Contrary to what you may have heard, a Will may not be the best plan for you and your family, primarily because it does not avoid probate when you die.  For at your death, a Will must be verified by the probate court before it can be enforced. Additionally, because a Will can only go into effect after you die, it provides no protection for your estate if you become physically or mentally incapacitated. Without such protection, the court could easily take control of your assets before you die.

The Florida Trail Association, Inc. has designed the following list of common questions, with answers, to help you in better understanding Revocable Living Trusts.

What is Probate?  Probate is a legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your Will. If you don’t have a valid Will, your assets are distributed according to state law.

Why is Probate So Bad?  Probate can be expensive due to legal/executor fees and other costs which must be paid before your assets can be fully distributed to your heirs or beneficiaries. Cost vary in each state, but are usually at 3 – 8% of the estate’s value. If you own property in other states, your family could face multiple probates, each one exercised according to the laws of that state.

Does Joint Ownership Avoid Probate? Not really, it usually just postpones it. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if the surviving owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.

Why Does the Court Get Involved at Incapacity?  If you can’t conduct business – personal or otherwise – due to mental or physical incapacity, only a court appointee can sign on your behalf, even if you have a Will. For your Will only takes effect after you die. Once the court gets involved, it usually stays involved until you recover or die. The court – not your family – controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you should recover. Additionally, it does not replace probate at death, leaving your family with the strong possibility of having to go through the court process twice.

Can a Durable Power of Attorney Prevent Court Intervention if  I Become Incapacitated? A Durable Power of Attorney lets you name someone to manage your financial affairs if you become incapacitated. However, many financial institutions will not honor one unless it is on their specific form. When used with a Living Trust, it can be very effective; however, a Durable Power of Attorney without a Living Trust in place can provide someone’s ability to do whatever they want with your assets – basically, a “blank check.”

What is a Living Trust? Like a Will, a Living Trust – which has been used successfully for hundreds of years - is a legal document that contains your instructions for what you want to happen to your assets when you die. But unlike a Will, a Living Trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets if you should become incapacitated. When you set up your Living Trust, you transfer assets from your name into the name of your Trust, which you will control. Legally, you will no longer own anything, so there is nothing for the courts to control when you die or become incapacitated. Although the concept is simple, it is what keeps you and your family out of the courts.

Do I Lose Control of My Assets in My Trust? Absolutely not. As a trustee of your Trust, you will keep full control of your assets and can do anything you could do before. That’s why it is called a Revocable Living Trust. You will even file the same tax return. Nothing changes except the names on the titles.

Is It Hard to Transfer Assets to My Trust? No, and your attorney, trust officer, financial advisor and insurance agent can help you. Through the process of moving your assets into your Trust, you will need to change titles on out-of-state real estate, and other titled assets such as marketable securities, bank accounts, insurance and other investments. Most Living Trusts also include clothes, jewelry, art, furniture and other assets that do not have titles. Also, beneficiary designations on assets such as insurance should also be changed to your Trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die.

Does It Take a Lot of Time to Establish a Revocable Living Trust? The process will take some time – usually a few weeks - but you can do it now, or you can pay the courts and attorneys to do it for you later when you die. One of the unique benefits of a Revocable Living Trust is that all of your assets are brought together under one concise plan. As a Revocable Living Trust can only protect the assets that have been transferred into it, it is important that you do not delay “funding” your trust.

Does My Trust End When I Die? No. Unlike a Will, a Trust does not have to die with you. Assets can remain in your Trust and managed by your specified trustee until the beneficiary provisions you have established within your Trust have been satisfied. Usually, these are satisfied through age, special needs, or charitable intent requirements.

Who Should I Consider as Trustee? You, of course, can be the trustee of your Trust, or you and your spouse may consider becoming co-trustees. However, some people select a corporate trustee – such as a bank or trust company -  to act as a trustee or co-trustee now, especially if they don’t have the time, ability or desire to manage their trust, or if both spouses are ill. Corporate trustees are experienced investment managers, they are objective and reliable, and their fees are generally reasonable.

If Something Happens to Me, Who Has Control? If you and your spouse are co-trustees, both can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, your handpicked successor trustee will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.

What Does a Successor Trustee Do? If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay for your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts, and distributes your assets. All this is done quickly and privately – according to your instructions – without court intervention.

Who Can Be Successor Trustees? Successor trustees can be individuals and/or a corporation – such as banks or trust companies. If you choose an individual, you should name more than one in the event your first choice is unable to act.

Does a Trust in a Will Do the Same Thing? Not really. A Will can contain wording to create a testamentary trust, but because it is part of your Will, this trust can not go into effect until after your death and the Will goes through probate. Additionally, it provides no protection should you become incapacitated.

If I Have a Living Trust, Do I Still Need a Will? Yes – you will need a “pour-over” Will that acts like a safety net if you should forget to transfer any assets to your Living Trust. When you die, your Will “catches” the forgotten assets and sends them into your Trust. The asset may have to go through probate first, but it can then be distributed as part of your Living Trust plan.

Is a “Living Will” the Same as a “Living Trust”? No. A Living Will is designed for medical affairs, that lets other people know how you feel about life support and terminal situations. A Living Trust is for your assets and financial affairs.

How Much Should Establishing a Revocable Living Trust Cost? Costs for a Revocable Living Trust will vary depending on the size of your estate, the experience of your attorney, and possibly even the area in which you live. However, without taking into consideration your attorney’s level of experience or quality of the document, recent studies have concluded that the average cost for a single person with a modest estate ran about $500.00 to $1,200.00. For a married couple with a combined estate of less than $1.2 million, and no tax or other financial planning involved, the average cost was about $800.00 to $2,500.00. Revocable Living Trusts established for larger estates, or those in need of additional professional services, can expect these average costs to be higher.

The price in creating your Revocable Living Trust should include a number of documents and services. It is therefore important for you to be informed by your professional, as to what documents and services are included in your price.

Should I have an Attorney Do My Trust? Yes, but make sure you have the right type of attorney. An attorney with considerable experience in Living Trusts can provide you with valuable guidance, and the peace of mind knowing that yours is prepared properly.

Proper estate planning can be a rewarding experience, and will provide you tremendous flexibility in developing your Revocable Living Trust. It can also save your estate considerable value, and pass effortlessly to those whom you wish to benefit.

If you would like more information regarding how to develop your estate plan, including the different options that may be of the most benefit to you, or, how to include the Florida Trail Association, Inc. in the charitable portion of your estate plan, please give us a call. We would be honored to have the opportunity to assist you. 

Dennis Miranda
Executive Director
Florida Trail Association, Inc.
5415 SW 13th Street
Gainesville, Florida 32608
1-877-HIKE-FLA
dmiranda@floridatrail.org