Living Trusts
 

My wife and I now own a house here in the Villages as well as in Michigan and plan to, at least for the next several years, be snowbirds. We currently have wills but not living trusts. It is my understanding that, should something happen to one of us, the Florida home (at least while we are Michigan residents) would have to go through probate which may be expensive and time consuming. As we are thinking of selling, and replacing, our Michigan residence, I think the time might also be right to create living trusts.

Here is my question — does anyone have experience with the execution (after a spouses or close relative’s death?) of an out-of-state living trust ? If so, was the out-of-state living trust recognized in Florida so as to avoid probate? Does the living trust really need to be drafted by a Florida attorney or are living trusts drafted by out of state attorneys just as good? Thanks in advance for your input

Every state is different. NJ is the worst. Estate laws govern where you reside when you die, not where you own.

A trust is different from a will in that a will needs to comply with the State law and often needs to be executed by a state probate court. But, a trust is a private document that can be executed by the named trustee without any involvement by a court. The only time a trust needs a court to get involved is when someone challenges the trust by suing the trustee. You probably need to consult with a lawyer, but, if your finances are relatively simple, I would try to avoid preparing a trust. Trusts are expensive, and often need to be updated when you buy or sell an asset. I doubt that you need a trust if your assets are simple and there are not a lot of heirs. Most assets can be transferred by setting them up as "payable on death". In Florida, real estate can be transferred automatically on death by having a joint title or by setting up a "lady bird" title. No trust or will needed for that.

By the way, I am a trustee for a trust that was prepared in Virginia by a deceased friend. I have been executing the terms of the trust for several years, and I have never had to get the trust validated or even looked at by a Florida court. That is because it is a private document, which is much different from a will, that can become a public document after death.

You could hold the deed in joint tenancy with right of survivorship (JTWROS). That way when one dies the other owns the property without any need to go through probate.

Good post. I'd be interested in hearing from others about Revocable Living Trusts (RLT) in general. Leaving all properties to the spouse is easy. Do a normal 'sweetheart' will. Everything goes to the surviving spouse. Everyone does it.


I don't believe there are any probate considerations. I do know that the estate transfers free of any inheritance taxes.

A Revocable Living Trust can be useful in transferring property after both spouses die. It's easier, private, and avoids probate, even though there is some incremental cost over a will. Wills are often free, since there is a payday waiting for the lawyer upon death. With an RLT, most of the legal hassle is moved up front.

To your question about out of state real estate: Do the trust in Florida. Maybe even use a discount mill. We did. They do volume and we found little downside if you do your homework. PM me if you'd like more info.

Once the trust is established, title has to be transferred. Location of the property is irrelevant, but the title transfer has to be clean, so it may require a local attorney. Real estate is the main asset in our trust. Other assets (bank accounts, brokerage accounts, life insurance, annuities) can be transferred directly and do not necessarily have to be retitled. Just make sure the beneficiary information is correct.

Florida will usually accept your estate type documents drawn in another state. The key is usually so best to ask an attorney that practices in Fl about your documents. My assumption is they will be ok. But a felon can not be your executor of your will. If you are a Fl residence a non blood person living in a state other than Fl can not be the executor. Also be sure your documents are witnessed according to Fl law.
For the home. Yes you will have probate in Fl if you are still a residence of your current state. The trust for just that assets could be a way to avoid it. If you are a Fl residence be sure the trust is titled so you get the homestead real-estate tax deductions and the liability protection. An inexperience attorney may not probably draw the trust so be careful. If your children will inherit the Fl home and your will says this you might have a simple probate but I would double check with a Fl attorney.

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I understand that Florida does not allow a house to be titled as "payable on death". But, you can accomplish essentially the same thing by preparing a "lady bird" real estate title. It will allow you to retain total control of your Florida house, including the ability to sell the house, if you want. Ownership will transfer directly to your children or other heir upon death without probate. So, it could avoid the necessity to go through probate just to transfer the house. I would suggest that you consider it, especially if the house is the only asset that may need to go through probate. If a house is transferred to an heir in a will, sometimes the estate needs to be probated to clear the title so the house can be sold by the heir. A title company may not accept an unprobated will to clear the title when doing a title search.

Take the case of the surviving spouse: the whole transferring process has been kicked down the road and the buck stops. A revocable living trust transfers title without probate from the surviving spouse to other beneficiaries. It sounds like the "lady bird trust" does the same thing. Can you please explain the difference?

Agree the Lady Bird transactions can work. I basically know nothing about it other than it is an option. But I think you have to be careful so that if you want to sell the property the beneficiary does not have the ability to stop the sale. Remember you will still need an attorney and fees to pay if you do set up the Lady Bird. Also Fl might have a different name for this but the idea is the same.
You are correct that you might still have to go through probate due to a title insurance company wanting it.

Good discussion. 2 points to ponder:
1. The property transfer should not get complicated with title insurance as long as the title is aligned and changed to the trust.
2. Selling should not be a problem as long as the trust (whether it be a revocable living trust or a lady bird trust) is "revocable." By definition, the RLT is revocable. Don't know about the LBT.

The lady bird is a type of deed for the the property. It is not a trust. The advantage is that it is just a deed, and will potentially save money and time in lieu of paying a lawyer to set up a complicated trust for all of your assets.

When my mother died, I was her only heir and all of her property was held jointly by me and her, except for her house, which she had left to me in her will. So, I legally owned all of her property. But, I had to go to probate court, open an estate, advertise the estate, and wait six months before I could close the estate. The only reason I had to do this was because I could not sell the house. The title company would not transfer ownership to a buyer with just a will. They required a probated estate that legally transferred a clear title to me, even though I owned the house via the will. But, if she had a "lady bird" title, I would have received clear title to the house immediately upon her death and would not have needed to go through probate at all. I hope that makes sense.

"A lady bird deed (also called a ladybird deed or an enhanced life estate deed) is a special form of life estate deed that gives the owner continued control over the property until his or her death. Once the owner dies, the property is transferred automatically to new owners without the need for probate."

Lady Bird Deed | What is a Ladybird Deed?

Joint tenants with right of survivorship (JTWROS) is a type of ownership in which all joint owners have equal portions of ownership that are immediately allocated to remaining owners if one owner dies.

Joint Tenants With Rights of Survivorship

I think that is a good idea for a husband and wife. But, it is not a good idea for a parent and child for several reasons.

1. If the child is in debt, a creditor could put a lien on the house.
2. You would need the child's permission to sell the house.
3. The child may have to pay capital gains tax when they sell the house, because they will not receive a stepped up cost basis when you die.
4. If they move in, you can't legally throw them out.

All true.:boom:

retiredguy: makes sense. If the LBT is just a titling change, wondering now how to accomplish that. Don't you need a lawyer to set up a LBT before you just change the title?

Estate Planning with Sebastian Guerra and Leslie Marenco! - YouTube

Check this out: skip to 51:00. Good and realistic description of Lady Bird Deeds and alternatives.

I think that maybe a title company could do it for you for a few hundred dollars. In my opinion, I think the lady bird deed would be appropriate for a lot of retired people in The Villages, who only have a few assets and no mortgage.

As a Michigan person the best advice is to seek an attorney in Michigan as most of them are licensed in multiple states.thete is the issue of probate and also most legal issues here are settled through arbitration with a 2 yr filing date on civil cases. Please use an attorney up north and get a free visit so you can interview at least 2. Also if the library is open up north do some research in your own. Many things are told to folks here that are not set in stone but they profit off of naive folks.

Good luck.

Trusts?
 

We share our time between TV and Pennsylvania and maintain PA as our residency. Our PA attorney is retired from the Air Force having been stationed in FL. He is licensed to practice law in both states. His advice on a trust......probate is expensive in FL but not in PA; trusts are expensive in PA but not in FL. As long as we remain PA residents a trust is not necessary. Should we change to FL residency he would recommend a trust. So....you may want to discuss the costs of each, probate/trust in Michigan until/if you become a FL resident.

Your best to go directly to Estate attorney, they will give you a free hour consultation. I would recommend Eric Millhorn 753-9333 especially if you’re a veteran or his partner Jennifer Henson. Not all golf course talk is correct.
Not all situations are the same....do yourself a favor and spend an free hour on your situation with Eric or Jennifer.

Ladybird clause
 

I was told by the closing agent on my house here in The Villages that the Florida equivalent of joint tenants with rights of survivorship is a "ladybird" clause. I executed that at closing, and the deed to my house goes directly to my two children upon my death with no fees or probate required.

Interesting. Never heard of that being so common in FL. Would you mind sharing the name of the closing agent?

Two musings: Taxes and homesteading

TAXES - The consideration for both LBD and a trust would be capital gains taxes. In either of those cases, I'm guessing that the beneficiaries named in the LBD or trust would be responsible for full capital gains when sold.

If the home is passed on through a will, there is a step up in basis, so the beneficiaries pay no capital gains taxes.

HOMESTEADING - I'm guessing that Homesteading is possible with a LBD. I know it's possible with a Revocable Living Trust, since we currently have one.

We went with Andrew Curtis to create ours. We are now FL residents and thought a trust written in FL and following FL laws was the best idea. He is a Villager himself. He advertises in the paper and on this site you should be able to find him. I do suggest getting your answers from a FL lawyer, even if you don't draw up a trust here.

My wife and I are also Michigan residents. We set up Revocable Living Trusts in 1995. We have amended the trusts six times since then for various reasons. In 2019 we bought in TV and are snowbirds. Our attorney told us that Revocable Living Trusts are recognized in 49 states regardless of where they were executed. This is because those 49 states are all based in English Common Law, same as US law. The other state, Louisiana, has its law based on French Common Law. Louisiana will not necessarily recognize Living Trusts written in any other state. We have the deeds to our properties in the name of both of our trusts. Hope this helps.

MSU: Thanks for the education. I assume the trust was originally created in Michigan?

Also, when you say "We have the deeds to our properties in the name of both of our trusts," I assume you mean that both properties are in your SINGLE trust. ...or did you creaye two trusts?

If you have a lady bird deed, you will retain your homestead exemption, and whomever receives the property when you die will benefit from a stepped up cost basis for capital gains taxes.

We created the trusts in Michigan in 1995. We each have a Revocable Living Trust. We leave things to each other. They are called A/B trusts. The benefit is that there is no inheritance tax when the first party dies regardless of the size of the trust assets.
The deeds to our houses are in the names of both trusts, i.e. instead of John and Jane Doe, it John Doe Living Trust dated May 15, 1995 and Jane Doe Living Trust dated May 15, 1995.

Step up basis in a RLT? Any educated guesses?

Thanks for the clarification. Makes sense. In our case, we would have two trusts also, but the assets would be difference and the beneficiaries would be our respective kids, since it's a second marriage. We all look at the world through different lenses, don't we?!

As with most things of a legal nature, requesting legal advice on a public forum like this you will get a variety of responses. In my view, one should consult an attorney who specializes in estates in a matter as important as this. That way...

Yes, for most cases, property received from a trust will receive a stepped cost basis.

That's a given, but I for one enjoy discussions like this with well meaning people. Plus it puts you in a better position to know what questions to ask.

Michele L. Foltz
Paralegal
Millhorn & Shanawany Law Firm
13696 US Highway 441, Suite 200
The Villages, Florida 32159
352-205-4408 (Direct line)
352-205-4995 (Office)

Is this a referral? Please tell us more.

I would be concerned in joint if both died say in a car accident. While it might work , I don't think joint is the best option

Right on!
"The general rule is that assets held in trust for beneficiaries will receive the stepped up tax basis if the trust assets are included in the estate of the decedent. This generally includes trusts that are revocable until death—they would be part of the taxable estate and receive a step up."

I agree with consulting an attorney. However, I would ask the attorney some hard questions about the need for a trust. I would also ask about future legal fees if you buy another house or make other financial changes that will require an update to the trust. A lot of people who go to an attorney end up buying a trust when they really don't need one. There are lots of free seminars with free dinners on how to avoid probate by putting all of your assets into a trust. They make it sound like probate is a complicated process that needs to be avoided at all costs. But, I have handled two probates myself, and it was not a big deal. And, there are less expensive ways to avoid probate without a trust. If you do buy a trust, I would insist on a fixed price from the attorney, not an hourly rate.

I would confirm this with another attorney.

Without any special purposes I prefer this

"The term tenancy by the entirety refers to a form of shared property ownership that is reserved only for married couples. ... This form of legal ownership creates a right of survivorship so if one spouse dies, the surviving spouse automatically receives the full title of the property"

I think the term enhanced life estate deed is what is used in Fl for the Lady Bird. Thank you.

As pointed out in the reference the ownership of the property is split between the original owner for life and the beneficiary is entitled to the property after the owner dies. Thus if the owner wants to sell the property the owner needs to get the beneficiary's rights back.