"Forming a legal trust is often pivotal to estate asset protection."
- Karen Estry, Esq.
Trusts are similar to a will in that they leave property to beneficiaries after one's death. Unlike many wills, a trust does not require probate because trust property continues to be owned by the trust, and controlled by surviving trustees.
Below are the basics of a how a living trust works in Florida:
When the initial trustees die, control of trust property passes to successor trustees. When successor trustees die, trust property passes to trust beneficiaries, after which, the trust is dissolved.
Tom and Tracy are married and wish to create a living trust. They have one child, Michael. In the trust agreement, each spouse is named as an initial trustee, and they leave all trust property to each other. Their son Michael is named as sole trust beneficiary. After the death of Tom, control of the trust and all trust property resides solely with Tracy, the surviving trustee. When Tracy dies, all trust property transfers to Michael, the trust beneficiary, and the trust is closed.
Living trusts, such as the one exampled above, are used primarily to avoid probate, a court procedure where it is decided who owns the deceased's property. With a living trust, trust property is automatically transferred to trustees and to beneficiaries, thereby avoiding probate entirely.
Three main roles are outlined in all trust documents:
Initial Trustee - Most of the time with married couples, spouses are the intial trustees of a living trust. When when spouse dies, the other becomes the sole trustee.
Successor Trustee - Every trust must name at least one successor trustee - the person who takes over the trust after both spouses die. Often, a married couples' children are appointed as successor trustees.
Beneficiaries - One names beneficiaries of a trust to receive trust property. Anyone can be named a beneficiary, but as long as one spouse is still alive, they are normally required to receive half of a trust's property in common law states such as Florida.