One of the big reasons one would consider setting up a Living Trust (technically called “inter vivos trust,” meaning a trust created while you are alive) is to avoid a probate administration after your death. By correctly titling all of your assets (except for personal effects, cash and other assets which are not “titled”) in the name of the Trustee, the goal is to leave nothing left in your name alone for which a probate administration is needed.
So why are careful Trustees often insisting that a Florida probate administration – sometimes with zero assets – be conducted before they will distribute assets after the death of the “settlor” (the person who set up the trust)?
Because there is a “glitch” in Florida law which creates legal exposure to a Trustee for two years following the settlor’s death if no probate is done. That’s how long potential creditors have to come forward in Florida and present their claims against the settlor, and if the Trustee has distributed out all assets to the beneficiaries, then there’s a problem. This could result in litigation involving not only the Trustee, but the beneficiaries who received the assets. Not good.
The “glitch,” if there is one, is that the Trustee under the law cannot publish a Notice to Creditors to “flush out” potential creditors. Only the personal representative of a probate estate can do that.
So, even though by law the Trustee must make trust assets available to pay creditor claims against the settlor, and even though the trust document may require the Trustee to “immediately” distribute assets to the beneficiaries upon the settlor’s death, a cautious Trustee often requires a probate administration so that exposure to creditors is reduced to four months (one month to open probate, plus three months after a newspaper publication) compared to two years.