When a married couple in Florida sets up a joint trust to hold their assets, if one spouse dies, the surviving spouse can change how their share of the trust is handled. But if the surviving spouse is the trustee, they might make mistakes that could cause problems, like giving away too much or not protecting the assets from creditors. The trust can have specific rules for how the assets are divided after one spouse dies, or it can give someone else the power to make that decision. Itâs important to have the help of professionals to make sure everything is done right. When planning for a homestead property in Florida, it is important to be mindful of the complex rules regarding how it can be passed on after death. The law says that if the owner of a homestead property has a spouse or minor child when they die, the property cannot be given to someone else in their will. Instead, the surviving spouse will usually get a life estate in the property, with the rest going to the ownerâs descendants. However, there are ways to work around this rule, such as making sure the homestead is not included in the deceased spouseâs share of the property. This can be done through careful planning and using legal documents like nuptial agreements or deeds. The law says that when a spouse dies, the other spouse gets some of the assets first and the rest can be passed on to someone else. If there are minor children, the trustee can give all the family home to the surviving spouse. The rules can be changed if the spouses include specific instructions in their trust. The homestead can also be transferred as long as both spouses agree. When a married couple sets up a trust to protect their property, the law allows them to keep tax exemptions and protection from creditors for their home. If one spouse owes money, the trust can specify which assets can be used to pay the debt. It’s important to choose assets that are protected from creditors, like a home or a share in a company. This can make it harder for creditors to collect the money owed, giving the spouse in debt more bargaining power. A limited liability company (LLC) protects its members from business-related problems. If a member has personal debt, the creditor can only get a “charging order” to collect any money the member gets from the LLC. But if there’s more than one member, the creditor can’t force the LLC to give them money whenever they want. This makes it harder for creditors to collect from the LLC. If a Florida LLC is owned solely by a Family Limited Liability Company Trust (FLCPT), it may be considered a single-member or multi-member LLC. This can affect whether a creditor can access the assets of the LLC. If the FLCPT is the only owner, the safest option is to form an irrevocable trust for someone else, like children, to be the other owner. Alternatively, the spouses can be partial direct owners of the LLC, with the rest owned by the FLCPT. The LLC and its members should have an operating agreement that specifies who the members are. For tax purposes, if the FLCPT is the only owner of the LLC and the LLC has not elected to be taxed as a corporation, then the LLC can be treated as disregarded for federal tax purposes. The FLCPT can help married couples with taxes and property ownership. It can be used to facilitate tax-free property exchanges, protect assets from creditors, and make gifts to spouses without triggering taxes. However, there are rules to follow, especially if the FLCPT is irrevocable. It’s important to get legal advice to make sure everything is done correctly. If one spouse has a lot of money and wants to give it to the other spouse, they can do so without paying gift or estate taxes as long as the total amount is less than $12,060,000. But if the receiving spouse is not a U.S. citizen, there are special rules and limits on how much can be given without taxes. If the giving spouse dies with more money than their exemption limit, special trust rules may need to be set up to avoid taxes. Nuptial agreements, like prenups and postnups, can affect how assets are divided in a divorce or after a spouse’s death. In Florida, if there is no nuptial agreement, the law provides for a fair division of assets in a divorce, and surviving spouses have certain rights after their partner’s death. The law also says that nuptial agreements don’t apply to assets in a community property trust.
If a nuptial agreement was made before the trust, the trust’s terms would take priority unless the nuptial agreement says otherwise. If the nuptial agreement was made after the trust, it would modify the trust’s terms. The trust’s assets must be divided equally between spouses in the event of a divorce or death, unless they agree otherwise in a separate written agreement during the divorce.
To ensure the trust is enforceable, it’s important to include any existing nuptial agreements in the trust’s terms. The trust will only apply to assets in the trust, so any other assets will be governed by the nuptial agreement.
Finally, the trust might not be enforceable if it’s unfair, not voluntary, or the result of fraud, coercion, or dishonesty. Both spouses should also fully disclose all assets and liabilities before creating the trust to make sure it’s enforceable.
In short, nuptial agreements and the terms of the community property trust can affect how assets are divided in a divorce or after a spouse’s death, so it’s important to consider these agreements carefully. The FLCPT act is a valuable tool for married couples in estate planning, but it comes with potential benefits and drawbacks. It’s important for spouses to carefully consider the terms and provisions of the trust, especially regarding taxes, death of a spouse, creditors, and other issues. If spouses decide to create a FLCPT, they should seek guidance from a legal professional to ensure the trust is set up properly. When one spouse dies, their half of the house doesn’t automatically go to the other spouse if there’s a minor child. If the surviving spouse didn’t make a specific choice in the law, the house will be divided according to the law. This can affect how much the house is worth for tax purposes. Also, if the house is in a special kind of trust, it might be protected from the debts of one spouse. In Florida, a married couple can use a Community Property Trust to protect their assets from creditors, but this may make some assets accessible to creditors that would otherwise be protected. However, transferring assets to a Community Property Trust could be considered a fraudulent transfer by creditors, but they would have limited ability to undo it if the couple used the funds to pay off their home. In a divorce, one spouse can use a company they own to protect their assets from the other spouse or creditors. The law in Florida says that a company owner is not personally responsible for the company’s debts. This means that if one spouse owns a company and the other spouse owes money, the owning spouse can keep their company assets safe. The courts in Florida have made decisions about how creditors can collect money from a person who owns a membership interest in a limited liability company (LLC). In some cases, the only way a creditor can get their money is through something called a charging order, which limits their ability to take the debtor’s ownership in the LLC. These decisions apply to different types of LLCs and ownership interests, and they can affect the rights of creditors and debtors. An LLC is like a partnership, where each member reports taxes on their personal return. When exchanging property, the replacement property must be used for business or investment. A small business can be owned by a trust or a joint trust between a husband and wife. But if the marriage ends, the trust may no longer be eligible to own the business. In some cases, the laws of another country can cause a nonresident alien to have partial ownership of a company, which can affect its tax status. Shareholders can also be held responsible for causing a company to lose its favorable tax status. There are specific rules about giving gifts to a spouse and transferring property after death. In Florida, there are laws that protect the rights of a surviving spouse, including rules about waiving those rights. It’s important for spouses to be honest about their assets when making agreements. If both spouses agree, they can change the terms of a trust they set up together. The trustee has the power to divide and distribute the trust’s assets, but there’s no clear rule for dividing them unequally. If the trust is divided in a divorce, it’s uncertain whether a prenuptial agreement can decide what happens to the separate assets. If someone tricks or pressures you into signing a trust, it might not be valid. You can disclose your assets and liabilities to protect yourself. Joseph M. Percopo is a lawyer in Orlando who specializes in estate and trust planning. The Florida Bar wants its members to learn about duty, serving the public, and making the justice system better. They also want to improve the study of law.
Source: https://www.floridabar.org/the-florida-bar-journal/understanding-the-new-florida-community-property-trust-part-ii/
Leave a Reply