When people come to us about crafting an inheritance plan in Florida, we often counsel them on using a revocable living trust as a way to protect their inheritance choices. But how do trusts protect the inheritance choices you want to make? What does a trust do that a will does not?
To help you understand how a trust allows you to make and protect your inheritance choices, let’s take a look at some important issues.
Living Trusts and Inheritances – Trust Creation
What will your inheritance plan look like when you use a revocable living trust? What kinds of inheritance choices can you make with it, and how will they be protected?
To explain how the process works, let’s start at the beginning. When you decide to create a revocable living trust, you create a legal entity that can own property. Once created, you can then take some, or all, of your personal property and transfer it into the trust’s name as the new owner. Because you will retain the ability to manage and benefit from the trust property, that property will never be out of your control.
Living Trusts and Inheritances –Inheritance Choices
When you create your living trust, you’ll have to decide what you want to happen to the trust property after you die. Like a will, you can essentially make whatever inheritance choices you want when you make these decisions. Do you want to distribute your property evenly between your children? Leave something to your parents or siblings? Donate to charity? You can do all of these things as long as you state what your inheritance choices are in the living trust document.
Also, because you have the ability to change the living trust terms whenever you like as long as you remain mentally competent, you can easily update your inheritance plan. If, for example, your child gives birth to a new grandchild, you can adjust the terms of your living trust to provide an inheritance for that grandchild.
Living Trusts and Inheritances – Distributing Inheritances
So you’ve created your living trust and decided how you want the trust to distribute its property as inheritances after you die. But how does this work? If you’re the trustee of the trust and you die, who will distribute the property? Will the court get involved? Will a court have to appoint someone?
When you create your revocable living trust you’ll have to name a successor trustee. This person, or organization, will be responsible for taking over the management of the trust after you die. The successor trustee will have to determine who inherits the trust property by reviewing its terms, and then distribute it accordingly.