Trusts

Jacksonville Florida Trust Lawyer

Florida trusts are one of the best and most flexible estate-planning tools at the disposal of a trust lawyer in Jacksonville.  A trust can be used in Florida to meet a huge variety of purposes.  Standard benefits of a trust include asset protection, Medicaid planning, managing assets, avoiding probate, tax relief, and privacy.  Traditionally, there are two different categories of trusts: revocable trusts and irrevocable trusts.  The estate-planning attorney’s here in Ponte Vedra and Jacksonville pride themselves on having some of the most diverse and revolutionary trusts in Florida.  

Florida Asset Protection Trust

One of the biggest strengths of the trusts we create is their ability to shield assets from creditors.  Asset protection is very nuanced and is one of the most complex fields of law currently.  If a top estate-planning attorney does not properly design a trust to shield assets, then the trust will fail, which is why every trust must be created to tailor to the exact needs of the client.

The Florida Asset Protection Trust, or the iPug™, offers the some of the strongest protection of Florida trusts.  This trust is so powerful because it shields the assets of the person that created the trust, known as the settlor, from future creditors.  Most trusts do not offer this protection without giving up control over the trust.  This trust is also an irrevocable trust, which typically means that once a top estate planning attorney creates this trust, it cannot be revoked, but we do permit the Florida Asset Protection trust to be modified by the settlor.  The iPug™ is one of the few irrevocable trusts that permits the settlor to retain the right to change the trust, such as if he or she wants to change a beneficiary.  

The Florida Asset Protection Trust is also is a great money saving tool.  Unlike other irrevocable trusts, the government does not tax this trust as a separate corporate entity.  Instead, government taxes the trust as if the settlor owns the property, which means the settlor may paying lower taxes than with traditional irrevocable trusts.  This trust can also be structured to allow our clients to qualify for Medicaid.  Florida has made Medicaid extremely hard to be eligible for, which has resulted in many clients losing their estates to high health care costs.  By using the iPug™, Medicaid recipients can receive help from the government subsidy and use any excess funds to enjoy a higher quality of life throughout retirement.  Remember there is a 60 month look back period when dealing with Medicaid, so the sooner you create and fund the trust, the sooner the money will be protected from Medicaid

Spendthrift Provision in a Florida Asset Protection Trust

Some of our clients do not need the full protection offered by the Florida Asset Protection Trust, which is why we  draft trusts with spendthrift provisions.  A spendthrift provision protects the beneficiaries of a trust from their creditors.  The provisions are a great piece of mind for our clients with children, or other relatives, that don’t always make the best decisions (to put it nicely).  

A spendthrift provision expressly restricts the beneficiary’s power to transfer (voluntarily or involuntarily) his or her equitable interest in the trust.  This protection is only valid if the spendthrift restrains both voluntary and involuntary transfers.  At first, this may seem like an unfair restriction for the beneficiary because he or she is unable to  assign his or her rights as the beneficiary sees fit.  The trade off is that creditors cannot attach to the beneficiary’s interest in the trust.  There are some exceptions, such as if the beneficiary owes child support, but for the most part the beneficiary is completely protected from any creditors.  

Discretionary Trusts included with Asset Protection

The asset protection trust can also be a discretionary trust if the settlor’s goal is to protect the trust’s beneficiaries from creditors.  A discretionary trust is when the trustee distributes income or principal from the trust at the trustee’s sole discretion.  There are no mandatory or regulatory distributions.   Creditors of the beneficiary may only reach mandatory distributions of income.  Further, creditors cannot compel the trustee to distribute trust funds.  The only right the creditor has is to attach to the funds once the trustee decides to make a distribution.  

Living Trust - A Great Way to Avoid Probate

Another type of trust that is commonly used by the best Florida Trust lawyers is called the living trust or revocable living trust.  A living trust is a revocable trust, which means the settlor may modify or revoke the trust at any time before his or her death.

Living trusts are an excellent way to avoid the probate process, which is a lengthy and quite formal process over 3 months after a person dies.  A living trust avoids probate by allowing the settlor of the trust to transfer assets into the trust why he or she is alive.  Much like a will, the settlor of the trust can decide where the property goes while he or she is alive.  Once the settlor dies, the trustee will distribute the assets according to the trust, and probate is not needed for any of the trust assets.

Separation of Legal and Equitable Title

Separation of the legal and equitable title is an important distinction to make when dealing with estate planning tools such as life estate deeds, revocable trusts, and irrevocable trusts.  The top estate planning attorneys in Jacksonville understand the key distinctions between these concepts, which is important because separating these titles can be an effective Florida estate planning tool.

A Florida trust can allow an estate to bypass probate, avoid costly estate taxes, and can protect a person’s assets.  A trust accomplishes these goals be effectively separating legal and equitable title from the settlor, or the trust’s creator. 

So what exactly is a title?  The title is another way of saying that someone owns something.  If you own a car, you are said to have title to the car.  This is a general term that means you own this piece of property.  In the legal world, a person may own a piece of property in different ways, which leads credence to the old saying “possession is nine-tenths of the law.”

Two Types of Title

The title can be split into broad categories: legal title and equitable title.  Legal title is the right to control a piece of property.  If you have legal title to a house, then this means you have the right to control the property.  A person with legal title to a house will receive the money when he or she sells the house.

Equitable title is the ability to use and enjoy a piece of property.  For instance, a person with the equitable title has the right to live inside the house.  A person with the equitable title can drive the vehicle to work.  However, if this person does not have the legal title than he or she does not have the right to sell the property or to otherwise control it.    

Life Estate Deed

Outside of trusts, a good example of this separation of the title might occur when someone gives a house by means of a life estate deed.   The person with a life estate has an equitable title to the house. The person that holds the remainder has legal title to the home. The equitable titleholder can live in the home until he or she passes away.  Once this person dies, he or she cannot give her interest in the home to another person because there was no legal title.  Once the life estate holder passes away, legal titleholder will also become the equitable titleholder. 

There are certain types of life estate deeds that allow a life estate holder to retain some legal title.  This type of deed is called the ladybird deed, or the enhanced life estate deed.  We commonly create these documents so our clients may become eligible for Medicaid.  Unlike a normal life estate deed, an enhanced deed allows the life estate holder to make improvements to the home, rent the home, and other actions that usually only the remainder holder can perform. 

Separation of Title for Trusts

Separating the two types of title can be beneficial in estate planning.  An irrevocable trust can be used to separate title to avoid probate and for asset protection.  For instance, Jane transfers her expensive silverware set to her irrevocable trust.  The trust document states her trust will distribute the silverware to her best friend Barb once she passes away.  The trust owns legal title to the silverware while Jane owns equitable title to the trust.  Once Jane dies, the trust will distribute the silverware to Barb.  Barb will then have equitable and legal title to the silverware. 

Protection From Creditors

Separating the title can be a great way to protect assets from creditors.  One way the top estate-planning attorneys can create asset protection is by including a spendthrift clause in the trust document.  A spendthrift clause often gives the trustee, or the manager of the trust, full discretion on when to distribute trust assets.  Creditors of the beneficiary cannot force the trustee to distribute trust assets to pay a debt without a court order. 

In this case, the beneficiary’s legal and equitable title is limited by the trust document.  These limitations prevent the beneficiary from selling his or her interest in the trust, but also prevent a creditor from forcing a trustee, the person with the legal title of the assets, from distributing the trust’s assets. 

If you would like more information on Florida Trusts or to create a Trust in Jacksonville or other areas of Florida, CONTACT our Jacksonville Florida Trust Lawyers by email or call us at 904-685-1200 to discuss your situation today.