What Are the Pros and Cons of a Revocable Trust in Florida?

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By Gary M. Landau, Esq.

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What Are Pros and Cons of Revocable Trust in Florida? | Call (954) 979-6566

Many people in Florida have been told that setting up a revocable trust is the best way to manage their assets. While in some cases that is undoubtedly true, revocable trusts are not the panaceas they are often made out to be.

What is a revocable living trust? How do you know if a trust is right for you? How does a revocable trust work? These are all questions asked by our clients in the more than 25 years our firm has served South Florida, because the topic can seem complex and overwhelming.

Revocable trusts are the most widely known trusts when it comes to Florida estate planning. Read on to learn about them from our experienced attorney. If you have questions about trusts, wills, or other basic estate planning, give us a call at (954) 979-6566 to schedule a free in-person or phone consultation.

What Is a Revocable Trust in Florida?

A revocable trust, also known as a revocable living trust or just living trust, is a document some people create to manage assets during their lifetime and to distribute them to beneficiaries after their death.

The person who creates the trust is known as the grantor or settlor. Since they are also the person who typically manages the assets in the trust, the same individual generally also serve as the trustee.

Crucially, during the creation of the trust, a successor trustee is named. That person steps into the role of trustee when the original trustee passes away or becomes unable to serve due to incapacity of some type.

All of the person’s assets are then put into the trust, a process known as funding it. Once that is done, the trustee has access to and can manage all of the assets in the trust as if they were in the person’s name–buying or selling property, withdrawing money from bank and brokerage accounts in the name of the trust, and the like.

Because it is a “revocable” trust, this trust can be amended or revoked at any point during the person’s lifetime. By contrast, many other types of trusts, known as irrevocable trusts, cannot be altered.

Working with a Florida estate planning attorney is the best way to learn about and possibly create a revocable trust.

Pros of Revocable Trusts

There can be several benefits for some people in creating a Florida revocable trust.

They include:

Flexibility

A revocable trust can be altered at any time. This means if you decide you want someone else to inherit your assets as your successor trustee, you can easily amend it to state that.

Direct Inheritance

When it is properly set up and funded, a revocable trust can speed up the timeline and reduce costs for a beneficiary to receive your assets. This is especially the case when there are only one or two beneficiaries because they can be named as the solo or co- successor trustees.

Because the successor trustee(s) steps into the role of trustee immediately upon the trustee’s death, there is no delay or court approval required to access all assets immediately.

Ongoing Asset Management

The trustee has full access to everything in the trust. Anytime they want to buy or sell assets, change brokerage accounts, and the like, they are fully able to do so.

Privacy

A will becomes public record when it goes through probate. If you own large, specific assets–such as a vacation home, for example–that you leave to a named beneficiary in your will, an outsider who looks up your will in the court records would see that.

This is less of an issue for most people, however. Most wills simply leave a percentage of their estate to each beneficiary–perhaps a third to each of their three adult children, for example–which isn’t particularly revealing to outside parties.

Potentially Avoid Probate

One of the main reasons people set up revocable trusts is to potentially allow their beneficiaries to avoid probate.

If your assets are in your name, after you pass away, they must go through the court process of probate. Assets in a revocable trust, by contrast, immediately pass to a successor trustee.

The problem is that most people create a trust and fund it with their current assets. But as they continue acquiring assets through life they may do so in their name rather than in the name of the trust, so these assets often remain outside the trust. Upon death, these assets must be probated. Our firm is regularly called to probate estates from people who had created a revocable trust at some point in their lifetime.

Cons of Revocable Trusts

Revocable trusts have several disadvantages compared to other estate planning tools. They include:

It’s Easy to Lose the Document

The document creating a living trust is not recorded in any court. This means the original document must be carefully guarded during the person’s lifetime, and it must be easily accessible to the successor trustee after the original trustee’s death.

We hear from many people that they are certain their parent, friend or relative had a living trust, but they are unable to locate the document. This all-too-common scenario creates problems for those who are named as successor trustees.

Many Trusts Aren’t Fully Funded

As mentioned above, a trust without assets funding it is just a piece of paper.

Unless the trust contains every asset the person owns, probate will still be required to distribute assets after the trustee’s death.

This is the reason when experienced attorneys create a revocable trust they also draft what is known as a pour-over will. This is a regular will dealing with all properties and other assets that fall outside the trust upon the person’s death. (Typically the will “pours over” assets not in the trust into the trust, and probate is required for this to happen.)

Costs

Revocable trusts cost money to create. Not just for an attorney’s fee; there are often fees involved with getting a new title in the trust’s name for cars, boats, stocks, and other assets the person owned in their name before creating the trust.

Quick Frequently Asked Questions

1. Does a Revocable Trust protect my assets from creditors while I am alive?
Generally, no. Under Florida Statute § 736.0505, the assets in a revocable trust are subject to the claims of the Grantor’s creditors to the same extent as if the assets were owned individually. Because you retain the power to revoke the trust and access the funds, the law does not allow you to use a revocable trust as a shield against personal liabilities or judgments.

2. Will transferring my home into a Revocable Trust cause my property taxes to increase?
No, provided the trust is drafted correctly. Transferring your primary residence to your revocable trust does not trigger a reassessment of the property’s value or a loss of the Save Our Homes (SOH) cap. Under Florida law, as long as the Grantor retains the equitable title and the right to use and occupy the residence, the transfer is not considered a “change in ownership” for property tax purposes.

3. Can I still claim the Homestead Exemption if my house is in a trust?
Yes. You can maintain your Homestead Exemption for both tax savings and creditor protection (as provided by the Florida Constitution) while the property is held in a revocable trust. To qualify, the trust document must include specific language granting the Grantor the present possessory right to reside on the property. This ensures the home remains exempt from forced sale by most creditors.

4. Does a Revocable Trust need its own Tax Identification Number (EIN)?
While the Grantor is alive and serving as the Trustee, the trust is considered a “disregarded entity” by the IRS. You do not need a separate Employer Identification Number (EIN); you simply use your Social Security Number for all tax reporting. However, immediately upon the Grantor’s death, the trust becomes irrevocable and must obtain its own EIN to file a Florida Fiduciary Income Tax Return (if required).

5. Does a Revocable Trust help me qualify for Medicaid?
No. In Florida, assets held in a revocable trust are considered “countable resources” for Medicaid eligibility. Because you have the legal authority to withdraw the principal of the trust for your own use, the state requires these assets to be “spent down” to the program’s limits (currently $2,000 for a single applicant) before you can qualify for long-term care assistance.

Get Help from an Experienced Florida Estate Planning Attorney

If you’re looking for an experienced estate planning attorney in Florida to answer further questions about trusts and wills, the Law Office of Gary M. Landau, P.A. can help. With more than 25 years of experience and countless satisfied clients, Gary M. Landau and his team are uniquely positioned to help you with your probate and real estate needs in South Florida. Whether you’re ready to probate a loved one’s estate or to write your own will, or if you are purchasing a home, have inherited a home, or want a closing agent to handle title insurance and all documents for your closing or refinancing, the Law Office of Gary M. Landau is ready to work with you.

Call our office at (954) 979-6566 or complete our online form today to schedule a free consultation. We work with our clients in person, over the phone, or on Zoom.

Copyright © 2023. LAW OFFICE OF GARY M. LANDAU, P.A. All rights reserved.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction.

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Frequently Asked Questions

A will is the simplest way to ensure that your funds, property and personal things will be distributed after your death the way you want them to. Even if you have very few assets, you will benefit from having a will. About half of all Americans die without a will (known in legal terminology as dying intestate). Without a will to indicate your wishes, the court steps in and distributes your property according to state law. A will ensures that your assets will be given to family members or other beneficiaries you designate.

 

Having a will is doubly important if you have young children. One section of the will allows you to designate a guardian for them in the event of your death. Without a will, the court will appoint a guardian for your children, who may not be the person you desire.

Many Florida residents have out-of-state wills, drawn up while they were still living among the hills of North Carolina or the hubbub of New York. If the will was valid according to your old state’s laws at the time you made it, it is still legal in Florida. However, if you are a Florida resident, you may benefit greatly by having a new will drawn up in Florida, because it will likely be more easily admitted to probate.

 

It is important to know that each state has its own requirements for what makes a will a legally binding document. For example, Florida doesn’t recognize handwritten wills that haven’t been witnessed (known as “holographic wills”), or oral wills not put into writing, even if other states okay them. There’s also the matter of Florida estate law. In this state, for example, your surviving spouse is entitled to 30 percent of your net probate estate, regardless of what you say in your will. The spouse may also have a “Homestead” interest in property you share here, even if you want your house to go to someone else. In fact, all real property owned in Florida will be subject to this state’s laws, even if you’re a snowbird maintaining a residence in the state where your will was drawn up. Other peculiarities also exist, which is why a Florida will could make things much easier for your heirs.

 

If you would like to have me review your current out-of-state will, I am happy to do so without charge. If it turns out to be in accordance with Florida state laws and procedures, you can continue to rely on it. If not, however, your heirs would rather you discover that now.

It is a good idea to re-read your will every few years to be sure it reflects up-to-date realities (you may not want to leave your heirloom to a niece you are no longer speaking to, nor have someone be named your child’s guardian if they have taken seriously ill since you drafted your will). It is especially important to reexamine your will if:

 

  • You have gotten married since it was last drafted;
  • You have made bequests to people who have fallen out of your favor or are no longer living (I recently updated the will of a man who had left everything to his first wife, who was long deceased), or you have not included people who are now dear to you;
  • You would like to change the person named as the personal representative of the estate. (Note: Florida law does not allow a nonresident of the state to serve in this position, unless it is an immediate family member or certain other relatives);
  • You have acquired pricey or sentimental items that are not accounted for in your will. Do note, though, that Florida law allows you to attach a separate personal property memorandum to your will, detailing who will get which specific items. This list can be changed whenever you want.

Perhaps I should answer this question with where not to store it: in a bank’s safety deposit box. Although it may seem logical to put this with your other important papers, it is often difficult for your heirs to gain access to the box once you die, since the box is sealed then and must be opened in the presence of a bank employee.

 

One good option is to leave your original will with the attorney who drafted it, making copies for your personal representative and other important relatives and letting them know who has the original. For my clients who prefer that I store their original will, I keep it in a fireproof will vault in my office, or in the vault in my bank.

 

As an alternative, you could store the will in a fireproof box or vault in your own home.

 

Wherever you store it, be sure to let your personal representative and other close relatives know where you have put it!

Probate is when the court oversees your assets and liabilities after your death. During probate, the court makes sure that your will is valid and acceptable; that all debts, bills, creditor’s claims, and taxes are paid from your estate’s assets; and that your remaining assets are distributed to your beneficiaries according to your will (or, if no will exists, by Florida law).

 

Probate usually does take longer than most beneficiaries would like. But in order to ensure that everyone with a right to a claim is included in the process, the court requires several steps. If the size and complexity of your estate are minimal, however, the entire process of probate can take as little as a few months. Larger estates that are subject to IRS estate taxes or those involving litigation on the part of creditors or heirs generally take longer, often one or more years.

 

To speed the process along for simple and small estates, the courts allow a shortened form of probate, known as “summary administration,” which requires much less paperwork and time.

A personal representative (PR) is a friend or relative, or an attorney or bank, who is put in charge of the estate until all matters regarding the probate are resolved. (In other states, this person is sometimes called an executor or administrator.) The job of the PR includes identifying all assets, searching for creditors and paying valid claims, filing required estate tax returns if the estate is large enough (the figure escalates over time, according to Congressional laws), coordinating with the probate court and attorneys, and overseeing the distribution of assets–all done under the guidance and assistance of a qualified attorney.

 

Serving as a PR is an important role, and such a person should be selected with care as to who is most willing and best able to serve in this position. By Florida law, your personal representative must be over 18 years of age, and be a blood relative, your spouse, the parent or child of your spouse, or a Florida resident.

Generally, no. If you co-own all property via such legal structures as “tenancy by the entirety” or by “joint tenancy with right of survivorship” the property immediately passed to you upon your spouse’s death. Proof of death is usually all that is needed to pass such jointly owned title for cars, stocks, and other personal property to the surviving spouse.

 

But if even one asset was held solely in the deceased person’s name, or any property is owned in the form of a “tenancy in common,” that estate will be required to go through probate. If the assets are limited, the shorter, simpler form of probate is generally all that is required.
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