Undoubtedly, living trusts are valuable estate planning tools. However, like everything in life, Florida living trusts are not perfect. Therefore, one should be aware of the problems and complications associated with this type of trust.
Keep reading to discover the cons of Florida living trusts.
What Are the Cons of a Florida Living Trust? – The Key Issues
No Protection Against Creditors’ Claims
Despite what some people may think, transferring the title of assets to a living trust will not shield them against creditors’ claims.
Under a revocable living trust, the assets will be protected from all types of creditors’ claims. As the trustor maintains ownership of the trust assets while he or she is still alive, creditors might look to collect from the property held in trust.
Therefore, if the trustor loses a lawsuit and the creditor is awarded a judgment by the court, it may expose the trust property to potential liability. Depending on the case’s circumstances, the trust may be closed, and the money handed over to the creditor.
If you are interested in finding cost-effective solutions to shield personal assets against creditors’ claims, the best approach is to consult with an expert attorney instead of creating a living trust.
Constant Record Keeping
Upon proper execution, a Florida living trust requires daily record keeping. As long as the trustor of a living trust also serves as the trustee, the Internal Revenue Service (IRS) requires no separate income tax records or returns.
As all the income generated by property held in the living trust is reported through the trustor’s personal income tax return, it is crucial to keep written records of any transfers of property to or from the trust.
Although it is not necessarily difficult, individuals who are constantly transferring property to the trust may find the task time-consuming.
Refinancing Trust Property May be Difficult
When the trustor of a living trust transfers the title of assets to the trust, he or she no longer has nominal ownership over the trust property. Therefore, if the trustor decides to refinance a property titled to a living trust, it may be difficult.
In such cases, a bank or insurance company may have an uncooperative attitude. Ideally, it would be sufficient to show a copy of the trust instrument and demonstrate you, as a trustee, have authority to borrow against the trust property.
If the lender decides to decline the refinancing, there are two solutions – either find another lender or transfer the property back to the trustor’s name, refinance the property, and then transfer it back into the living trust.
What Are the Cons of a Florida Living Trust? – Attention to Detail
When transferring assets to a living trust, the trustor must guarantee that the property held in trust was legally transferred to the trust’s trustee.
Generally, certain assets have no ownership document, such as jewelry, furniture, artwork, etc. In such cases, it is possible to draft an Assignment of Property to legally transfer the title of the asset to the trust’s trustee.
Regardless, setting up a living trust requires expert legal guidance, which is something only an experienced Florida probate attorney can provide.