When you initially sit down to create an estate plan, a Last Will and Testament may be all you need to ensure that you don’t leave behind an intestate estate in the event of your death. A Will can distribute your entire estate; however, as your estate and your family both expand, you may find that a Will is no longer sufficient to meet all your estate planning needs. At that point, you may decide to incorporate a Family Wealth Trust into your estate plan. Despite the name, a Family Wealth Trust is not only for the wealthy, as you will realize by learning more about how one might fit into your estate plan.
Trust Fundamentals
A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason unless a court grants the right to revoke or modify the trust.
How Might My Estate Plan Benefit from the Inclusion of a Family Wealth Trust?
A common misconception is that you need to be wealthy to benefit from a Family Wealth Trust (FWT). While those with large estates can certainly benefit from the inclusion of an FWT in their estate plan, the same is true for those with smaller estates. Basically, an FWT is simply a revocable or irrevocable living trust into which you transfer the majority of your assets.
There are a number of ways in which your estate plan might benefit from the inclusion of a Family Wealth Trust. To begin with, if you choose to create an irrevocable FWT it can protect assets from creditors both now and after your death. Assets held in an FWT may also be safe from claims made by a beneficiary’s spouse in a divorce. Another important benefit to including an FWT in your estate plan is the ability to protect assets meant for your minor children because your minor children cannot legally inherit directly from your estate. A Family Wealth Trust can protect your children’s inheritance until they reach the age of majority and are able to inherit directly. In the event you divorce and remarry at some point, an FWT can also provide for your spouse while simultaneously protecting assets you wish to be preserved for children from a previous marriage. Your spouse can be named as the Trustee of the trust, or you can appoint a close friend or professional Trustee. Your spouse can use or benefit from the property held in your FWT, but he/she does not own those assets. Ownership in the property held in the Trust is reserved for your children. A “spendthrift” provision in a Family Wealth Trust is often used to retain a certain degree of control over assets and protect those assets from mistakes a beneficiary might make. It prohibits the heir from transferring his or her interest and also bars creditors from reaching into the trust. Finally, because the assets are held in a trust they are not required to go through probate, offering one of the most important advantages of using a Family Wealth Trust to distribute your estate.
Contact Florida Trust Attorneys
To learn more, please download our FREE solid estate plan checklist. If you have specific questions about how a Family Wealth Trust might fit into your estate plan, please contact the experienced Florida trust attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
