A Revocable Trust is often used in estate planning to accomplish the settlor’s testamentary intent, while avoiding the probate process. The Revocable Trust functions much like a will, except the Revocable Trust speaks during the lifetime of the creator of the trust, and is also used to plan for disability of the creator of the trust. Trust attorneys refer to the creator of a trust as the “grantor” or “settlor.” The settlor retains the right to amend or revoke the trust at any time during the settlor’s life, which allows the settlor to retain complete control over the assets of the trust. A common Revocable Trust will also name the settlor as the initial trustee. The settlor also appoints a successor trustee, or successor trustees, who will administer the trust upon the death or disability of the settlor. It is recommended to nominate one or two subsequent successor trustees who will serve in the event the first successor trustee is unable or unwilling to administer the Revocable Trust.
In addition to planning for the disability of the settlor, the Revocable Trust contains provisions which govern the distribution of the assets of the trust upon the death of the settlor, much like a will. The settlor can provide for specific gifts of cash or property, (i.e. “I give $1,000 to my daughter, Jenny” or “I give my blue Mercedes to my son, John). The Revocable Trust will also include a provision governing the distribution of the Residuary Trust Estate, (which includes all assets of the trust not devised through a specific gift).
If properly funded, a Revocable Trust allows the settlor and his or her beneficiaries to avoid the probate process entirely through a private trust administration. Upon the death of the settlor, all assets owned by the trust pass outside of the probate estate to the beneficiaries as set forth in the trust document. As long as all assets are titled to the trust upon the death of the settlor, there will mostly likely be no need to initiate a probate proceeding in court. A court proceeding is public and open to public scrutiny. So long as a trust remains uncontested, the trust administration is private.
Revocable Trusts work best in conjunction with a pour-over will. While it is ideal to ensure that the Revocable Trust is funded with all of the settlor’s assets during his or her lifetime, there may be assets that go overlooked. Any asset titled in the name of the settlor, individually, as opposed to the trustee of the trust, will be subject to probate administration. The pour-over will ensures that all probate assets are distributed, (or pour over), to the Revocable Trust.
Trust Creation Amendments, and Revocation
The requirements for creating a trust are set forth in Section 736.0402 of the Florida Trust Code. A trust is created only if: (1) the settlor has capacity to create a trust; (2) the settlor indicates an intent to create the trust; (3) the trust has a definite beneficiary or is a charitable trust; a trust for the care of an animal; or certain non-charitable trusts described in Section 736.0409 of the Florida Trust Code; (4) the trustee has duties to perform; and (5) the same person is not the sole trustee and the sole beneficiary.
In practice, a Trust is typically governed by a written instrument which appoints the trustee(s) and the beneficiaries. Assets are then conveyed to the trustee who holds legal title of the trust assets for the benefit of the beneficiaries. The trust instrument grants the trustee certain powers and bestows upon the trustee certain duties as it relates to the trust assets. It is common for the settlor to retain certain powers over the trust, particularly the power to amend the trust provisions and to revoke the trust in its entirety. This way the settlor is able to retain control over the trust assets during his or her lifetime.
A Revocable Trust may be amended or revoked by the settlor at any time during his or her lifetime. In practice, all amendments and revocations should be done in writing. An Amendment will reference the name of the Trust and either replace, revise or delete a provision of the existing Trust instrument. A Revocable Trust may also be amended and restated. An Amended and Restated Trust will supersede the Trust in its entirety.