3 Lesser Known Florida Trusts and How You Can Benefit from Them

Trusts are excellent estate planning tools. Their main advantages lie in their flexibility and versatility. A person’s assets and money can be organized in different kinds of trusts according to that person’s individual needs, family situation, and estate planning goals. In this article, we will present a brief overview of 3 trusts available to Florida residents that may be lesser-known but can provide enormous benefits in certain circumstances.

1. Spendthrift Trusts

Creating a spendthrift trust allows a grantor to carefully regulate the manner, amount, and even the frequency in which the assets in the trust will be disbursed to the beneficiaries. Often, the grantor of a spendthrift trust will name an asset management company as the trustee, allowing such an entity to invest the trust’s money once the grantor has died or once the trust has been converted to an irrevocable trust. This way, the trust can generate interest, securing the pay-out of the dividends to the beneficiaries.

Additionally, the trustee controls the distribution of money to the beneficiaries and ensures that these take place strictly according to the trust agreement. For example, if the trust agreement stipulates that the beneficiary is entitled to a certain amount of money per year, the beneficiary will be able to obtain and used only as much even though the trust’s assets have a much greater value.

Importantly, if a spendthrift trust’s beneficiary uses the trust’s money as collateral when taking a loan, the creditors can only attempt to make claims to the money that has already been disbursed to the beneficiary. In other words, creditors’ claims cannot be made against the trust as a whole.

2. Discretionary Trusts

A discretionary trust, while based on a similar idea and legal principle to the one that spendthrift trusts employ, gives much more control to the trustee. The trustee will, therefore, have much more control over how the trust’s assets and money will be distributed to the beneficiaries. If a beneficiary proves to be irresponsible or even reckless in their financial habits, the trustee may be able to withhold payments to the said beneficiary. 

Interestingly, the trustee may also choose to cover the beneficiary’s expenses rather than providing them with direct access to the trust’s funds. That way, the trustee can also protect the trust’s assets and money from any creditors’ claims as these can only be made against the funds that have already been transferred to the beneficiary.

3. Generation-Skipping Trusts

A generation-skipping trust allows the grantor to transfer their wealth to their grandchildren – or to any subsequent generation – while bypassing the family members who are considered to be the first in line as heirs. This entails important tax benefits as assets in a generation-skipping trust are not subject to the estate tax. Additionally, a generation-skipping trust may be practical for individuals who do not wish to pass on their estate to their children for fear of their financial irresponsibility that could hurt the future financial security of the grandchildren.

Need a Trust? Talk to a Lawyer First

While trusts do offer great benefits, it is important to note that they are rarely, if ever, DIY solutions. In order to take full advantage of the benefits they offer, while avoiding certain unobvious pitfalls, it is essential to consult an experienced attorney before creating any specific trust. Luis E. Barreto & Associates, P.A. are trusted estate planning lawyers operating in Miami, Florida. Do not hesitate to contact us to schedule a consultation where a member of our legal team will talk to you about your estate planning solutions most suited to your individual needs.

Luis E. Barreto