Similar to a will, a trust is a legal arrangement established by a document (trust agreement) with instructions detailing what happens to the trust maker’s asset upon death or disability. However, a trust offers many exclusive benefits, such as avoiding probate and protecting assets to beneficiaries.
In this article, you will have a full picture of the advantages and disadvantages associated with revocable and irrevocable trusts.
Florida Revocable Trust – Explaining the Term
A revocable trust is a legal arrangement wherein the grantor (the person making the trust) can alter, amend, or change the provisions in the trust agreement while he/she is still alive. Plus, the grantor can cancel or revoke the trust altogether (if necessary).
Generally, a revocable trust created and used immediately is popularly known as a “living trust.” In most cases, the creator of a revocable trust names him or herself as the trustee in the trust, maintaining control of the assets held within it for their lifetime.
Considering their flexibility, revocable trusts tend to be the favorite choice when people seek strategies to avoid probate or secure their assets in case of disability.
Setting up a Revocable Trust in Florida – Pros and Cons
Primarily, the main advantage of a revocable trust is avoiding probate and safeguarding beneficiaries from a costly and time-consuming experience in court. Additionally, revocable trusts mean flexibility, in terms of asset control.
In a revocable trust, the trust maker retains control of the assets up until his/her passing. A grantor can name him or herself as the trust’s trustee, naming a successor trustee to assume the trust upon his/her death or disability.
A revocable trust does not require a separate tax ID number nor any registering or filing to maintain the trust during the grantor’s lifetime. Instead, it serves as an asset container to protect assets to the grantor’s beneficiaries.
Still, nothing is perfect in life – neither are revocable trusts. In terms of creditor protection, a revocable trust is not the best option. Additionally, revocable trusts are not ideal for gift/tax liability protection, charity and insurance-related purposes, and healthcare protection (e.g., Medicaid benefits, nursing home care).
Florida Irrevocable Trust – Explaining the Term
Unlike a revocable trust, an irrevocable trust cannot be amended, altered, nor canceled. Once the trust maker signs the trust agreement to establish an irrevocable trust, it is done. Also, all the assets transferred to an irrevocable trust are no longer in its grantor’s control.
Irrevocable trusts are completely separated entities from their creators. Hence, an irrevocable trust needs its Tax ID (EIN) Number, as the taxes incurred by the income earned within the trust must be paid in the trust’s name.
Setting up an Irrevocable Trust in Florida? – Pros and Cons
When compared to revocable trusts, irrevocable trusts offer a superior level of asset protection. As assets held within an irrevocable trust are no longer part of the grantor’s estate, creditors cannot collect on it.
In an estate planning strategy, irrevocable trusts are useful on matters that involve estate tax reduction, Medicaid income protection, beneficiaries with special needs, life insurance, and other related issues.
In Florida, it is possible to create an irrevocable trust to protect a disabled beneficiary from Medicaid. Let us say a disabled 30-year-old individual receives Medicaid-related benefits but ended up inheriting $200,000.
As provided by Medicaid rules, the person would have to choose between receiving the inheritance or the disability benefit, which is not ideal. However, it would be possible to use an irrevocable trust strategically to permit this individual to receive the inheritance while maintaining the Medicaid benefits.
Which is Best Revocable or Irrevocable Trust? – Work with an Expert Attorney
The best way to discover the ideal type of trust to tailor your circumstances is having your case assessed by an experienced estate planning attorney in Florida. Waste no time – call Attorney Romy B. Jurado today at (305) 921-0976 or email Romy@juradolawfirm.com to schedule a consultation.