By: Robert W. Bible, Jr., Attorney at Law
With a new year upon us, our list of resolutions might include, “finally get around to doing that estate plan.” As we flip through the infomercials or accept an invitation to a local seminar, we decide that a revocable trust (often also referred to as a “living trust”) is the way to go. Some of the proclaimed benefits of a revocable trust which pulled us in might include, protects against creditors, saves taxes, and avoids probate.
A revocable trust is a document which provides for both a lifetime management of trust assets and a predetermined manner of distributing those assets on the death of the one who created it, often called a grantor or settlor. Unlike an “irrevocable” trust, which generally may not be amended or terminated solely at the will of the grantor, a revocable trust may be amended or revoked (terminated), and any trust asset may be removed from the trust, at any time and for any reason solely by the act and decision of the grantor.
So, does a revocable trust really provide all those amazing benefits we’ve often heard that it does? Let’s tackle the easy ones first. Florida law says that if the grantor can readily access trust assets and return them to his or her personal control and possession with the simple act of unilateral revocation, then so can the grantor’s creditors. A revocable trust is not an effective creditor protection device. All income generated by a revocable trust is reported and taxed on the grantor’s personal income tax return, and since a grantor at any time during his or her life could have readily placed control and possession of trust assets back in his or her name, all assets in a revocable trust are part of the grantor’s gross estate for estate tax reporting purposes. A revocable trust, in and of itself, does not save or avoid income or estate taxes. So that leaves, avoids probate.
Let’s say “Grantor” purchases a revocable trust do-it-yourself kit or creates a revocable trust through some other means. The text of the revocable trust provides that all property listed on Schedule “A” is a part of the revocable trust. Grantor prepares a Schedule “A” to include, my chalet in Tennessee, my bank account at XYZ Bank, my stock in ABC Co. (a publicly traded corporation), and my RV. Grantor does nothing else other than attach the completed Schedule “A” to the revocable trust. If Grantor dies a week later, has the revocable trust allowed him or her to avoid probate? Unfortunately, no.
Only property which is actually transferred into a revocable trust is able to avoid probate. Certain items of property, such as real estate, bank accounts, stock, and motor vehicles, require separate additional acts to transfer title before they become part of a revocable trust. Simply designating property on a Schedule “A” is ineffective to transfer title into a revocable trust of any asset which requires a specific act or document to implement and evidence a change of ownership.
If you have questions concerning the use of a revocable trust, need assistance with transferring certain items of property into an existing trust, or want an existing trust reviewed to make certain it was set up correctly, at Bob Bible Law, we have the knowledge and over 35 years experience to help you navigate revocable trusts and your other estate plan objectives.
For more information, contact Robert W. Bible, Jr., Attorney At Law at 727/538-7739 (office), 727/710-5166 (cell) or by email at: b.bible@BobBibleLaw.com; www.BobBibleLaw.com