Many Florida estate plans include a revocable living trust as a foundational piece. Revocable living trusts are excellent estate planning tools capable of providing privacy, security, and flexibility. Yet for all their strengths, revocable living trusts are no panacea. They won’t, and can’t, provide certain types of benefits that other estate planning tools can. Here are a couple of reasons why revocable living trusts are not suitable as a comprehensive estate planning tool.
No Tax Shelter
If you are worried about minimizing your estate tax exposure or searching for ways to try to reduce how much you will have to pay in income taxes, using a revocable living trust is not going to help you in your pursuit. Living trusts will not protect you from any state or federal estate, gift, inheritance, or generation-skipping transfer taxes. Further, the IRS will consider the trust property as your personal property for income tax purposes.
No Asset Protection.
Revocable living trusts are also not suitable devices if you’re interested in protecting your assets against creditors or possible judgments. If, for example, you are sued and lose, the winner can seek to collect on the judgment by going after the assets the living trust owns. While some other trusts are capable of providing asset protection, living trusts are not among them.
So, if you want to protect your assets and reduce your potential tax burden, you’ll need to create a more extensive estate plan. Talk to your estate planning attorney about how to do this as soon as possible.