What is a trust?

A trust can be an essential estate planning tool with a variety of benefits, including: reduction of estate and generation skipping transfer taxes, avoidance of probate, protection from creditors for grantor and beneficiaries, allows for assets to last over beneficiary’s lifetime and provides for grantor to have assets used for a particular purpose, rather than giving assets outright to individuals.

What is the purpose of a Living Trust?

  • Potential tax benefits (i.e. when husband & wife’s net worth exceeds one spouse’s estate tax exemption – currently $5.34 million);
  • Probate avoidance (for assets titled in the name of the trust, versus a typical husband/wife joint ownership plan where probate may be required at the second death);
  • Lifetime protection from incapacity (a successor trustee has authority to use the trust assets for your benefit in the event of your incapacity).  

Your Decisions:

  • One Trust or two (for husband and wife)?  This depends on the size of your estate (i.e. in excess of $5.34 million), the nature of your assets (i.e. whether the assets are available for transfer to a trust), or potentially whether this is a second marriage.
  • Who acts as Trustee?  Typically both spouses together act as Trustee, with other individuals (i.e. family members) and/or an entity (i.e. trust company) as a co-trustee or successor trustee(s) following the Trust owner’s death.
  • How restrictive or liberal do you want the terms of the Trust to be for the benefit of your spouse?  This typically depends on whether it is a first marriage or not.
  • Do you want your spouse to have the ability to “re-direct” assets among your heirs after the first spouse’s death?  This can be a flexible tool for modifying the estate plan of the first-spouse-to-die’s plan in the event of unforeseen circumstances that occur prior to the second death.
  • Whom do you wish to name as your beneficiaries (typically children) and in what proportion (typically equally)?
  • If any of your beneficiaries die out of order (i.e. predecease the second spouse), whom to you wish to receive that beneficiary’s funds (i.e. a child’s share goes to that child’s children, or if none, to that child’s siblings).
  • At what age(s) do children (or other generations) receive trust assets (typically following the surviving spouse’s death)?  Most clients like to wait until at least age 25 (hopefully out of college), with some clients directing partial distributions at subsequent ages (i.e. 30 & 35 years of age).
  • Are there any special needs of any of the beneficiaries (i.e. a child that is already well off and you wish to avoid taxation at that child’s death; a disabled child with special needs that may be receiving governmental support; or a child with substance abuse problems)?
  • What assets go into the Trust?  This requires a detailed discussion with your estate planning attorney.  However, in general the key assets that will perhaps not go into your Trust include your Florida homestead and your retirement plans (IRA’s, 401-k’s, etc.).