Florida trusts are a very good way to protect your assets in the state of Florida before and after you die, but it’s important to be familiar with the types of trusts that are available to you when planning your estate. A Florida estate planning attorney can help you to determine what variety of trust is the right choice for your assets, but let’s take a look at some of the options available to you.
Types of Florida Trusts to Protect Your Assets
Trusts have many advantages if they are used correctly, they serve a number of purposes including:
- Reducing estate taxes
- Distribute your assets among your heirs without going through probate.
- Reducing gift taxes
- Set stipulations on who will benefit from your estate and what and when they will benefit after you die.
- Protect your assets against lawsuits and collection from creditors.
- Choose who manages your trust and or your trust assets if you are incapacitated or die.
The cost of a trust varies depending on the type of trust you are setting up and the complexity of that trust. Additionally, you can expect to pay added fees if you want to make changes to your trust at any time.
A credit-shelter trust is a trust in which you bestow a certain amount of money up to the estate-tax exemption and then you can leave the rest of your estate tax-free to your spouse. With this type of trust, you stipulate how you want the trust to be used by your heirs. This type of trust is also referred to as a family trust or bypass trust and once money is put into the trust it can never be subjected to an estate tax.
By using a credit-shelter trust you can financially protect your spouse should they need to rely on income from the trust.
Qualified Personal Residence Trust
A qualified personal residence trust is designed to let you gift your home to your heirs while allowing you to maintain control of it for a specified period of time. This trust subtracts the value of your home or vacation home from the value of your estate and assumes that the value of the gift of your home is less than the current value since your heirs will not take control of the estate for a period of time. The longer the period of time outlined in your qualified personal residence trust, the lower the value of the gift of your home is considered to be.
A qualified personal residence trust is a good option if the value of your home is likely to increase over time but not if there’s a possibility that you won’t outlive the trust. If you don’t outlive the trust, the actual value of your home when you die will be included in your estate. If you do outlive the trust, once the period outlined in the trust is up, you have to either move out of the home or pay market value rent to continue living there (with rent paid reducing your estate value.)
Also known as a “dynasty trust” is a trust that lets you allocate a large amount of money (within the exemption amount) to beneficiaries who are two or more generations below you (for example grandchildren) without their having to pay taxes on the money. If you allocate more than the exemption amount, the named beneficiaries must pay a generation-skipping transfer tax. When setting up a generation-skipping trust you can make stipulations that allow your children to receive income from the trust or take from the trust principle amount to provide certain needs for their children (two generations your junior).
Irrevocable Life Insurance Trust
An irrevocable life insurance trust is designed to take your life insurance out of your taxable estate value, provide your heirs with cash, or help pay estate costs. The stipulation with this type of trust, however, is that you must surrender your rights of ownership to the life insurance policy which means that you may no longer change beneficiaries or borrow against the policy.
The irrevocable life insurance trust is a good option if you are bequeathing non-liquid assets to your heirs that may require access to cash to keep them maintained. For example, leaving a business to your children, the business will require capital to keep it running after your death until your children can sell it.
Qualified Terminable Interest Property Trust
A qualified terminable interest property trust allows you to put assets into a trust so that your spouse can benefit from the income from the trust. The assets in the trust will be treated as a part of your spouse’s estate and might be taxed accordingly. Upon the death of your spouse, the remainder or principle of the trust will then be directed to particular relatives as stipulated in your trust.
If you’re thinking about setting up a qualified terminable interest property trust, it’s best to first set up a credit-shelter trust to take advantage of the tax-free benefits and put any remaining assets into a QPRT trust.
Do You Need Help Setting Up Florida Trusts?
If you live in the state of Florida and need assistance setting up trusts to protect your assets before or after your death or need help contesting a trust already in place, Weidner Law can help. Just give us a call at 727-954-8752 to set up your appointment today.