Florida Estate Planning Lawyer Blog
Trusts are one of the most commonly used estate planning tools by Jacksonville estate planning lawyers for a good reason. A Trust can permit an asset to bypass probate while allowing the original owner the power to control and manage the assets. A trust can also provide asset protection and make assets exempt from the Medicaid qualification process. Our Jacksonville estate planning attorneys are often asked about differences between using a trust and an outright gift to a beneficiary.
In most cases, the answer is that it is it better to keep the asset in a trust to reduce income taxes, protect the asset from creditors, and prevent penalties in the case long-term care is needed. We will attempt to explain why in this article A major purpose of a trust, which can be irrevocable or revocable, is to provide an easy way to transfer ownership of a property when the owner passes away and permit an unlimited step-up in basis without income taxes to the person who receives the items. Some trusts also provide asset protection or can be designed to protect assets in the case long-term care is needed. As a person begins to age it can be dangerous and costly to make large outright gifts. The risks are often specific to the individual and should be discussed with an estate planning or elder law attorney.
One example may be a 65-year-old client who owns a rental home or multiple rental homes. The homes are primarily rented out to generate income while they appreciate in value. The client can transfer the property into an asset protection trust. The trust becomes the owner of the rental property, and the rent and value of the properties can, over time be excluded if the client needs long-term care. The client can be in charge of their trust and determine how the assets are invested and to whom the funds are given to.
The income can be given to a child if desired without the risk that activity the child participates in will put the assets at risk of loss. A properly drafted trust document can also address the issue of the inability of the client to manage the property in the future by naming a successor trustee to manage the property.
If the client waits and gives the property to his son after death, then the son will receive the property at its current day value. This means that client’s son if he plans to sell the property, can significantly reduce the costly capital gains taxes that would have to be paid if the assets were given to the child while the client was alive.
For more information on how trusts can be used to avoid probate, protect the family, provide asset protection, and create Medicaid exempt assets contact Jacksonville estate planning attorney David Goldman at the Law Office of David M. Goldman PLLC.