The Florida revocable living trust

Section 01What a revocable living trust is

A revocable living trust is a legal arrangement created during the grantor's life, under the Florida Trust Code, to hold and pass on their assets. The structure is deliberately self-contained: the grantor creates the trust, transfers assets into it, serves as the trustee who manages those assets, and is the primary beneficiary who enjoys them during life. Nothing about daily control changes, the grantor still uses and directs the assets exactly as before.

What the trust adds is a built-in plan for death. The grantor names a successor trustee and the beneficiaries who take afterward. When the grantor dies, the successor trustee steps in and distributes the trust assets to those beneficiaries directly, without a court proceeding. Because the assets are owned by the trust rather than by the deceased individual, they are not part of the probate estate, and the Florida ancillary probate that a Canadian owner's heirs would otherwise face is avoided for everything the trust holds. Unlike a deed, which moves a single property, a funded trust can carry many assets at once: several properties, accounts, and holdings across more than one state.

Section 02The funding requirement

The single most common failure of a revocable living trust has nothing to do with the document and everything to do with what follows it. Signing the trust does not move any assets into it. Each asset has to be re-titled into the name of the trust, a step called funding: the deed to a property is changed to put the trust on title, accounts are re-registered in the trust's name, and so on for every holding the plan is meant to cover.

An asset that is never funded stays in the grantor's own name, and at death it passes through probate just as if no trust existed. A Canadian who signs a trust but leaves the Florida condo titled in their personal name has bought a document that does nothing for that condo. Funding is not optional housekeeping, it is the step that makes the trust work, and it has to be completed and then maintained as new assets are acquired.

Section 03Incapacity protection

A revocable living trust does one thing that the probate-avoidance deeds do not: it plans for incapacity as well as death. If the grantor becomes unable to manage their affairs, the successor trustee named in the trust can step in and manage the trust assets right away, under the terms the grantor set out. There is no need to ask a Florida court to appoint a guardian over the person's property, a process that is slow, public, and expensive.

For a Canadian who spends part of the year in Florida and holds assets there, this matters. Without a trust or a separate, valid power of attorney recognized in Florida, an incapacity could leave the Florida assets frozen until a guardianship is arranged across the border. The trust keeps management seamless. This incapacity feature, more than the probate avoidance, is often the strongest reason a trust is recommended, and it is a feature a Lady Bird deed does not provide.

Section 04No creditor protection, no estate-tax shelter

The word revocable carries a cost. Because the grantor can take the assets back at any time, the law treats those assets as still belonging to the grantor for two important purposes. The first is creditors: a revocable living trust does not shield the assets from the grantor's creditors during life, since anything the grantor can reclaim, a creditor can reach. People who want creditor protection need a different and irrevocable structure, with its own trade-offs.

The second is US estate tax, and this is the point a Canadian must not miss. Avoiding probate is about how title passes; US estate tax is about what the deceased is treated as owning. For US estate tax, the IRS looks through a revocable living trust and treats the assets as the grantor's own. A Florida property held in the trust is still a US-situs asset and still counts in the US-situs estate of a non-resident. The trust changes nothing here. Whether any tax is owed depends on the USD 60,000 threshold and the Canada-US treaty credit, set out in our US nonresident estate tax guide. The lesson is the standard one: avoiding probate and avoiding estate tax are two different jobs.

Section 05The Canadian cross-border tax trap

This is the heart of the matter for a Canadian, and the reason a tool that is routine for a Floridian becomes a liability across the border. Everything above describes what the trust does. This section describes why, for a Canadian, it usually should not be used at all.

Two countries, two opposite treatments. For US income tax, a revocable living trust is a disregarded entity, often called a grantor trust. The United States looks straight through it: there is no taxable event when assets go in, none when the trust is revoked, and the grantor simply reports the income as their own. Canada does the opposite. Under the Income Tax Act, a trust is a separate taxpayer, a distinct person with its own filing obligations and its own tax. The structure that is invisible in one country is a full taxpayer in the other, and that mismatch is the source of every problem that follows.

The 21-year deemed disposition. A trust that is resident in Canada is deemed, under section 104(4) of the Income Tax Act, to dispose of its capital property at fair market value every 21 years, whether or not anything is actually sold. Accrued gains are taxed on that anniversary as if the assets had been sold and bought back. A Florida property quietly appreciating inside the trust can therefore generate a Canadian capital gains bill with no sale, no cash, and no warning, on a clock the grantor may not even know is running.

When the trust is deemed a Canadian resident. A trust's residence for Canadian tax follows where its central management and control actually sit. If the grantor is the trustee and is, or becomes, a Canadian resident, the trust can itself be deemed resident in Canada. From that point it owes Canadian tax on its worldwide income and must report to the Canada Revenue Agency, while the United States still expects its own reporting, so the same trust is now filing on both sides of the border. A Canadian who sets up a Florida trust while still in the United States, then moves home, can drag the trust into Canadian residence without realizing it.

Attribution back to the grantor. Section 75(2) of the Income Tax Act adds a further layer. Where property is held by a trust on terms that let it return to the person who contributed it, or pass to people that person chooses, the income and capital gains from that property are attributed back to the contributor and taxed in their hands during life. A revocable living trust, by its nature, is exactly such an arrangement, so its income is generally taxed to the grantor personally under Canadian rules, removing even the deferral a separate taxpayer might otherwise offer.

The double-taxation risk. The deepest problem is that the two systems do not line up, so the taxes do not offset cleanly. At death, Canada deems a disposition of capital property and taxes the accrued gain; the United States imposes estate tax on the value of the US-situs assets. These are different taxes, on different bases, levied by different countries, and the foreign tax credits that are supposed to prevent double taxation often do not fully align between them. US estate tax paid is not necessarily creditable against Canadian capital gains tax. The result can be tax in both countries on the same property, the precise outcome cross-border planning is meant to avoid. Structures designed from the start for both systems exist; the guide to cross-border trusts for Canadians with Florida assets maps the variants planners actually use to bridge the two regimes.

Section 06When a trust still makes sense for a Canadian

None of the above means a revocable living trust is never the right answer for a Canadian. It means the decision has to be made with eyes open, against the tax cost. There are situations where the trust's flexibility genuinely earns its keep: an estate with several properties across more than one US state, distributions that have to be staged over time, beneficiaries who are minors or who cannot manage a lump sum, a blended family where the plan must protect children from a prior relationship, or a serious incapacity concern where seamless management matters more than tax efficiency.

In those cases the answer is not to reach for the trust by default, but to bring in a cross-border tax specialist, an advisor qualified in both US and Canadian tax, who can weigh the 21-year exposure, the attribution, and the double-taxation risk against the planning benefit, and structure around them where possible. The point of this guide is not that trusts are forbidden, but that for a Canadian they are an advanced tool with a steep tax tail, not the routine first choice they are for a Florida resident.

Section 07Trust, Lady Bird deed, and probate compared

The three ways to handle a Florida property at death differ in what they cover, what they cost, whether they handle incapacity, and, decisively for a Canadian, how much cross-border tax friction they create.

Read down the cross-border tax row and the choice for most Canadians becomes clear. The Lady Bird deed, covered in our Lady Bird deed guide, delivers the same probate avoidance for a single property at a fraction of the cost and without the trust's tax exposure. The trust wins only where its breadth and its incapacity handling are genuinely needed, and even then the tax tail has to be managed. A married couple has a further option in tenancy by the entireties, and co-owners in joint tenancy with right of survivorship.

Section 08Worked example

Consider a Canadian snowbird who owns a Florida condo worth about USD 300,000 and, on Florida advice, signs a revocable living trust and funds the condo into it. The figure is an illustration, not a calculation for any specific case. During the years she spends largely in Florida, the plan looks tidy: she controls the condo as trustee, and at death the successor trustee would pass it to her children without ancillary probate.

Then her circumstances change and she returns to live in Canada full time, continuing as trustee. Because central management and control of the trust now sits in Canada, the trust can be deemed a Canadian resident. From that point it is exposed to the 21-year deemed disposition on the condo's accrued gain, its income is attributed back to her under section 75(2), and she faces reporting to both the CRA and the IRS. At her death, Canada will deem a disposition of the condo and tax the gain, while the United States will assess estate tax on the same US-situs property, with no guarantee the two offset. The trust did avoid probate, but it imported a cross-border tax problem that a simple Lady Bird deed on the condo would have avoided entirely. The dollar figure here is illustrative; the mechanism is the point.

Section 09Common mistakes

Signing the trust but never funding it. An unfunded trust avoids no probate. Every asset has to be re-titled into the trust's name, and new assets added as they are acquired. A trust with the condo still in the owner's personal name does nothing for that condo.

A Canadian using a US revocable trust with no cross-border advice. This is the central error this guide is about. The 21-year rule, the attribution rules, the risk of deemed Canadian residence, and the double-taxation exposure can all apply, and none of them are visible from the Florida side.

Assuming the trust protects against creditors. A revocable trust does not. Because the grantor can reclaim the assets, the grantor's creditors can reach them during life.

Assuming the trust avoids US estate tax. It does not. The IRS looks through the trust, and the Florida property remains a US-situs asset in the non-resident's estate.

Section 10Checklist

• Before anything else, ask whether a Lady Bird deed would meet the goal more simply and more cheaply.
• If you are a Canadian resident, do not set up a US revocable living trust without a cross-border tax specialist.
• Understand the 21-year deemed disposition, the attribution rules, and the risk that the trust is deemed Canadian-resident.
• If you already hold a US trust and are moving to Canada, get advice on collapsing it before you become resident.
• If you do use a trust, fund it: re-title every asset into the trust's name and keep it funded.
• Account for US estate tax separately: the trust does not shelter the property from it.
• Engage an advisor qualified in both US and Canadian tax, not a Florida-only or Canada-only professional.

Section 11FAQ

Does a revocable living trust avoid Florida probate? Yes, for every asset funded into it. Assets left in the grantor's personal name still go through probate, so funding is essential. The proceeding the trust avoids is explained in our Florida ancillary probate guide.

Why is it a problem for Canadians specifically? Because the United States ignores the trust for income tax while Canada treats it as a separate taxpayer. That brings the 21-year deemed disposition, attribution back to the grantor, possible Canadian residence for the trust, and a double-taxation risk.

Is a Lady Bird deed better for me? For a single property and a simple plan, usually yes. A Lady Bird deed avoids the same probate at a fraction of the cost and without the trust's cross-border tax exposure.

Does the trust avoid US estate tax? No. The IRS looks through it, and the Florida property remains US-situs. See our US nonresident estate tax guide for the threshold and treaty credit.

What about my Canadian estate and my will? Your Canadian estate still has its own probate and fees, covered in our Canadian probate fees guide, and the validity of your will in Florida is covered in our Florida will validity guide (in development).