Who Actually Owns The Property in a Revocable Living Trust?

who owns the property in a revocable trust

So, you’ve set up a revocable living trust to avoid probate for your real estate holdings and other assets. Smart move! But now comes a common question—who technically owns those properties in the trust? Did transferring a deed relinquish your control as the original owner?

It’s a common question with a complicated answer. The quick answer is that assets put into a revocable trust are “owned” on paper by the trustee.

However, there are three key things to know:

  1. As the trust creator (grantor), you retain rights to use and benefit from property placed in the trust. You have equitable title.
  2. You can name yourself as trustee, allowing you to retain ownership and control of the property.
  3. Named beneficiaries ultimately inherit the property, but they have no control until trustees transfer it to them – which typically occurs after you pass away.

In this blog, we break down who controls what and when. Taking the mystery out of revocable trust property ownership leads to better planning.

What is a Revocable Trust?

A revocable trust, sometimes called a revocable living trust, is a legal arrangement that allows you to place selected assets into a separate entity during your lifetime.

The person creating the trust is called the grantor or settlor, and fundamental characteristics that define revocable trusts are:

  • It can be changed, amended, or revoked entirely at any point.
  • Grantors maintain lifetime control and access over the assets.
  • Grantors report income, gains, losses, and deductions associated with assets in the trust on their personal tax returns.

In contrast, once created, you cannot alter or revoke an irrevocable trust. The terms are fixed, and the trust owns and controls its own assets.

How Revocable Trusts Work in Florida

Establishing a revocable trust in Florida involves two main steps – creating the document itself and then funding assets into it by retitling them in the trust’s name.

Drafting Stage

First, you draft your revocable living trust agreement with the help of a Florida estate planning law firm. This written legal document names you as the grantor and initial trustee. It also names successor trustees to manage trust assets if you become incapacitated or pass away. Finally, the document names beneficiaries who will receive distributions following your death.

Funding Stage

This step involves retitling assets like bank accounts, investment accounts, and real estate, changing the name to that of your revocable trust. The new title typically includes identifying details about the trust and grantor, such as the “John Smith Revocable Living Trust Dated January 1, 2023.” After you retitle assets into the trust, you file new deeds, account registration paperwork, etc., to update ownership records.

You also need to name a trustee to manage the assets held inside the trust. Often, the grantor serves as the trustee. This assignment allows you to continue accessing and managing the assets just like before you moved them into the trust structure.

It’s important to note that trustees have a fiduciary duty to manage trust assets in the best interests of beneficiaries per the terms of the trust agreement itself.

Lifetime Control for the Grantor

A significant benefit of using a revocable trust in Florida estate planning is it allows grantors to retain important asset control during their lifetime. Unlike an irrevocable trust, you can continue accessing trust property at any time as a fiduciary. You maintain the ability to buy, sell, withdraw, or distribute funds from accounts and property held in the estate freely.

If you name someone else as a trustee, you still reserve the right to remove them and appoint a new trustee later on. Whether you serve as a trustee or designate a third party, you also retain total control to modify the trust terms, change beneficiaries, revoke the trust, or amend the trust as needed to suit your evolving needs.

The level of flexibility and ongoing control distinguishes revocable trusts from alternatives like irrevocable trusts.

Who Legally Owns Assets in a Florida Revocable Trust?

The designated trustee takes legal ownership once you formally retitle assets in the trust’s name.

The law designates the trustee as holding legal title, allowing them to administer the assets according to the trust terms. Think of the trustee as a manager empowered to:

  • Open financial accounts
  • Hold title to real estate
  • Enter into contracts
  • Distribute funds
  • And, otherwise control trust assets much like a CEO runs a corporation

Beneficiaries, on the other hand, do not have direct ownership or control until the grantor’s passing, as spelled out in the trust documents.

While the trustee holds official legal title, the grantor retains equitable title – meaning customary rights of ownership and control rather than legally transferring assets away.

Who Pays Income Tax on Trust Income?

Many Florida residents have questions about tax reporting and liability for assets held within a revocable trust.

Here is how it works – the IRS treats revocable living trusts as grantor trusts for tax purposes as long as you live. This tenure means all income, gains, losses, and deductions flow through you personally.

You must report the activity on your individual Form 1040 income tax return annually. No special trust tax returns or changes to how you have handled reporting are required.

This tax clarity and simplicity help ensure revocable trusts remain transparent and accessible for most Florida residents to work with. Credit reporting also continues unchanged – assets retitled into your revocable living trust still factor into your personal credit record the same as before.

Asset Protection Benefits and Limitations

Because you retain access and practical ownership over assets held in a Florida revocable living trust, they receive limited protection from potential creditors.

The trust provides a modest level of shielding but will not block claims if you actively owe a debt while serving as trustee. It also would not stop personal liability for potential lawsuits or other actions taken against you as a grantor.

That said, the trust structure limits vulnerability compared to owning property or accounts in your name. Creditors cannot automatically reach or seize funds held by the trust entity, forcing them to file court claims. However, in some scenarios, an aggressive creditor could petition to dissolve the trust.

For these reasons, Florida revocable living trusts serve primarily for probate avoidance rather than ironclad asset protection against all possible risks.

Is a Revocable Trust Right for You?

Florida revocable living trusts can save time, money, and privacy down the line.

You should have a Florida estate planning attorney analyze your complete financial picture, asset distribution priorities, tax situation, and intended legacy wishes to determine if a revocable trust aligns with your personal goals.

When you weigh all factors for your specific scenario, the decision often hinges on whether probate avoidance will yield more benefit than cost or inconvenience.

Discuss your options with our qualified wealth and estate planning attorney at Stivers Law in Florida to make the most informed choice possible.

Author Bio

Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.

With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialist™ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.

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