When creating your estate plan, you have many options available to you that enable you to keep control over your assets after you pass away. One of the main ways to accomplish the goal of controlling the flow of your assets is a living trust, sometimes referred to as an inter vivos trust. A living trust is a legal document that you create while you are still alive. Once your trust is created, all of your assets will be titled in the name of your trust by you, the trust owner. Those assets are then used or spent down by you while you are living. At the time you pass away, the beneficiaries who are designated by you in your trust, then get access to your remaining assets, and those assets will be managed by the trustee you’ve chosen to succeed you. There are two types of living trusts in Florida: revocable living trusts and irrevocable living trusts.

Advantages and Disadvantages of a Revocable Living Trust

Some of the main benefits of a revocable living trust are:

1. Probate Avoidance: If you have a revocable living trust in place, it doesn’t go through probate.

2. Protects Your Last Wishes: By utilizing a revocable living trust, you maintain complete control of your assets until you are physically or mentally no longer able to do so. If you have a history of Alzheimer’s or dementia in your family history, a revocable living trust can provide you with peace of mind.

3. Changes: You can change your revocable living trust at any time in the future.

The main disadvantage of a revocable living trust is that it does not protect you from creditors or lawsuits. Because you have control of everything in your trust and have access to the assets, you can still be sued for liability.

Advantages and Disadvantages of a Irrevocable Living Trust

An irrevocable living trust is exactly like a revocable living trust except for one major difference – you cannot change an irrevocable trust at any time. Because revocable trusts are permanent, you need to ensure that the benefits outweigh the disadvantages. The benefits are:

1. Protection from Lawsuits:  If your irrevocable trusts contains all your assets, then your trust actually owns your assets – not you. This means that any liability lawsuit cannot go after your assets in your revocable trust.

2. Estate Tax Reduction: Because you no longer own any asset in the irrevocable trust, it cannot be taxed when you pass away.

3. Gives You Access to Government Programs: In order to be eligible for some programs, if you have a disability or are a senior adult, there are strict rules about income levels for some government programs. If you have an irrevocable trust, it can actually lower your taxable income so you or a loved one can remain in the government program.

The downside of an irrevocable trust is because you no longer own anything in the trust, if you want to change anything, you have to go through a legal process.

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