Florida Trust Naming Conventions

5. How do you name a trust?

Revocable Trusts

A revocable trust usually includes the following information:

(1) The specific name of the trust,
(2) The date that the trust was executed/created,
(3) The name of the trustee,
(4) The title of the word trustee
An example is: the John Q. Public Revocable Trust dated April 15, 2006, John Q. Public Trustee.

At least one or more successor trustees should always be included in a revocable trust.

Irrevocable Trusts

Names of irrevocable trusts are similar to the revocable trusts. A primary difference of the names is the name of the trust itself, which typically indicates its purpose and would typically have a different trustee then the grantor. or example, Tom S. Smith could create an irrevocable life insurance trust (ILIT) that would be named as follows: Tom S. Smith , as Trustee of the Tom S. Smith 2006 Irrevocable Life Insurance Trust dated March 15, 2004.

The year is especially important in naming irrevocable trusts because one can create several trusts of the same type. For example, Beth Jones could create two charitable remainder unitrusts (CRUTs) to accomplish charitable tax planning objectives in successive years: (1) the Beth smith 2007 Charitable Remainder Unitrust, ABC Bank, Trustee; and (2) the Beth smith 2005 Charitable Remainder Unitrust, ABC Bank, Trustee.

The more significant distinction between the revocable trust and irrevocable trust are the tax consequences and flexibility. A revocable trust as its name states can generally be altered or amended at any time during the life of the grantor while they retain the capacity to do so. An irrevocable trust cannot although in some circumstances there are ways to essentially revoke the trust such as having the trustee stop paying the premiums on an irrevocable life insurance policy.

An irrevocable trust needs to get an independent tax identification number. For income tax purposes the trust is at the highest income tax rates after reaching a much lower amount of income then if it were earned by individuals. An Irrevocable Trust could help with estate tax planning though by getting property out of a decedents estate. The appreciation of the assets subsequent to the creation of the trust would also be sheltered from the estate tax. The Estate tax starts at 41% and rises to nearly 50% well above the top income tax rate. The current estate tax exemption amount a taxpayer has is $1.5 million in 2005. Under current law this will rise to $2 million next year through 2008 then rise to $3.5 million in 2009 and be repealed in 2010 only to return to $1m in 2011 when the prior law sunsets. However, President Bush is pushing to make a permanent repeal to estate taxes and do so more quickly then 2010. Although there is some support in Congress for this he would need to reach 60 votes and with mounting deficits and other priorities of the war and social security reform it is unclear what will happen with this. Some attorneys and tax commentators think it is likely that the estate tax exemption will be increased but not repealed prior to 2010 although until it happens one can only plan based on the current law and with the knowledge that there may be subsequent estate tax reform on the horizon of the next few years.

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