There are four (4) main advantages for adopting the Revocable (Living) trust as part of an individual’s Estate Plan: (I) Privacy, (II) Continuity of Management, (III) Avoiding Guardianship/Conservatorship, and (IV) Avoiding Probate.
I. Privacy. The primary reason most often cited for adopting the Revocable Trust as the centerpiece of an individual’s Estate Plan is that of privacy, meaning that all of the individual’s innermost thoughts, i.e., who inherits what property or share of the Estate — as spelled out in the Trust — is kept confidential, as well as the nature and extent of the assets conveyed to the Trust during lifetime by the Settlor or Creator of the Trust.
While it is true that all terms and provisions of a Revocable Trust are private – because they are known only to the Settlor – under present Florida Probate Rules, the actual list of assets of a Decedent’s Estate shown on the Probate Inventory is now sealed, thus, this information is not available for public inspection.
However, the actual terms of every Will and Codicil admitted to Probate in the State of Florida continue to be open to the public. This tends to heighten the emotions of disgruntled heirs and promote Will contests and other Probate litigation. Clearly, if such omitted or slighted family members are unaware of the possible prejudice being visited upon them by the Decedent, fewer will resort to litigation in the Probate Court to redress their grievances.
Thus, for persons who wish to reduce the likelihood of challenges to their Estate Plans, the use of a Revocable Trust or Declaration of Trust may be advisable.
II. Continuity of Management. The Revocable Trust provides the ideal entity or vehicle by which the Settlor’s assets can be effectively and professionally managed and invested during the Settlor’s lifetime, unimpaired by the possibility of sudden or gradual incapacity. The Settlor may delegate complete investment authority to a separate individual or corporate Trustee, or he or she may retain complete responsibility for management of all Trust assets and activities.
For the person who is physically unable, or who merely finds it inconvenient, to go back and forth to a safe deposit box, or to sign papers, monitor securities, or who is questionably disabled or incapacitated, the Revocable Trust provides substantial protection and security.
The Revocable Trust permits the Settlor to observe the practical operations of the Trust’s management by the selected Trustee.
A Testamentary Trust, which arises under the person’s Last Will and Testament, and takes effect only after the individual’s death, offers the Testator no such opportunity to observe the management of his or her assets. With a Revocable Trust, the Settlor can observe the Trustee and/or remove the Trustee in order to ensure that the Trust will operate smoothly after his or her death.
If the Settlor owns a business, has income-producing assets, or other assets that require daily supervision, he or she may ensure continuity by establishing appropriate systems and techniques within the Trust Instrument for their management and operation.
The Settlor may also train a Co-Trustee or Successor or standby Trustee in the operation or management of his or her business and/or other assets. This observance of the Trustee or Co-Trustee helps the Settlor assess how the beneficiaries may react after the Settlor’s death.
Consider the case of a wealthy northern retiree who comes to Florida where the lifestyle is more relaxed and the winters more conducive to his or her health and well-being.
Much of this person’s property remains back in the “big city” or scattered in other states. Court proceedings for Probate in other jurisdictions (called “Ancillary Probate”) are often complicated, time consuming and expensive.
Executors (Personal Representatives) appointed under the person’s Will may have to qualify in the foreign states, or, on the other hand, they may not be permitted to serve as Executor there.
The person may also wish to have those advisors who guided him or her to financial security during his or her lifetime continue to do the same for his or her spouse and children following death.
III. Avoiding Guardianship/Conservatorship. Both the Revocable Trust and the Declaration of Trust provide methods for avoiding the delays, stigma and other related problems often associated with a formal court instituted and supervised Guardianship or Conservatorship procedure. For example, a Revocable Trust may provide that upon the occurrence of any one of the following events, the Co-Trustee or successor Trustee shall assume the full responsibility for the care and management of the Trust Estate:
IV. Avoiding Probate. All assets held in a Revocable Trust or a Declaration of Trust at the death of its Settlor avoid Probate, as these assets are not subject to administration. This arrangement not only reduces the costs of Probate (which in Florida are very modest, the current filing fee in Palm Beach County being approximately four hundred one dollars ($401), regardless of the value of the Estate), but more importantly, the Trust avoids the delays frequently associated with the transfer of assets which are encountered during the Probate Administration process.
The successor Trustee continues with the management of the Trust without interruption or inconvenience to the beneficiaries who have immediate access to the continued flow of all income from the Trust.
The process of locating, identifying and assembling the Probate assets is avoided when the Trust is successfully funded during the decedent’s lifetime.
In addition, the Revocable Trust Instrument is not deposited with the Court, nor is the Trust’s Schedule of Assets made a part of the public record. The Trust does not come under the supervision or jurisdiction of the Probate Court.
In Florida, it is necessary to file an independent action or complaint with the Civil Division of the Circuit Court in order to invoke the Court’s jurisdiction over an existing Trust. Similarly, the post-Probate administration of Testamentary Trusts (i.e., those created under a Will) is not supervised by the Florida Courts.
It is not necessary to file and obtain Probate Court approval of the annual accounts of a Testamentary Trust. Thus, the laws of the State of Florida are very flexible when it comes to the administration of Trusts.
Recently, changes have been made to Florida’s Trust Laws that may require that the Trustee of a deceased Florida resident’s Revocable Trust file a Notice of Trust in a local newspaper and serve the same on reasonably ascertainable creditors of the deceased Settlor.
Thus, trust assets are liable for the payment of a decedent’s creditors, just as are Probate assets. However, this Notice procedure is advantageous because it allows the Trustee and beneficiaries to be reasonably certain that all of the decedent’s financial obligations are paid, so that no creditors come forward in the future seeking payment of the decedent’s debts.
Some problems can be eliminated or simplified by placing title to property located in different states in the name of and under the management of the Trustee of a single Revocable Trust which can continue to administer and distribute the Trust Estate smoothly, both before and after the Settlor’s death.
Therefore, the typical use of a Revocable Trust is to avoid the necessity of having Ancillary or multiple Probate proceedings through the conveyance, IN TRUST, of the Settlor’s foreign real estate (i.e., the real estate located in states other than Florida).
By conveying the real estate, IN TRUST, the nature of the asset is changed to intangible personal property, and this allows Florida Law to govern or to take jurisdiction over the asset. In addition, for the Florida resident, the proper drafting of the Settlor’s reserved powers retains for the Settlor and his or her family the Homestead real estate tax exemption, despite the transfer of title of the real estate to the Trust.
For the nonresident individual seeking to serve as a Florida Trustee, there are no Florida Laws which restrict or deny his or her designation or limit their ability to hold title to Florida property.
If the person is capable of taking title to property for himself, he or she may take title to property as Trustee. The individual nonresident Trustee need not meet standards any different from those applicable to Florida residents who are Trustees of Florida property. As previously mentioned, such individuals are prohibited from being the Personal Representative under the Settlor’s Last Will and Testament unless they are related to the Settlor/Testator in a certain degree of blood relationship.
A Chart illustrating Chart of Legal Blood Relations (Consanguinity) appears in Exhibit II and III of our Firm’s book.
As for corporate Trustees, however, Florida Law is different. In Florida, there are severe limitations placed upon the activities that may be performed by the foreign (i.e., out-of-state) corporate Trustee. Some of these limitations include the following: