What is a revocable trust?

On Behalf of | Dec 14, 2017 | Estate Planning, Firm News |

While it is true that a revocable trust often allows heirs to skip probate in Florida, there are several elements to consider before settling on it as the best way to handle your estate. The term “revocable” means that you can still alter or terminate the document unless you become incapacitated, or impaired mentally and physically.

According to The Florida Bar, this document gives the named trustee the ability to manage your estate. You can remain as the trustee if you wish, or you can name another person, or even a bank, as the trustee. While you live, it is the trustee’s job to manage trust assets.

To avoid probate, a revocable trust needs to be fully funded, which means that ownership of all your assets must be transferred to the trust while you are alive. Assets include your checking and savings accounts, real estate/homes and investments. Your estate attorney or tax attorney can advise you if there are specific assets that should not be transferred to avoid income tax complications.

Any assets not transferred to the trust may need to go through the probate process, however. Probate is the legal process of transferring your assets to your beneficiaries, after first paying off debts to creditors, as well as any income taxes and legal expenses. When you die, the trustee has immediate authority to pay bills, taxes and any claims and then transfer the trust assets to your heirs.

Because creditors can make claims against an estate for up to two years, some people may want to have both a trust and a probate estate. Opening both of these sets a timeline in motion for creditors, typically limiting the claim period to three months. It also gives the trustee or estate a means of objecting to claims.

This is general information about trusts for educational purposes only and should not be interpreted as legal advice.