What is a trust, and why do you need one?
Perhaps we should start with a little background.
A (trendy) way to avoid probate administration
In 1965, Norman F. Dacey published a now-famous book titled How to Avoid Probate!
In his book, Dacey outlines how to set up trusts to avoid the delays and expense of probate administration. After the publication of Dacey’s book, and from time to time since then, trusts became all the rage. (Just like, in the words of Olena Tyrrell, marrying a Targaryen was all the rage.)
Marrying a Targaryen may have fallen out of fashion, but the use of trusts in estate planning has not. In my meetings with estate planning clients, the topic of trusts often arises.
What is a trust?
Put simply, a trust is a property interest held by one person, at the request of another, for the benefit of someone else.
The most common type of trust I draft for clients is a revocable trust. This means a settlor (creator of the trust) has the ability to terminate (also known as revoke), amend, or alter the trust at any time during the settlor’s lifetime.
If the settlor becomes incapacitated, a named successor trustee can manage the trust property, so long as the successor trustee does so in a fiduciary manner.
In addition, revocable trusts are like wills in that trusts contain post-death distribution clauses. (For example: Upon my death the then-serving trustee shall distribute all my real property interests to my children, outright and free of trust.)
These clauses activate when the settlor dies, and those post-death distribution provisions can be administered without court oversight (i.e., probate avoidance).
Trusts are a probate-avoidance option
Trusts are indeed beneficial in avoiding probate, but using trusts to avoid probate can be an expensive alternative to more common probate-avoidance devices.
In certain circumstances, however, clients can benefit from executing a trust.
I typically advise clients to execute a trust if they own real property in Florida and other states. Property owned in other states must be transferred to the trust in order to avoid probate and be administered under the terms of the trust. This will avoid the need to open probate administration in the state where the property is located.
In addition, I typically recommend a trust to clients if they own multiple properties in Florida. Transferring multiple properties to a trust enables a successor trustee to easily manage and sell those properties after the death of the settlor.