UNDERSTANDING LIVING TRUSTS
FOR FLORIDA RESIDENTS
A PRACTICAL GUIDE ON HOW TO:
• Avoid Probate
• Save Estate Taxes
• Minimize Court Intervention
Rarick & Beskin, P.A.
6500 Cowpen Rd., Ste. 204
Miami Lakes, FL 33014
Tel: (305) 556-5209
(954) 861-1426
E-mail: info@raricklaw.com
Web Site: www.rblawfl.com
By: Phillip B. Rarick, J.D.
Member, Florida Bar Association
Copyright® 2021 Rarick & Beskin, P.A.
INTRODUCTION
When I first wrote about Living Trusts for Florida residents over twenty years ago we were at the
beginning of the
Living Trust Revolution: Trusts were replacing wills as the principal
planning tool for persons regardless of age or income
. The primary force driving this
change was that people did not want a court or probate judge to intervene in their family or
business affairs. People wanted to avoid probate in the event of disability or death. As you will
read here, a Will requires a court to step into your personal affairs. Today, Living Trusts have
become firmly established as the legal tool of choice for most people. This booklet will explain
why.
What we're talking about is called estate planning.
Estate planning is not just for the wealthy
.
Regardless of your age, marital status, or wealth it's something we all need to do if you want to
keep control of your assets (your estate) and of decisions about your medical care when
something happens to you. It's important to plan now, while you can, because with estate
planning no one gets a second chance.
I'll look at five basic ways people "plan" their estates. (You're already using at least one of them
now, even if you think you haven't done any estate planning.) We'll explain what can happen
when you use them. We'll show you how one plan gives you a way
to keep legal control in the
family and stay out of the court.
I'll do my best to explain it all in plain English.
1. LOSING CONTROL WITH A WILL
C
ontrary to what you've probably heard, a Will is usually not the best plan for you and your
family, primarily because
a Will does not avoid probate when you die
. All Wills, including
those with trusts in them, must be admitted to the probate court before they can go into effect.
Equally, if not more important,
a Will does not avoid guardianship
– the legal process where
the court steps into your life and appoints a guardian to manage your personal and/or financial
affairs. A Living Trust can avoid these two basic problems. These are the reasons the Living
Trust, not a Will, has become the primary legal planning tool for families in Florida and
nationwide regardless of whether you have $100,000, $1 million or more.
What is probate and why do we have to go through it?
Probate is the legal process through which the court makes sure that, when you die, your Will is
legally valid, your debts are paid and your assets are distributed according to your Will and
Florida law. It is a bureaucratic, costly, and time consuming procedure to transfer title from your
name to your beneficiaries.
What assets go through probate?
Not everything you own is automatically subject to probate. Jointly owned assets that transfer to
the surviving owner and assets that have a valid beneficiary designation (like an insurance
policy) generally do not go through probate. But there can be some significant problems with
both. You'll want to finish reading this booklet before you rely on them.
What's bad about probate?
It can be expensive. According to a study by the American Association of Retired Persons
(AARP), attorney fees for probate are usually three percent or more of the estate's gross
value. Florida presumptive statutory probate fees for attorneys (F.S.733.6171) are
approximately:
Estate Florida Probate Fee
$100,000
$3,750
$250,000
$7,500
$500,000
$15,000
$750,000
$22,500
$1,000,000
$25,000
$2,000,000
$50,000
These fees are not the total cost of probate
:
they do not include the Personal
Representative's fee, which are often paid to a family member or waived. If not waived, the
Personal Representative's fees can be up to 3% of the total probate estate.
Probate takes time - usually 9 months to 2 years. During this time, your assets will be frozen
(unless you wish to incur the expense of a bond) so an accurate inventory can be taken, and
nothing can be distributed or sold without the court and/or personal representative's approval.
Loss of Privacy. Probate is a public process. An "interested party" can find out details about
your estate, including who the heirs are, what they will receive, their addresses, etc. This
information is sometimes used as "business" leads by solicitors.
Loss of Control and Intervention of the Courts in your Family Affairs. The probate judge—
not you or your family—has supervision over how your Will is interpreted, how much
probate will cost, how long it will take, and what information is made public. Families are
accustomed to handling their affairs privately and independently. Suddenly, losing that
control to a legal process and having to pay for it can be frustrating.
Wills Cannot Plan for Disability. This is the most serious, yet least understood limitation of
Wills. Disability is the lack of capacity to manage your own affairs. Think about this for a
few moments. If you can't handle your affairs because of mental or physical incapacity - for
example, if you have a stroke or a heart attack, develop Alzheimer's Disease, or are injured
in an auto accident—who will conduct business for you? Sooner or later, your signature will
probably be required for something—to withdraw savings, sell/ refinance assets to pay your
expenses, etc. Unless you have legally given another person the legal authority to sign for
you, you will not be able to transfer these assets without the intervention of the probate
court.
2.
LOSING CONTROL BY DOING NOTHING
W
hat happens is you don't do anything? If you own assets in your name and you become
incapacitated, the court can take control just as we explained. And when you die, your estate
will go through probate. The only difference is that your assets will be distributed according to
Florida law, which is probably not what you would have wanted. Under Florida law, if you are
married and have children, they will each receive a share of your estate. This means your spouse
could receive only a fraction of your estate, which may not be enough for him or her to live on.
And if you have minor children, the court will control their inheritances and it will
appoint their
guardian(s) without knowing whom you would have chosen
.
3.
LOSING CONTROL WITH JOINT OWNERSHIP
H
ave you seen the designation, "JTWROS" on your mutual funds or other investments? This
means Joint Tenancy with Right of Survivorship. Upon death of one person holding as
"JTWROS", the survivor takes everything. Joint ownership is probably the most commonly used
estate plan - and probably causes more problems than any other estate plan, such as (a) Since
jointly held property is not controlled by your will
, it could defeat the objectives of your will; (b)
Putting a savings account in joint name with a son or daughter will expose those monies to the
creditors of those children; and (c) For married couples with a taxable estate over two million
dollars, jointly held property can have adverse estate tax consequences.
4.
LOSING CONTROL BY GIVING AWAY ASSETS
S
ome people re-title assets in their children's names while they are living, thinking it will make
things easier for their children when something happens to them. The primary problem with
giving away an asset is - it's gone. What if you want or need it back? What if the son or
daughter becomes mired in a divorce? What if the child is in an auto accident and is sued?
Another problem is the gift tax: if the value of the gift exceeds $14,000 per person annually, a
gift tax return should be filed.
5.
KEEPING CONTROL WITH A REVOCABLE LIVING TRUST
A
recent article in Forbes magazine titled, "Trust a Trust", advises: "
Have you set up a trust? If
you haven't, get cracking. No middle-class family should be without one."
What is a Revocable Living Trust?
The key word is "REVOCABLE", which means you have unfettered discretion to alter, change,
amend or revoke the trust. You are THE BOSS. A Revocable Living Trust is a legal document
that includes your instructions for what you want to happen to your assets when you die, just like
a Will. But, unlike a Will, a Living Trust avoids probate at death. It also prevents the court from
controlling your assets if you become incapacitated and it gives you control of the assets you
leave to your minor children or grandchildren—
without court supervision
.
How does a Living Trust avoid probate and prevent court supervision at incapacity?
When you set up a Living Trust, you transfer assets from your individual name to the name of
your Trust, which you control, such as from "John and May Smith, Trustees, of the Smith Family
Trust, dated 6/7/__." Technically, you no longer own anything, so there is nothing for the courts
to administer when you die or if you become incapacitated. The concept is very simple,
but this
is what keeps you and your family out of the courts - even if you own assets in other states.
Do I lose control of the assets I put into my Living Trust?
Absolutely not. You
keep full control
. You can do anything you could do before - including
buying, selling, investing, etc. You can make changes or even cancel your Trust (that's why it's
called a revocable trust). In fact, the Internal Revenue Service considers putting assets in a
Revocable Living Trust to be a "non-event" because you can take them out at any time. Nothing
changes but the names on the titles. And, as you'll see in the next few pages, you'll actually have
more control with your assets in a Living Trust than you do now.
How does a Living Trust work?
When you set up a Living Trust, you become the Trustmaker, Trustee and Beneficiary. If you
are married, you and your spouse can be Co-Trustmakers, or you can be Trustmakers of your
own separate Trusts. Only you, the Trustmaker, can make changes to your Trust.
That's how
you keep control
.
What happens if I become incapacitated?
If you have named someone else as your Trustee or to be a Co-Trustee with you (for example,
your spouse or a family member), they will continue to manage your financial affairs according
to your Trust's instructions for as long as necessary. If you recover, you automatically resume
control. If you are the only Trustee or your Co-Trustee is unable to act (for example, if your
spouse is also incapacitated or has died), your hand-picked Successor Trustee(s) will step in and
act for you.
That's how you keep control within Your family
.
What happens when I die?
Your Trustee or Co-Trustee essentially has the same duties as a Personal Representative. He/she
collects any income or benefits, pays your remaining debts, sees that tax returns are filed, and
distributes assets according to your Trust's instructions. If estate tax planning is involved, he/she
will work with your team of professionals to make sure everything is done strictly according to
your wishes. All of this can be done efficiently and privately - with no court interference.
Who can be a Successor Trustee?
Successor Trustees can be individuals (your adult children, other relatives, or trusted friends)
and/or a Corporate Trustee, such as a bank or trust company. If you choose an individual, you
should name more than one in case your first choice is unavailable or unable to act. You can
name two or more to act together.
How do I know my Successor Trustee will do what I want?
A Trust is a binding legal contract, and Trustees are fiduciaries. Under Florida law, they have a
legal duty to follow your Trust's instructions and act in a "prudent" (conservative) manner at all
times for the benefit of your Beneficiaries. If your Successor Trustee were to abuse his/ her
duties by not following the instructions in your Living Trust, he/ she could be held legally liable.
Does a Living Trust reduce my taxes?
A Revocable Living Trust has no effect on your income taxes. There are even income taxes on
the income you receive in the year you die. However, depending on the size of your estate, a
Living Trust can help reduce or even eliminate estate taxes when you die.
What is the Current Estate Tax or “Death Tax”?
The new federal IRS tax laws passed in 2012 and in 2017 have fundamentally changed estate tax
planning. Although the 2021 estate tax exemption is now $11.7 million per person, this
exemption drops to approximately $5.6. million in 2026. This means in 2026 estates above the
$5.6 million exemption will be taxed at the punishing rate of 40%.
Note: Under the new law, if a person is not a U.S. citizen, the tax rate remains at 40% over the
exemption of $60,000. Foreign investors who are non-residents and own property in the U.S. need
to do special planning to avoid this tax.
Important Planning Note:
To determine your current net estate, add up the present value of
your assets and subtract your debts. Your assets include everything you own: home, other real
estate, investments, personal belongings, retirement benefits, IRAs, death benefits and life
insurance. Many persons do not know this latter fact: Many persons believe life insurance
benefits are not subject to the estate tax because such benefits generally are not subject to
income tax. This is wrong. If you own the policy, the life insurance benefits will be subject
to the estate tax if you are over the exemption amount listed above.
Is there anything I can do about estate taxes?
YES! - IF YOU PLAN NOW. One thing you can do, if you are married and your spouse is a
U.S. citizen, is to use Uncle Sam's plan - the marital deduction. (If you or your spouse are not
U.S. citizens, there are other options we should discuss.) When you die, you can leave an
unlimited amount to your spouse tax-free. And when your spouse dies, the estate will be entitled
to a tax exemption.
How does a Living Trust reduce or eliminate estate taxes?
It can include provisions that lets a married couple tax full advantage of their estate tax
exemptions, so that married persons in 2026 can shelter up to approximately $11.7 million
dollars from the federal estate tax. Under the new federal estate tax laws, a married couple has
“portability” options that may need to be addressed in your living trust to provide maximum
flexibility for tax planning.
What's involved in setting up a Living Trust?
You make the basic planning decisions by deciding who will be your Trustee, Successor
Trustees, and Beneficiaries. The legal document is then prepared from your decisions. After
you've approved and signed the document, you transfer your assets to your Living Trust. This is
called "funding" your Trust.
Do I need to fund my Living Trust now?
If you want the control we've been talking about, you must fund your Living Trust now, while
you are able. Your Living Trust can only control the assets that have been transferred into it.
Is it hard to put assets into my Living Trust?
No, and your attorney, financial advisor and insurance agent can help. You'll need to change
titles on real estate (local and out-of-state) and other assets with formal titles, such as savings,
stocks, CDs, other investments, insurance, safe deposit box, etc. Tax deferred savings plans, like
IRAs and 401(k) plans are exceptions. If you are married, there may be valid tax reasons for you
to name your spouse as first Beneficiary and your Trust as second Beneficiary. You'll want to
discuss your options with your attorney and tax advisor.
Doesn't it take a lot of time to change titles and beneficiary designations?
It will take some time. But you can do it now, or you can pay the courts and attorneys to do it
for you later when you can't. Think about this for just a minute. Who knows better than you
what you own and where all the paperwork is located? And if there is a problem with a title,
wouldn't it be better for you to straighten it out now than for your family (and attorneys) to try to
resolve it without your help? One of the benefits of a Living Trust is that it organizes all your
assets under one plan, with one master set of instructions.
Should I have an attorney prepare my Living Trust?
Yes, preferably an experienced attorney who specializes in Living Trusts. I have yet to review a
"do-it-yourself" trust that comes close to meeting Florida law requirements and fulfilling the
family's needs. Invariably, these attempts to save money result in the opposite: expensive fix-
ups, expensive litigation, family headaches, and family division.
Is a Living Trust expensive?
Not when compared to the costs and loss of control that come with probate at death and court
supervision at incapacity.
How much does a Living Trust Cost?
The cost for a Living Trust depends on how complicated your estate is and whether you need to
do tax planning. I can tell you the exact cost following our initial meeting.
How long does it take to get a Living Trust?
It will only take two to three weeks to prepare the documents after you make the basic decisions.
Are Living Trusts new?
Not at all. Trusts are as old as Wills: They have been used effectively for hundreds of years.
When should I set up a Living Trust?
Now, while you are healthy and you don't think you need one. Because, remember, with estate
planning, you don't get a second chance, to KEEP CONTROL IN YOUR FAMILY - AND OUT
OF THE COURTS.
CONSULTATION
You may schedule an initial consultation by calling Rarick & Beskin at (305) 556-5209 or
email to info@raricklaw.com
. At this first meeting, our job is to listen to you and learn about
your family. We will then outline an estate plan designed to meet your needs and the needs of
your family. We will give you the total cost of the plan at this meeting, so that if you decide to
go forward with your planning, you will know the exact cost. If you elect not to proceed,
there is no further obligation.
We hope to meet you soon!
ESTATE PLANNING CHECKLIST
The following checklist will help you determine whether estate planning is necessary. Please
answer each question YES or NO.
1.
Has it been more than three years since you reviewed your estate plan, including
your Will, life insurance policies and any other documents? [ ] YES [ ] NO
2.
If you or your spouse passed away today, are you uncertain about what would
happen to your property? [ ] YES [ ] NO
3.
If you became incapacitated, would your family have to go through court
proceedings to carry on your affairs? [ ] YES [ ] NO
4.
Do you have minor children or other people who are dependent on you?
[ ] YES [ ] NO
5.
If a death occurred and court approval was required to release accounts for
working capital, could it disrupt your business or family life? [ ] YES [ ] NO
6.
Would you like to avoid probate of your estate? [ ] YES [ ] NO
7.
Does your life insurance or other accounts name a minor child as a beneficiary?
[ ] YES [ ] NO
8.
Do you have children by a previous marriage? [ ] YES [ ] NO
9.
Have there been any major changes in your family since you last signed your will,
such as marriage, separation, divorce, birth, etc.? [ ] YES [ ] NO
10. Are any of your children poor money managers, have credit card debt,
or in a marriage that is not stable? [ ] YES [ ] NO
If you answered any one of the above questions YES, you may need estate planning now
.
YES answers indicate potential problems in the areas of tax, cost and delay of probate, or simply
lack of a plan which carries out your wishes.
Planning now can help solve these problems
later!
CONTACT:
RARICK & BESKIN, P.A.
Call (305) 556-5209, (954) 861-1426 or e-mail to info@raricklaw.com.
