The Florida irrevocable trust is one of the best and most valuable estate planning tools used by some of the top asset protection lawyers in Jacksonville. An irrevocable trust allows the person who creates the trust, the settlor, to manage their assets while avoiding probate and providing asset protection from future creditors. A Florida irrevocable trust can also help reduce estate taxes for those who are subject to the federal estate tax.Revocable Trust vs. Irrevocable Trusts in Florida
A revocable trust and an irrevocable trust are different in many ways. One significant difference between the two is how each trust is revoked or modified. A revocable trust can be freely changed or revoked at any time by the settlor before he or she dies.
An irrevocable trust can also be easily modified if written correctly. Many traditional irrevocable trusts were much harder to modify or revoke. These restrictions are no longer necessary for the vast majority of our clients who are not subject to the Federal Estate Tax (10.9 Million for a couple as of 2016) Once a settlor creates an irrevocable trust, any assets transferred into the trust become owned by the trust. The settlor, or the beneficiaries, may only modify or destroy the trust by the terms of the trust. Many of the Irrevocable trusts we create contain powers of appointment that permit these changes.Are There Other Ways to Modify an Irrevocable Trust in Florida?
A court will permit an irrevocable trust to be changed if all of the qualified beneficiaries agree. A court will also modify an irrevocable trust itself if the trust’s purpose has become frustrated or illegal. An irrevocable trust can be changed, but the procedure necessary often depends on the terms of the trust, and if the terms are not flexible enough, it may not be as easy as with revocable trust where the settlor is in complete control.Benefits of a Florida Irrevocable Trust
An irrevocable trust offers many benefits to our clients for estate planning and elder law in Jacksonville. Like the revocable trust, an irrevocable trust can be used to avoid probate. A Court will start the probate process when a person dies with a will. Probate is a very formal process that often takes up to 12 months. The court appoints a personal representative to administer the decedent's estate, and the personal representative must follow strict guidelines. All trusts, if properly designed and used, can avoid probate and permit a trustee, the person that manages the trust, to administer the trust assets quickly and efficiently.
The main benefit of the Florida irrevocable trust we often provide is the ability to help a settlor protect the assets from creditors and over time make the assets exempt from Medicaid. Some of the Florida irrevocable trusts we create are designed to avoid costly estate and gift taxes. The best Elder Law Attorneys in Ponte Vedra and Jacksonville will tell you that to make some assets exempt from Medicaid in Florida; a transfer must occur more than 60 months before the application is filed. Because an irrevocable trust is irrevocable, assets can be placed in the trust and protected from creditors.Tax Relief With a Florida Irrevocable Trust
For those looking to reduce estate tax, an irrevocable trust can be designed so that the grantor or settlor can be relieved of any income tax liability from the income generated by the assets and can avoid estate taxes. The current gift and estate tax exemptions are now very generous. A person is allowed to give $14,000 a year without being taxed. Additionally, a person may give over $5.45 million in his or her lifetime without being taxed, or over $10.9 million if the person is married and the spouse has not used his or her lifetime exemption.Asset Protection With a Florida Irrevocable Trust
An irrevocable trust also offers good asset protection in two key ways. First, an irrevocable trust can be designed to be a discretionary trust. This means the trustee only distributes trust assets at his or her discretion. While this might seem like a scary prospect at first, a trustee must act in the best interest of the beneficiary. This means a trustee will only distribute trust income or principal when he or she feels its in the beneficiaries best interest. The good news is that for many of our clients, they can be the Trustee of their irrevocable trust. Historically this was not the case because the estate tax exemption was only $600,000. Now that it is over $5 million for an individual and almost $11 Million for a couple, most clients are not concerned with removing the assets from their estate. This means you can be in control of your irrevocable trust and receive asset protection from future creditors.
A creditor cannot force a trustee to distribute trust assets unless the court orders it when child support is due or for other similar reasons. This means that if a beneficiary has a lot of creditors, a trustee may keep and preserve the money, so the trust assets do not go to the creditors.
Our irrevocable trusts contain powerful spendthrift clauses. A spendthrift provision prevents creditors from attaching to the beneficiaries’ interest in the trust. This provision further protects the beneficiary from creditors. The spendthrift provision does have its drawbacks. It will not allow a recipient to transfer his or her interest in the trust. For example, a beneficiary of a spendthrift trust could not sell his rights in the trust to a third party.
Also, our irrevocable trusts contain powers of appointment to permit you to change the beneficiaries in such a way at any time in such a way as your creditors cannot have access to the funds.Are There Disadvantages of a Florida Irrevocable Trust?
There are two disadvantages to the traditional irrevocable trust. The first is the trust not easy to revoke or modify. Second, a standard irrevocable trust can incur a higher tax rate on income. This is why we recommend Florida residents consider using our extremely flexible irrevocable trust called the Florida Asset Protection Trust, which is also known as the Ipug™ or Florida Protection Trust. Our trust is easily changed and does not incur the higher tax rates that a traditional irrevocable trust does.
If you would like more information on Florida Irrevocable Trusts or to create a Irrevocable Trust in Jacksonville or Ponte Vedra Beach, CONTACT our Jacksonville Trust Lawyers by email or call us at 904-685-1200 to discuss your situation today.