor or other third party.

Attorney Myrna Serrano Setty is a kind and attentive estate planning and trust administration lawyer currently working in Florida. For over two decades, she has helped countless individuals and couples obtain peace of mind by building plans and trusts to protect their legacies and care for those they leave behind.

Ready to work on your estate plan? Curious about whether a trust might be right for you? Contact The Law Firm Of Myrna Serrano Setty PA today to schedule a free consultation.

What Are The Tax Implications Of Choosing A Revocable Versus An Irrevocable Trust In Florida?

The differences in trusts also have implications on your taxes. If you choose a revocable living trust, you are not treated any differently during your lifetime when it comes to your taxes. Any income gains or losses of assets that belong to your revocable living trust are reported on your individual tax return.

On the other hand, for an irrevocable trust, the tax implications depend on how the trust is drafted. There are certain types of irrevocable trusts where you still report those income gains or losses on your individual tax return. Other types of irrevocable trusts end up filing a separate tax return. As a general rule, however, when a trust is irrevocable, that trust is going to pay taxes at a higher rate than most individuals pay.

What Are The Primary Risks Associated With Creating Each A Revocable Or Irrevocable Trust?

There are many different kinds of trusts designed to minimize some risks at the cost of others.

• Irrevocable trusts may require a larger initial investment, while revocable trusts may be open to adding to over the course of your lifetime.
• The level of control also varies greatly between irrevocable trusts, where you cannot maintain control over the assets that are in your trust, and revocable ones, where you can.
• Some trusts are designed for specific tasks, like offering liability protections for business owners or providing a safety net for a relative with special needs. Using the wrong type of trust runs the risk of it being unhelpful or even counterproductive.

As a result, different trusts may be right for some and wrong for others, depending on your financial situation and goals. Only an experienced estate planning lawyer can help you make the right choices as part of your personalized plan.

Can You Use Both Kinds Of Trust?

It is also absolutely possible, and sometimes even optimal, to use two or more trusts. People will often incorporate an irrevocable trust as part of their overall plan to accomplish a specific objective or protect particular assets while already having a revocable trust (perhaps with a pour-over-will) to handle the bulk or remainder of their assets.

Curious About How Revocable Or Irrevocable Trusts Could Be Used In Your Estate Plan?

For more information On Revocable And Irrevocable Trusts In Florida Estate Planning, for a free consultation is your next best step. Get the information And legal answers you are Seeking by Calling (813) 686-7175 today.