Undoubtedly, trusts are valuable legal tools to avoid probate and ensure a smooth distribution of your remaining assets to your beneficiaries upon death.
Yet, many people tend to confuse between revocable and irrevocable trusts, especially when it comes to distinguishing a trust regarding its purpose or structure. In this article, you will discover the key differences between revocable and irrevocable trusts in Florida.
Revocable vs Irrevocable Trust in Florida – An In-Depth Look
Understanding Revocable Trusts
As its name suggests, a revocable trust is a trust wherein the trust’s creator (also referred to as the settlor or grantor) can change, amend, or revoke the trust during his/her lifetime. Therefore, as long as the trustor is still alive, it is possible to modify the trust arrangement.
Generally, revocable trusts are created by people who want to avoid probate upon their passing while retaining control of the assets held in the trust. Many trustors designate themselves as the trustee of the trust.
Hence, while they no longer have direct ownership of the assets within the trust, they still control them. In such cases, the trustor may designate a successor beneficiary – either a person or entity to serve as the trustee of the trust in case of death or incapacity.
As revocable trusts do not require a separate taxpayer ID number (i.e., an EIN) and there is no need to file or register the arrangement while the trustor is still alive, setting up a revocable trust is a fairly uncomplicated task.
Once the trustor dies, a revocable trust automatically becomes irrevocable. Thus, no changes or amendments may affect the trust any longer, and the trustee must immediately proceed with the distribution of the assets held in the trust to their respective heirs.
While revocable trusts are valuable tools to avoid probate while retaining control over the assets transferred to the trust, they are not suitable for many cases, such as asset protection from expensive nursing home care, reduction of tax liabilities, etc.
Understanding Irrevocable Trusts
An irrevocable trust is a trust arrangement that a trustor cannot change, amend, or revoke upon signing the trust agreement. Accordingly, once the trustor transfers the title of property to an irrevocable trust, there is no way to take it back.
Additionally, the settlor or grantor cannot add or remove beneficiaries designated in the trust agreement, nor change the terms and provisions outlined in the document. Rarely, it is possible to modify an irrevocable trust under a few exceptional situations. Still, the rule is that irrevocable trusts will not permit amendments or changes.
The general rule is that the settlor may not be the sole beneficiary of the trust. Furthermore, in most cases, irrevocable trusts may be dissolved in two cases only – if there is no feasible manner to maintain the trust or if all the beneficiaries to the trust consent in the dissolution as provided by statutory rules.
Due to its stricter requirements, irrevocable trusts are not used as much as revocable trusts. Generally, the most common use cases for an irrevocable trust include:
- Minimizing estate taxes for wealthy individuals
- Reducing taxable estate
- Preserving the trustor’s heirs eligibility for government programs
- Protecting Medicaid benefits
- Protecting beneficiaries with special needs
- Protecting assets from expenses incurred from nursing home care
Revocable vs. Irrevocable Trust in Florida – Immediately Contact an Expert Estate Planning Attorney to Help You
When determining whether a trust is the best solution for your case, waste no time with uncertainty. Call Attorney Romy B. Jurado today at (305) 921-0976 or email [email protected] to schedule a consultation.