For many foreign owners of Florida property, a revocable trust may be a practical starting point when the main goal is avoiding Florida probate while keeping control of the property. When comparing a revocable vs irrevocable trust, however, probate is only one consideration. A revocable trust generally does not reduce U.S. estate tax. An irrevocable trust may reduce estate tax exposure in some cases, but it requires giving up certain rights and careful planning with tax advisors in both countries.
Can I create a Florida trust if I am not a U.S. citizen?
Yes. Florida law does not require you to be a U.S. citizen or to live in Florida to create a trust.
A trust is an arrangement in which a trustee, the person or company that manages the property, holds property for others called beneficiaries.
The property must be transferred to the trust, for example by signing a new deed. A trust controls only the property placed in it.
What is the difference between a revocable vs irrevocable trust?
The main difference between revocable vs irrevocable trust is control.
You can change or cancel a revocable trust at any time during your life. You generally cannot change or cancel an irrevocable trust after you sign it.
With a revocable trust, you usually act as your own trustee and keep full use of your property. If you become unable to manage your affairs, your successor trustee, the person you choose to take over, can manage the trust property.
When you die, the trust generally becomes irrevocable, and the successor trustee follows your instructions.
How the two compare
- Florida probate: Both generally avoid it for property properly held in the trust.
- U.S. estate tax: A revocable trust generally does not reduce it. An irrevocable trust may reduce estate tax exposure, depending on how it is structured and funded.
- Creditors: A revocable trust generally offers no creditor protection. An irrevocable trust may offer some, depending on its terms and the rights you retain.
Will a trust help my family avoid probate in Florida?
Generally, yes, for property held in the trust.
Probate is the court process that transfers property after death. If you live outside Florida and die owning Florida property in your own name, your family may need ancillary administration, a separate probate case in Florida in addition to any process in your home country.
Property properly held in a trust generally does not go through Florida probate. Your successor trustee can transfer it under the trust’s terms.
This matters for foreign families because Florida law generally allows someone who lives outside Florida to serve as personal representative, the person the court appoints to manage an estate, only if that person meets specific relationship requirements.
Our article on What Happens to Your Florida Assets If You Die Without a Will explains Florida probate and intestate succession in more detail.
Will a trust reduce U.S. estate tax?
A revocable trust generally will not.
If you are neither a U.S. citizen nor domiciled in the United States for estate tax purposes, U.S. estate tax may apply to certain U.S.-situated assets, including Florida real estate and shares of U.S. corporations.
If the value of your U.S.-situated assets, together with certain adjusted taxable gifts, exceeds the general $60,000 filing threshold, your executor generally must file Form 706-NA. That threshold does not mean that every dollar above $60,000 is automatically taxed. The final estate tax calculation can depend on deductions, treaty provisions, the structure of the estate, and other factors.
A revocable trust generally does not remove property from your taxable estate because you retain control over the assets.
An irrevocable trust may reduce estate tax exposure in some cases, but the result depends on how the trust is structured and funded. Retaining certain rights over the property can affect whether the assets remain part of your estate for U.S. tax purposes.
Moving U.S. real estate you already own into an irrevocable trust can also create gift tax issues. For a nonresident who is not a U.S. citizen, transfers of U.S. real property can be subject to U.S. gift tax.
A tax treaty between the United States and your home country may also change the result. Florida itself does not currently impose a state estate tax.
Will my home country recognize a Florida trust?
It depends on your home country.
Many countries, especially those with civil law systems, do not use trusts in the same way as the United States. Some recognize foreign trusts, while others may treat them differently for inheritance or tax purposes.
Some countries also have forced heirship rules that reserve part of an estate for certain family members, such as children. Those rules may affect your broader estate plan, the treatment of beneficiaries, or assets located in that country.
Your home country may also tax the trust differently from the United States.
For cross-border planning, it is important to coordinate advice in Florida with legal or tax guidance in your country of residence.
Are there tax issues when the trust sells the property?
Yes.
Using a trust does not automatically avoid FIRPTA, the U.S. tax withholding regime that can apply when a foreign person disposes of U.S. real property. How the withholding rules apply depends on the ownership and tax classification of the trust.
A trust created for Florida property may also be classified as a foreign trust for U.S. tax purposes.
That classification does not depend only on the law governing the trust or the location of one trustee. U.S. tax rules look at whether a U.S. court can exercise primary supervision over the trust and whether U.S. persons control its substantial decisions.
The classification can affect tax filings and reporting requirements.
Does a trust protect my property from creditors?
A revocable trust generally does not.
Under Florida law, property in a revocable trust remains subject to the settlor’s creditors during the settlor’s lifetime to the extent the property would otherwise be available if owned directly.
An irrevocable trust may offer some protection, depending on how it is structured. However, a settlor’s creditors can generally reach the maximum amount that may be distributed to or for the settlor’s benefit.
Which trust is right for me?
For many foreign owners, a revocable trust can be a practical starting point when flexibility and avoiding Florida probate are the main goals.
If U.S. estate tax exposure is a central concern, an irrevocable trust or another structure may be worth evaluating with tax professionals in the United States and your home country.
You may still need a will for property that is not in the trust.
For financial decisions if you become unable to act, see our article on Durable Powers of Attorney.
Key Takeaways
- You generally do not need to be a U.S. citizen or Florida resident to create a Florida trust.
- Both revocable and irrevocable trusts can help your family avoid Florida probate for property properly held in the trust.
- A revocable trust generally does not reduce U.S. estate tax. An irrevocable trust may reduce estate tax exposure when structured appropriately.
- A revocable trust generally does not protect your property from your creditors.
- Your home country’s inheritance, trust, and tax laws may affect your plan.
Berke Celikel
Law Clerk at Loigica
Disclaimer
This article provides general information about revocable and irrevocable trusts, Florida probate, and related U.S. tax considerations. It does not constitute legal or tax advice and does not create an attorney-client relationship. Trust structure, estate and gift tax consequences, reporting requirements, and treatment in another country depend on the facts of each case. U.S. and foreign tax rules should be reviewed with qualified advisors before transferring property or creating a trust.
Find out wichone is better revocable vs irrevocable trust for your case
If you own property in Florida and live outside the United States, LOIGICA can help you review how a trust may fit into your estate plan and identify the U.S. and cross-border issues that should be considered.