You’ve likely heard the word “trust” before, at least in some legal sense. A trust is a tri-party fiduciary relationship. A grantor transfers legal title to an asset to a trustee. The trustee then holds the asset for the benefit of the beneficiary until the grantor allows the trustee to transfer title to the beneficiary. During the time in which the trustee holds the property, they must manage the property or asset for the benefit of either grantor or beneficiary (or both).

Trusts have existed since the year 400 B.C. From what archaeologists have been able to find, early records of Roman law contain examples of “testamentary trusts,” a term discussed later in this article. By the 1500s, British common law would adopt those examples and add “inter vivos trusts.”

Centuries later, we have a body of law that contains dozens of types of trusts, all with their own legal requirements. In this article, we’ll be talking about two specific characteristics of trusts: irrevocable and revocable. 

Terms to Know 

There are three terms to know, in addition to the definition of a trust that is discussed above. These terms are: (1) grantor, (2) trustee, and (3) beneficiary. 

A grantor is also called a “creator,” “settlor,” or “donor.” This is the person or entity (such as a company, charity, museum, etc.) who is conveying the property in the first place. It is the person or entity that creates the trust. 

A trustee is the person or entity designated in the trust to hold equitable and legal title to the property conveyed by the grantor in the trust. 

A beneficiary is the person or entity that has the beneficial interest in the trust. This is the person for whom, at the end of the day, the trust was created. 

Irrevocable Trusts 

The Definition 

In an irrevocable trust, the terms of the trust (conditions, specifications, etc.) cannot be modified, terminated, or amended unless the named beneficiary gives permission to make changes. The grantor has effectively transferred their ownership, which legally removes their right to make modifications or cancellations. 

Types of Irrevocable Trusts 

There are really two main types of trusts that can be irrevocable. These include testamentary and living trusts. A testamentary trust arises when the grantor dies. It is specified in the grantor’s will, so it must go through probate. A trustee is appointed to manage the testamentary trust, which contains assets of the deceased. This trust reduces estate taxes.  

A living trust can be revocable or irrevocable. An irrevocable living trust is created during the grantor’s lifetime. A trustee is responsible for managing the grantor’s assets for the eventual beneficiary’s benefit. 

Reasons for This Trust 

Estate and tax purposes are the two main reasons that an irrevocable trust is set up. When this trust is made, the asset is removed from the grantor’s taxable estate. The grantor no longer owns it, so they do not have to pay taxes on it. The grantor is relieved of the tax burden, but they are also often relieved of any income the asset generates. 

Who is this Trust For? 

“Trust funds” have always been thought of as tools for the super-rich, but that isn’t the case. People who work in professions that might make them subject to lawsuits—lawyers, doctors, accountants, contractors, etc.—can use these trusts to shield their assets from lawsuits. A creditor can’t take what you don’t legally own. However, the loss of control and rigid terms are two disadvantages that often discourage people from forming them. These characteristics are not found in revocable trusts. 

Revocable Trusts 

The Definition 

As you may have guessed from the name, a revocable trust can be changed or amended, and terms can be eliminated without the permission of the named beneficiary or beneficiaries. These changes can be made by the grantor during his or her lifetime. A revocable trust offers a degree of flexibility that an irrevocable trust does not. Grantors maintain control. They can even get rid of the trust during their lifetime, if they want. 

Types of Revocable Trusts 

A revocable living trust is the main type of trust to know when it comes to revocable trusts. This trust is created by the grantor during his or her lifetime, and it is during that period that he or she can make changes. There are dozens of other types of trusts that can be revocable as well, but the concept of a living trust is the main one to know.

Reasons for this Trust 

A main reason people enter into a revocable trust is for privacy. A revocable living trust ensures that your estate, when you die, doesn’t enter probate court. Your estate’s possessions and assets are not dragged through the court system and publicized. A revocable living trust bypasses probate court

Additionally, revocable trusts adhere to a grantor’s wishes. They offer flexibility, and a grantor can change the terms of the trust if needed. They are not bound to their original decision-making. 

Visit our website to learn more about trusts.

There’s no denying that 2020 was been tough on businesses. Nearly everyone’s business sustained some form of loss, and the governmental assistance, though helpful for many, could only do so much. Looking forward to the future, there is a light at the end of the tunnel. This means that it’s time to talk about things that don’t involve mitigating or preparing for disaster. 

Namely, this article will discuss partnerships. This structure might be beneficial for your business, and, if you think a partnership is something that interests you, you should contact an attorney about filing any necessary paperwork. 

What is a Partnership? 

A business partnership shares the business between multiple owners (two or more). The partnership is a formal arrangement by the parties to share the business’ profits and manage and operate the business together. In a partnership business, partners might share in the losses and profits together. Or, they might have limited liability. 

What are the Main Types of Partnerships? 

General 

General partnerships are the most informal arrangement that you can have in Florida. A general partnership means that each partner is personally liable for not only the debts of the business, but also the actions of their fellow partners. In Florida, it is not difficult to start a general partnership. Choose a business name, trade name, draft a partnership agreement and sign it, and then apply for the appropriate licenses, permits, zoning clearances, and EID.

Limited

A limited partnership is similar to a general partnership, though it does have a few distinctive features. For example, a limited partnership must have at least one general partner. This partner must be personally liable for the business’ debts and claims, and the GP must manage the business. Other partners can be “limited” partners, who contribute capital and investments to the business but are not involved in management. If the limited partner is not involved in management, they aren’t liable for debts or claims. 

Limited Liability

A limited liability partnership is often preferred by medical, legal, or accounting practices. These LLPs are distinctive because, though they have the same basic structure and tax advantages as other partnerships, they have liability protection. An LLP partner’s personal assets are protected if there are claims against one of their partners. An LLP partner is not personally responsible for their business partners’ actions. Though assets held in the partnership can be liable for claims or debts, the LLP offers more personal protection to its partners. 

Advantages of a Partnership 

A good partner can bring things that you might lack, including specialized expertise and cash. A partner also allows you to share the capital expenditures and expenses necessary for your business, lessening the financial burden on you. Additionally, a partner can provide access to new business opportunities and inroads with investors or communities to which you alone might not have been connected. 

There are tax advantages to certain types of partnerships. According to the IRS partnership page, a general partnership might not have to pay income tax, as it “passes through” its profits and losses to the partners themselves. Partners might be able to deduct certain business losses from their tax returns. Note: it is important to contact an attorney for more information on what, if any, tax benefits you can get through a partnership. 

Disadvantages of a Partnership 

As with anything, there are drawbacks, even in the face of benefits. A partnership does somewhat involve a loss of autonomy, as you now have to consult with another person about at least some decisions (especially true in a general partnership, where everyone’s involved in management). 

Also, a partnership entails sharing losses. Though LPs and LLPs prevent personal losses, there is still always at least some extent of loss incurred together. In the future, you could also have issues if you want to sell your business and your partner(s) refuse. 

Lastly, there is always the chance of conflict. Though states have some laws about this (in the event of fraud or “insanity,” usually), these regulations are only put into use in extreme situations. Bickering and disagreement could be enough to sink a business, but it likely won’t be actionable in court. Choose your partner wisely.

As you can see, a lot goes into a partnership, and this article serves as only a brief overview. If you’re feeling a little overwhelmed or confused by this information, that’s perfectly normal. Law isn’t easy, but, luckily, lawyers exist. If you want to learn more about partnerships, consider booking a consultation with an attorney to talk about your options and visit our website.

Well, we can finally say (with no small amount of relief) that 2020 is over! The bar is low, which means that all 2021 has to do is be better than 2020—an easy feat. Now that the New Year is starting, everyone is making New Years’ resolutions. Though these resolutions might be as simple as, “Survive,” they are still an important commitment to avoid falling into bad habits. Just making the resolution is the first step.

In this article, we’ll talk about some of the bad habits that often affect the legal aspects of your life, especially your estate plan. Being aware of these habits is the first step to changing them. 

Bad Habits to Watch 

Procrastination

Procrastination is a problem for a lot of people. It might be a small comfort to know that probably over half the population struggles with putting things off that they shouldn’t. In estate planning, procrastination can be really damaging. 

The damage in this field is caused by the fact that you can wait too long to do something. If you procrastinate on picking a power of attorney or setting up a healthcare directive, and you get sick, things will become much more difficult for you than they would have been, had you gotten around to it earlier. 

Here are five tips from Inc.com to beat procrastination: 

1. Start easy. That helps you build momentum, and you’re more likely to finish a job if you get over the beginning hump than if you never start at all. 

2. Break it down. Big tasks get easier when you disassemble them into smaller steps. 

3. Be nice to yourself. Strictness doesn’t always help—what’s done is done, it’s time to move on. Don’t beat yourself up for past procrastination.

4. Know “why.” Is there a particular reason you’re procrastinating this task? Getting an answer to that question might make it easier to finish. 

5. Be mindful. Don’t dwell on perfectionism or fear of failure. Doubt the doubts.

Don’t Ignore Your “Future Self” 

Particularly if you’re currently in good health, it can be easy to ignore a future where you are sick or bedridden. That is not a good idea. As 2020 taught us, you can’t disregard the unexpected by assuming it won’t happen to you. Picking a power of attorney and getting together an estate plan will benefit a “future” you…but that future you might not be so far off as you think.

“Wait and See” Attitude

A good example of this one relates to marriage and divorce. If you have an estate plan and someone marries into your family, you might decide to wait and see if the marriage works before you add them into your asset division. 

While that is a sensible approach, we have a word of caution. “Wait and see” can easily lead to forgetting or procrastinating. Ten or fifteen years down the line, you might forget that you planned to return to the estate plan, and that could leave your new family member in a bind. 

Not Taking Estate Planning Seriously

This habit is commonly seen among younger people. If you’re under fifty, you might view estate planning as something that’s only good for older generations. However, that’s not the case. As we have said earlier in this article, 2020 proved that anything can happen. Betting on your current healthy status is not quite such a sure thing as you may think. It’s best to spend the money necessary to meet with an attorney and get an estate plan together. This is doubly important if you have or are planning to have kids.  

DIY-ing It

Sites that allow you to fill out your own legal paperwork are, arguably, convenient, but are they accurate? The law is filled with little technicalities. On these websites themselves, they acknowledge that, often stating at the bottom (in small print), that they’re “not a substitute” for an actual attorney’s legal advice. 

These main bad habits might not be too hard to break, but, if you’re not aware of them, they definitely will be. In estate planning, these five are all too common. In 2021, let’s leave these back with the rest of 2020.

Want to learn more about planning? Visit our website and get more details.