Law Offices of James W. Mallonee, P.A.
Port Charlotte 941-206-2223
Venice 941-207-2223
Helping individuals & families across Florida with their legal matters since 2005

Get a Trust

You’ve probably heard the story that by titling all your assets to a trust you will avoid probate. Comments such as that are one of the great myths of all time. It’s true that you can avoid probate if your assets are titled to a Trustee of a trust, provided you are willing to wait 2 years from the date of death. The reason why you must wait two years is because Florida law bars all creditor claims against a person’s estate after two years. But you might think that the decedent had no creditors. To this comment I often ask, “did you publish a notice to creditors in the paper for two consecutive weeks?” In many cases the response is no. If you did not publish a notice to creditors in the legal section of a decedent’s local newspaper, then how can you be sure that all creditors have been notified to submit a claim for payment? The point is, you can’t be sure.

More importantly, even if you did publish in the paper, how is the creditor to file a claim against the estate. To file a claim, the creditor will have to file for probate of the decedents estate which the creditor can do. When this happens, the law gives the creditor (who will likely serve as the personal representative) the right to compel the Trustee of the decedent’s trust to provide funds to pay claims and expenses charged against the estate.

What happens if the Trustee has distributed the trust to its beneficiaries and there are no funds to pay the claims of creditors. In that event, the Trustee will likely be personally liable for all claims and administrative expenses (including lawyers fees and costs to recover those funds). This could become quite expensive which could have been avoided had the Trustee probated the decedent’s estate.

What happens if the Trustee has not distributed the trusts assets, but refuses to deliver the funds to a personal representative to satisfy creditor claims. Florida law provides that a personal representative can compel a Trustee to deliver the necessary funds (if available) to satisfy creditor claims.

The point of this article is to inform you that even if you have a trust, you will and you need to go through probate. Most lawyers will call this a dry probate. A dry probate is one that consists of a piece of tangible personal property such as a chair or lamp to simply initiate a probate. However, it is not necessary to list any property for purposes of probating an estate, provided you let the court know (as a courtesy) why no property is listed.

So why have a trust? The reason for paying for a trust is to save on overall costs and avoidance of Federal Estate Tax. Overall costs generally include the preparation cost of a Will or Trust document along with probate and trust administration fees and costs. In the author’s experience, if you have net assets that exceed $200,000.00 you are a likely candidate for a trust to save on overall costs to your estate. If your net assets are between $120,000.00 and $200,000.00 you are in a very gray area of whether a trust or Will is best for you when considering the overall costs to your estate. If your net assets are less than $120,000.00 you are likely not a candidate for a trust from an overall cost standpoint.

Most trusts are also prepared on the basis of avoiding Federal Estate Tax. The general method of avoiding Federal Income Taxes is to split a husband and wife’s assets into two separate trusts to take advantage of the Federal Applicable Exclusion for each spouse. When this occurs each spouse has their own separate estate. The essence of having separate estates allows the husband and wife to double the applicable exclusion. For example, the current Federal Applicable Exclusion is $3,500,000.00. Thus, if a husband and wife separate their assets into a two trusts, they can effectively have aggregate assets that total $7,000.000.00 (3.5 million x 2 = $7.0 million) before being required to pay Federal Estate Tax. Can this be done without having to invest in a trust agreement? The answer is yes, but you may lose the ability to manage your assets before and following death and more importantly, the expense of probating your estate may be exceptionally high.

If you are considering testamentary documents to dispose of your estate assets following your death, check with your attorney about what documents are best for you from an overall cost standpoint. You might be surprised at the overall costs involved between a Will and Trust which might sway your decision as to which one to select. You’ll be even more surprised to learn that you will need to have your estate probated even if you have a trust.

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