Estate planning allows assets to transfer to beneficiaries after the owner passes away. Estates without proper plans go through the probate process and face extra taxes and court fees. Florida allows assets in a revocable trust, transfer on death or joint title to stay out of probate. A will is essential, but a trust can help safeguard your assets from future issues. The type of trust depends on the complexity of the estate.
The owner usually creates living trusts during their lifetime with a property transfer to a trustee. The owner retains the ability to change or revoke the trust. After the owner dies, the trust becomes irrevocable, and the trustee can’t change anything. The trustee must follow the rules of the living trust to distribute assets and make payments. Living trusts during estate planning allow the estate to pay for the owner’s end-of-life healthcare. The assets move quicker to beneficiaries than in the slow-moving probate process. Florida shields the homestead from creditors, but property in the trust is susceptible to creditor claims. All income in the owner’s living trust is taxable.
Irrevocable life insurance trust
An ILIT helps with the estate of a wealthy family. The government offers estate tax exemptions for estates up to $11.7 million. Estates higher than the exception have taxes as high as 45%, and life insurance is a trusted tool in estate planning. Irrevocable life insurance trusts give the owner flexibility and tax-saving techniques by excluding life insurance proceeds from both spouses. The owner must live three years after the policy transfer to be a valid trust.
Charitable remainder trust
Charitable remainder trusts protect appreciated assets on a low basis, including real estate or stocks. The property in a CRT doesn’t incur capital gains taxes after selling, but the trusts are irrevocable. The owner loses their rights to the property and can’t change anything without the beneficiary’s permission.
A good estate includes a will and at least one trust, but each trust covers different scenarios. Special needs trusts offer an estate the ability to fund a physically or mentally disabled person without losing public assistance. Non-citizen spouses can have marital deductions with qualified domestic trusts. Think about the trust that can help your situation best when starting your estate planning.