4. What are the general myths about Florida revocable trusts?
“Revocable Trusts Save Taxes.”
Revocable trusts do not save income taxes or estate taxes. Typically during the life of the grantor the tax id of the grantor is used and any tax flows through to the grantor at his rates. Following the death of the grantor if the trust continues and is not immediately distributed outright to the beneficiaries it must then get a tax identification number and the retained income is taxed to the trust which has a more compressed rate schedule often resulting in a higher tax rate then if the individual beneficiaries were paying. This is not a potential problem until after the passing of the grantor though and then with proper planning the income can be distributed to the beneficiaries and there will be no adverse tax issues.
“Revocable Trusts Protect Assets from Creditors.” – Myth
This is generally not correct as it relates to the grantor themself. Creditors may reach the assets of the grantor. Some asset protection could be achieved for other beneficiaries though. A Florida trust attorney could further help explain the details of how a trust could help with asset protection for other beneficiaries.
The primary benefit of creating a revocable trust is that it allows for continued management and preservation of your assets, should you become disabled. It can also help avoid probate and set forth all of the dispositive provisions of your estate plan including delayed distributions to beneficiaries if desired and professional management of such assets.