In Florida, individuals engaged in litigation may contemplate assigning their rights to litigate to a revocable living trust as part of their estate planning strategy. This approach offers certain advantages but also presents specific challenges and risks. At Lumsden Law, we aim to provide a comprehensive overview to assist clients in making informed decisions regarding their litigation and estate planning needs.
Advantages of Assigning Litigation Rights to a Revocable Living Trust
- Continuity in Case of Incapacity
A significant benefit of a revocable living trust is the provision for seamless management of assets, including litigation rights, should the settlor become incapacitated. In Florida, the trustee can continue to manage the trust’s assets without the need for court intervention, ensuring that ongoing litigation proceeds uninterrupted. This arrangement can be particularly advantageous in maintaining the momentum of legal proceedings without delays associated with appointing a guardian or conservator.
- Privacy Considerations
Transferring litigation rights to a revocable living trust can offer enhanced privacy. Unlike probate proceedings, which are public, the administration of a trust is generally a private matter. This confidentiality can be beneficial for clients who prefer to keep the details of their legal disputes out of the public domain.
Potential Drawbacks and Risks
- Trustee as the Real Party in Interest
Assigning litigation rights to a trust means that the trustee becomes the real party in interest in legal proceedings. Florida law recognizes the trustee as the legal titleholder of the trust property, granting them the authority to initiate or defend litigation on behalf of the trust. This arrangement can complicate matters if the trustee lacks the requisite expertise or if the trust’s provisions regarding litigation authority are ambiguous.
- Creditor Claims and Asset Protection
It’s crucial to understand that assets held in a revocable living trust are generally not shielded from the settlor’s creditors. Since the settlor retains control over the trust and can revoke it at any time, Florida law considers the trust assets as owned by the settlor for creditor purposes. Consequently, creditors can pursue claims against these assets, potentially exposing them to legal liabilities.
- Potential for Increased Complexity and Costs
Integrating litigation rights into a revocable living trust can add layers of complexity to both the management of the trust and the litigation process itself. This complexity may lead to increased administrative burdens and legal expenses, particularly if disputes arise among beneficiaries or between the trustee and beneficiaries regarding the handling of the litigation.
Conclusion
While assigning litigation rights to a revocable living trust in Florida offers certain benefits, such as continuity during incapacity and enhanced privacy, it also introduces potential challenges, including issues related to trustee authority and creditor exposure. At Lumsden Law, we recommend that clients carefully evaluate these factors in consultation with experienced estate planning and litigation professionals to determine the most appropriate course of action tailored to their individual circumstances.
