Should I Fund my Living Trust?

The Florida Trust Code provides the requirements to create a valid trust in this state. Specifically, Section 736.0402, states that a trust is created when five requirements are met. The five requirements are that:

  1. The person creating the trust must have legal capacity;
  2. The person creating the trust must intend to create the trust;
  3. The trust must have a definite beneficiary (or at least one that could be defined at some point in the future);
  4. The trustee being appointed has some duties to perform; and
  5. The same person is not the only trustee and only beneficiary.

This seems simple enough, right?

Well, you could run into some problems if the validity of the trust is ever questioned in court, let’s say Federal Bankruptcy Court for example. Federal courts and common law have another set of requirements for the valid creation of a trust.

The United States Bankruptcy Court in the Middle District of Florida has held that an express or technical trust exists where there is: (1) a segregated trust res, (2) an identifiable beneficiary, and (3) affirmative trust duties established by contract or statute.

Numbers two and three are covered in the Florida requirements, but what is this “segregated trust res” business all about?

Trust “res” is just a fancy Latin word meaning trust property, and it must be segregated. This means that it must be separate from your property, or in other words, it must be owned by the trust.

Changing the legal title to personal property or real estate from your name into the name of the trust is a process known as funding the trust. This is a crucial step in the trust creation process, and it may not be clear from a plain reading of the Florida statute.

For a detailed discussion about your estate planning options, contact the attorneys at Haynes & de Paz, P.A. for a complimentary consultation to discuss your case.