How to Create a Living Trust in Florida

Understanding living trusts in Florida

In Florida, a living trust requires the signatures of two witnesses. Florida also doesn’t have an estate or inheritance tax, although you’ll still need to pay federal estate tax if your estate is worth a certain amount.

The person who establishes the trust is known as the grantor. They often engage an estate planning attorney to help navigate estate tax implications and probate procedures. To create a living trust, you draft a trust agreement, choose a trustee (someone who manages your trust), and designate your beneficiaries who will receive the assets designated in the trust.

Establishing the trust agreement

The trust agreement is a formal legal document that lays the foundation for the living trust. It outlines the regulations and stipulations of the trust. It’s the blueprint of the trust, and the grantor is the architect who outlines their intentions in the trust documents.

The chosen trustee is the person tasked with the management of the property for the beneficiaries’ benefit. If the grantor passes away, the trust agreement directs the trustee to either distribute the trust property to the beneficiaries or continue managing it for their benefit. It becomes effective immediately upon its creation and signing, initiating the roles and duties of the grantor and trustee as specified in the agreement.

Funding the trust

Funding the trust means transferring ownership of your assets into your trust so they’re protected. A living trust can hold a broad range of assets, even including business interests. While there’s no minimum value requirement to fund a trust in Florida, most people place substantial assets—such as real estate, bank accounts, and valuable personal items—into the trust.

The repercussions of inadequate funding should not be ignored. Any assets not included in the trust or taxable estate will go through probate after your death. A trust without enough assets to cover intended distributions may not function effectively.

Succession planning

Succession planning is an essential aspect of creating a revocable living trust. You’ll need to designate a successor trustee to oversee the trust if your primary trustee is unable to fulfill their duties or if they pass away. Your trustee will also have a fiduciary duty, which is an obligation to make decisions that benefit you and your beneficiaries, and can face stiff penalties if that duty is betrayed. You can be your own trustee, but you will still need to designate a successor.

The responsibilities of the successor trustee include:

• Administering the trust
• Ensuring that the terms of the trust are followed
• Managing and distributing the trust assets to beneficiaries
• Communicating with beneficiaries and keeping them informed
• Handling any legal and financial matters

Having a successor trustee in place helps ensure that your financial affairs will be properly managed and your wishes will be carried out.

Revocable vs. irrevocable trusts

Both estate planning tools have unique advantages and serve different purposes. Your decision will be based on the level of control you wish to maintain, your asset protection needs, and tax implications.

The flexible nature of a revocable living trust

A Florida revocable living trust offers a blend of control and flexibility that many find attractive. As the grantor, you have the liberty to make alterations and maintain authority over your assets during your lifetime. When you pass away, revocable living trusts become irrevocable, and the successor trustee takes over the task of fulfilling your wishes.

The protective shield of an irrevocable living trust

Irrevocable trusts provide a higher level of asset protection and tax benefits. Transferring ownership of your assets from your name to the trust can make these assets less accessible to creditors. It can also offer tax benefits. However, you must fully relinquish ownership and control of the assets transferred into the trust. You may also need to pay for annual trustee fees and attorney fees, as it’s smart to work with a professional to set up this type of trust.

Step-by-step guide to forming your living trust in Florida

Creating a living trust in Florida involves compiling assets, designating beneficiaries, choosing a trustee, and drafting the trust agreement. It also requires ongoing maintenance and updates to address life changes and include new assets. Learning how to set up a trust in Florida may seem overwhelming, but there’s no need to worry—setting up a trust comes down to seven major steps.

1. Pick between a single or joint living trust

First, decide on the type of trust you want to establish. A single living trust is set up by an individual, while a joint living trust is created for two people, typically spouses. Single trusts suit individuals who want complete control over their assets and plan to manage their estate independently. Joint trusts are a good choice for married couples who share assets and want a combined estate plan.

2. Decide what assets to include in the trust

Compile a list of your assets. Keep in mind that not all assets are appropriate for transfer into a Florida revocable living trust. Some assets might be better managed outside of the trust to avoid estate taxes. For instance, moving specific assets—like a 401(k) or IRA—into a living trust might lead to tax complications. Most people include things like real estate, investments, bank accounts, and valuable personal items as trust property.

3. Choose a trustee and successor trustee

You can be your own trustee and manage all your assets while you’re alive. You’ll also need a successor trustee to take over upon your death or if you become incapacitated. Choose someone trustworthy, responsible, and able to make financial decisions, like a family member, estate planning attorney, or financial advisor.

4. Designate beneficiaries

Beneficiaries are the people who will inherit the assets in your trust. They could be family members, friends, or even charities. Be mindful of potential conflicts if someone is both a trustee and a beneficiary, as this can lead to disputes. And always maintain clear communication with beneficiaries to prevent misunderstandings and disagreements.

5. Create the living trust document

When it’s time to draft your living trust agreement, you have a few options: You can write the trust agreement yourself, hire an estate attorney, use a pre-made form, or use an online solution like LegalZoom’s living trust service. The trust agreement should include the names of the trustee and beneficiaries, a comprehensive list of assets, and the necessary signatures and records.

6. Have the trust document witnessed and notarized

A Florida living trust requires the signatures of two witnesses to make it legally valid. And even though notarization isn’t legally required, getting it notarized can create an extra layer of credibility and strengthen your trust in case it’s ever challenged in court.

7. Transfer property to the trust

Transferring assets into the trust involves identifying assets such as real estate, personal property, financial accounts, and business interests. For example, you’ll update real estate deeds to show the trust as the owner and fill out paperwork with any financial institutions. This process can be complex, so you might benefit from guidance from an attorney who can make sure everything is done correctly.

Pros and cons of establishing a living trust in Florida

A Florida living trust comes with its set of pros and cons. Whether you need a trust all comes down to your personal or financial circumstances.

Advantages of a living trust in Florida

There are several primary benefits to establishing a living trust in Florida, including the following:

1. Avoiding probate. Probate is the legal process for obtaining court approval of a will. In Florida, you’ll need to pay attorney’s fees, probate court and filing fees, and various other costs. Florida also has not adopted the Uniform Probate Code, which means the probate process can take months or years. The ability for your family to sidestep the probate process and ensure smooth transfer of assets is a major benefit of a living trust. Your personal and financial matters also remain private, unlike probate proceedings, which are public record.
2. Control of assets. The ability to manage your assets throughout your life is another positive. In the event of your incapacitation, a Florida revocable living trust can ensure that your assets are managed according to your wishes. This allows for the continued adherence to your wishes regarding their management, making a revocable trust an appealing option.
3. Flexibility. With a revocable living trust, you have the flexibility to adjust the trust’s terms as needed, including provisions for tax flexibility. This is important because you can keep your estate plan up to date after important life events like marriages, divorces, or adding new family members. Life always evolves, and a revocable trust reflects your current wishes and financial circumstances.

Disadvantages of a living trust in Florida

Establishing a living trust is not without its drawbacks, either.

1. Cost. Setting up a living trust in Florida can be a complex process, potentially incurring higher costs than creating a will. Establishing a revocable living trust can cost from $1,000 to $3,000, depending on the complexity of your estate. Online services and DIY solutions can reduce costs in some cases.
2. Complexity. Setting up a trust is more complicated than writing a will, especially for complex estates. For example, a trust involving multiple properties, businesses, or out-of-state assets requires more documentation. Understanding tax advantages and properly transferring assets can also add complexity.
3. Maintenance. A revocable living trust requires more continual upkeep than a will to ensure it remains updated with any changes in assets. This involves guaranteeing adequate funding, moving assets into the trust, and handling possible family disputes over trust funds.

The financial implications of a living trust in Florida

Establishing a revocable living trust has financial implications that you need to consider. As mentioned above, it can cost from $1,000 to $3,000 to establish a living trust in Florida. The costs associated with setting up a living trust can vary significantly based on the complexity of your assets and estate.

After the establishment of the trust, there may also be ongoing expenses to consider:

• Annual trustee commissions
• Maintenance fees
• Tax preparation fees
• Fees for updating the trust

Estate taxes in Florida

It’s also important to note that assets in a revocable living trust in Florida may be subject to estate taxes. While the state does not have an estate or inheritance tax, estates valued over $13.6 million are still subject to federal estate tax.

If your estate is substantial, you may want to consider other estate planning tools in addition to a revocable living trust to help avoid the estate tax.

• QTIP trusts. A Qualified Terminable Interest Property (QTIP) trust allows you to leave assets to a surviving spouse, deferring estate taxes until both spouses have passed.
• Charitable Remainder Trusts (CRTs). A CRT allows you to donate assets to a charity after a designated period, providing income for beneficiaries before the assets go to the charity.
• Irrevocable Life Insurance Trusts (ILIT). By placing your life insurance policy in a trust, you can keep the payout outside of your taxable estate.
• Irrevocable trusts. Placing assets in an irrevocable trust removes them from your estate, reducing the taxable estate size.
• Gifts. Florida is unique because it does not have a gift tax. However, gifts above $18,000 are still subject to the federal gift tax.

Keeping your living trust updated and maintained

The flexibility of a revocable living trust means that regularly reviewing it is important. In Florida, assets acquired over time need to be retitled to your trust to avoid probate after your death. If you don't retitle these assets, they will be subject to probate after your death. Certain situations may necessitate the modification of your living trust, such as marriage, divorce, childbirth, and any desired alterations in asset distribution or trusteeship.

To modify a revocable living trust, you need to amend the trust and specify the desired changes. After completing the form, you need to sign it. It’s also possible to incorporate new assets into an existing living trust at any time.

Frequently asked questions

How much does a living trust cost in Florida?

Setting up a living trust in Florida typically costs between $1,000 and $3,000, depending on the estate plan, the trust's complexity, and attorney's fees. More intricate trusts may incur additional expenses.

What is the primary purpose of a living trust?

The primary purpose of a living trust is to facilitate the transfer of assets outside of probate, avoiding the public, time-consuming, and potentially expensive probate process. This provides greater control over the distribution of assets at death.

Does a living trust avoid probate in Florida?

Yes, a properly funded living trust avoids probate court in Florida. Probate is required for any assets left outside the trust, but assets within the trust transfer directly to beneficiaries, saving time and fees.

Can I do my own living trust in Florida?

Yes, you can create your own living trust in Florida by using a pre-made form or online service. Some online services like LegalZoom also offer guidance from an estate planning attorney, which may be best if your estate is complex.

What’s the difference between a living trust and will in Florida?

Both a living trust and a will outline your wishes after your death. A living trust lets you transfer assets outside of probate, taking effect as soon as you sign it. A will is simpler to set up and does not require the transfer of assets until after your death, but it must go through probate.