When someone passes away in Florida, their estate often has to go through a legal…
If you are just starting to consider your estate planning options or are in the middle of the process, you probably have questions about how to distribute your assets and who should handle it.
A trust can be a valuable tool in your estate planning toolkit. A properly created trust gives you and your family more options, flexibility, and privacy than a will alone.
Unlike a will, a trust can help keep your estate from going through an expensive, time-consuming, and public probate process. If you establish a trust, you still create a will, but it becomes a pour-over will, which transfers (or “pours”) your assets into the trust after your death.
There are several types of trusts available, and the right option depends on your goals, financial circumstances, and how you want your assets managed and distributed.
What Is a Trust?
A trust is a legal arrangement that allows a person or entity to hold and manage assets for the benefit of another person or group. Trusts involve three main parties:
| Trust Party | Role |
|---|---|
| Trustor (also called grantor or trustmaker) | The person who creates the trust and transfers assets into it. |
| Trustee | The person or entity responsible for managing the trust assets according to the trust terms. |
| Beneficiary | The person or organisation who receives benefits from the trust. |
More than one person can create a trust, and a trust can have multiple trustees or beneficiaries. In some situations, the trustor, trustee, and beneficiary may all be the same person.
Common Types of Trusts
Different trusts serve different purposes. Some of the most common types include:
| Type of Trust | How It Works |
|---|---|
| Living Trust | Keeps assets available to the trustor while they are alive and explains how assets will be distributed after their death. |
| Testamentary Trust | Created after a person dies and benefits the deceased person’s heirs. |
| Revocable Trust | Allows the trustor to remain a beneficiary during their lifetime and change beneficiaries after their death. |
| Irrevocable Trust | Generally cannot be changed after creation and may help protect assets from creditors, taxes, and Medicaid qualification issues. |
| Qualified Income Trust (Miller Trust) | Holds income above Medicaid qualification limits so the trustor may continue receiving Medicaid benefits. Availability depends on state law. |
Why Create a Trust?
Trusts can provide several benefits depending on your estate planning goals.
Avoid Probate
One major benefit of a trust is that assets held in the trust generally do not need to go through probate court before reaching beneficiaries.
This can help beneficiaries receive assets more quickly while keeping the details of the estate private. Probate proceedings can take months, and court records may become available to the public.
Learn more about the probate process and how it may affect your estate.
Protect Assets for Beneficiaries
A trust can hold and manage assets for beneficiaries who may not be ready or able to manage them independently, including:
- Minor children
- Individuals with disabilities
- Beneficiaries who need assistance managing finances
Trusts can provide instructions about when and how beneficiaries receive assets, helping protect those assets over time.
Medicaid Planning
Some trusts help remove assets or excess income from consideration when someone plans to apply for Medicaid benefits.
These trusts are often created years before applying for Medicaid because certain rules may require advance planning. You can learn more about Medicaid eligibility requirements through the official Medicaid website.
Reduce Estate and Gift Tax Concerns
Estate taxes and gift taxes can reduce the amount of assets beneficiaries receive. Certain trusts may help minimise these taxes and preserve more assets for future generations.
Trusts may also help protect assets from creditors or family members who may have different ideas about how assets should be managed.
The Role of a Trustee
A trustee is responsible for managing the trust and following the instructions created by the trustor.
The trustee’s responsibilities may include:
- Managing trust assets
- Distributing income or principal according to the trust terms
- Paying taxes owed by the trust
- Keeping accurate records of expenses and income
- Managing physical assets, such as real estate
- Providing reports to beneficiaries when required
The trustee’s authority depends on the terms of the trust. Some trusts give trustees broad discretion, while others include strict instructions about how assets can be used.
Special Needs Trusts and Government Benefits
If a beneficiary receives benefits from Medicaid, Medicare, or another government program, the trustee must carefully manage distributions to avoid affecting eligibility.
Some trusts include special or supplemental needs provisions designed to support individuals with disabilities while helping protect access to government benefits.
More information about special needs planning is available through the Social Security Administration.
How to Choose a Trustee
Selecting the right trustee is an important part of creating a trust. The trustee should be someone you trust to follow your instructions and act in the best interests of the beneficiaries.
A trustee may be:
- A family member
- A trusted friend
- A professional trustee
- A bank or trust company
For some trusts, such as a living trust, you can serve as the initial trustee. You can then appoint someone else to take over if you become incapacitated or after your death.
Can a Trust Have More Than One Trustee?
Yes. More than one person can serve as trustee at the same time. This arrangement may be helpful when beneficiaries are young or when additional oversight is needed.
For example, a trustor may allow a young beneficiary to serve as a co-trustee with an older trustee until the beneficiary reaches an appropriate age to manage the trust independently.
Do You Need a Trust Instead of a Will?
Not everyone needs a trust. The right estate planning tools depend on your assets, family circumstances, financial goals, and wishes for the future.
An experienced estate planning attorney can help you determine whether a trust, will, or combination of estate planning documents best suits your needs.
Frequently Asked Questions About Trusts
What is the main purpose of a trust?
The main purpose of a trust is to manage and distribute assets according to the trustor’s instructions while potentially providing benefits such as privacy, asset protection, and avoiding probate.
Is a trust better than a will?
A trust is not always better than a will. Each serves different purposes, and many estate plans use both documents together.
Who manages a trust?
A trustee manages the trust assets and must follow the instructions outlined in the trust document.
This article offers a summary of aspects of estate planning law. It is not legal advice, and it does not create an attorney-client relationship. If you’re looking for an estate planning attorney in the Mount Dora, Florida area, please contact us at (352) 565-7737! We look forward to hearing from you!
