Trust and Probate Myths
Trust and Probate Myth #1
Holding assets in a revocable trust protects my assets from the claims of creditors.
Wrong! As long as you hold the power to revoke the trust, a creditor can pierce the trust and levy on the assets in the trust, unless those assets are protected by some other legal theory. Homestead real estate in Florida is protected from all creditors except the Federal government; and assets held in the name of a married couple as tenants by the entireties is protected against the claims of creditors of either married individual (but not both). Thus, holding assets in a revocable trust is not a guaranty that your creditors cannot reach those assets.
Trust and Probate Myth #2
I can pass my home to my spouse through a revocable trust and by-pass my minor children.
False, again! Often, in “blended” families, meaning a married couple that each have children from prior marriages, or a family where there are minor children of both, the parties often believe that using a trust will by-pass one spouses’ or both spouses’ children. The thought is that the spouse with the minor child or minor children would rather have the surviving spouse own the property. Unfortunately, when a person dies and is survived by a minor child, the Florida constitution dictates how the parties may devise the homestead, not the terms of the trust; and the Florida constitution protects the minor child or minor children from being disinherited.
Trust and Probate Myth #3
Having all of my assets in a revocable trust at the time of my death avoids probate.
Not necessarily. First of all, it is actually rare that a decedent successfully places ALL of their assets in their trust. There are often small balance bank accounts and other assets that are discovered after death that were overlooked and not placed in the trust. To transfer them into the trust, the probating of the decedent’s will or the administration of the decedent’s estate for distribution of those assets to the decedent’s intestate heirs will be required.
Trust and Probate Myth #4
If I hold all of my assets in a trust at the time of my death, my creditors will have nothing to attach and I can avoid paying all of my creditors.
Wrong. The successor trustee of your revocable trust may be personally liable for the payment of your creditors unless proper steps are taken and a provision is made for the payment of creditors.
Trust and Probate Myth #5
Real estate that is in probate cannot be sold until the estate is settled.
Absolutely incorrect. Once a probate estate is opened, the personal representative may either have immediate power of sale if provided for in a properly drafted will, or may petition the court for authority to sell the real estate. Often, assets held in an estate can be sold and closed within a few weeks of the opening of the estate.
Trust and Probate Myth #6
Probate results in estate taxes imposed upon the estate.
Wrong, unless we are talking about a very large, multi-million dollar estate; and even then, it is not probate that imposes the estate tax, it is the Federal government that has an automatic estate tax lien on the assets whether subject to probate or not. For the vast majority of estates, there are no Federal estate taxes; nor does Florida impose a death tax.
Trust and Probate Myth #7
Probate is expensive.
Well, this depends on the attorney you hire to handle the probate. Many will charge a percentage of the value of the estate or large hourly fees to handle a probate. The probate department at BocaClosings℠, however, typically charges a flat fee based upon the expected complexity of the administration. We have found our clients appreciate knowing ahead of time what the administration of the estate is going to cost.
Trust and Probate Myth #8
Everyone should have a trust.
Not necessarily. As Johnny Cochrane might have said, “If your facts don’t fit, a trust you should quit.” Trusts for the right reason at the right time in someone’s life can be a great asset management tool. But for the wrong reason or at the wrong time in someone’s life, trust can be an unnecessary expense. Trusts, simply stated, are not necessarily for everyone all the time.
The foregoing are some of the most common myths regarding trusts and probate; there are many more. It is a shame how people make estate planning decisions based upon false information and use or misuse trusts when, in fact, a little help from someone that knows the ropes could really be beneficial. We have been drafting trusts and have been handling probates and trust administrations for over 40 years. Our office would be happy to discuss with you the administration of an estate or the preparation of an estate plan for you and your family that will maximize your estate planning goals at a reasonable flat fee.