Here are some basic facts about Revocable Living Trusts:
- The assets funded into the trust will still be considered ones own personal assets in actions by a creditor;
- trust assets will be included in computing the Estate Tax;
- the trust assets are counted by Medicaid;
- the trust assets are still considered in marital dissolution actions; and most importantly,
- the State of Florida recognizes property held in a revocable living trust as the grantors for purposes of permitting the Constitutional Homestead protection and the homestead tax exemption.
Since Revocable Living Trusts are so flexible, why aren’t all trusts revocable? Because the downside to a revocable trust is a revocable trust offers no creditor protection if you are sued, all of the trust assets will be considered yours for Medicaid planning purposes, and all assets held in the name of the trust at the time of your death will be subject to inheritance tax.
So why should you use a Revocable Living Trust as part of your estate plan? For three important reasons:
- To plan for mental disability – Assets held in the name of a Revocable Living Trust at the time a person becomes mentally incapacitated can be managed by their Disability Trustee instead of by a court-supervised guardian or conservator.
- To avoid probate – Assets held in the name of a Revocable Living Trust at the time of a persons death will pass directly to the beneficiaries named in the trust agreement and outside of the probate process. Probate is especially cumbersome when you own real state in more than one state, or have an on-going business entity.
- To protect the privacy of your property and beneficiaries after you die – By avoiding probate with a Revocable Living Trust, your trust agreement will remain a private document and avoid becoming a public record for all the world to see and read. This will keep the details about your assets and who you have decided to leave your estate to a private family matter.