What Are the Disadvantages of a Trust in Florida?

While trusts are one of the most effective tools for estate planning, they have some disadvantages too. The main disadvantages of a trust are its cost, maintenance responsibilities, lack of control of irrevocable trusts, and having to choose a trustee.

Cost and Complexity of Creation

A trust requires more time, effort, and money compared to a standard will. Trusts demand careful planning, legal expertise, and often the help of professionals to ensure they’re set up correctly.

The complexity increases if you establish irrevocable trusts, dynasty trusts, or offshore trusts.

Not only is there an initial cost to set up the trust, but ongoing expenses for administration can also add up.

Trustees, especially professional or corporate trustees, charge fees for managing the trust, and legal or accounting assistance may be required periodically to ensure compliance with changing laws or trust terms.

You can save money by serving as trustee of your own revocable trust.

These costs may not be justifiable for smaller estates where the benefits of the trust don’t outweigh the administrative expenses.

Maintenance and Management Responsibilities

Once a trust is created, it’s not a “set it and forget it” type of arrangement. You must actively maintain and manage the trust, ensuring that assets are correctly titled in the trust’s name.

If you forget to transfer assets into it, the trust becomes ineffective.

When you acquire new assets over time, such as real estate or business interests, you need to make sure they are also transferred to the trust. Neglecting to update the trust as your financial situation evolves can lead to unintended consequences, such as certain assets being subjected to probate despite the existence of the trust.

Limited Control in Irrevocable Trusts

While revocable trusts allow you to maintain control over the assets during your lifetime, irrevocable trusts do not. Once you establish an irrevocable trust and transfer assets into it, you typically relinquish control over those assets.

Florida law does allow you to serve as trustee of your irrevocable trust. However, in Florida self-settled trusts are not protected from creditors. A self-settled trust is one that you set up for your own benefit.

Difficulty in Choosing the Right Trustee

Choosing the right trustee is a critical decision. This person or institution will be responsible for managing and distributing your assets according to the terms of your trust.

Selecting a trustee can be more challenging than it seems. A close family member or friend may be trustworthy, but may lack the expertise needed to handle complex financial or legal issues that could arise during trust administration. On the other hand, hiring a professional or corporate trustee ensures expertise but comes with additional costs and the possibility of impersonal management.