estate planning attorney

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

Control of Assets and Trusts

Control of assets is a key issue in deciding on a trust.  Any trust created while the person, known as the “grantor,” is living, is known as a “living trust.” However, the term is also used interchangeably with “revocable trusts,” which can be changed according to the grantor’s wishes. During the lifetime of the grantor, as explained in the recent article “Control of Assets a Key Issue in Deciding on a Trust” from FED Week, that person can be the trustee as well as the beneficiary. Control is retained over the trust and the assets it contains.

Trusts are used in estate plans as a way to avoid probate. Equally importantly, they can provide for an easier transition if the grantor becomes incapacitated. The co-trustee or successor trustee steps in to manage and control assets, and the process is relatively seamless. The family, in most cases, will not have to apply for conservatorship, an expensive and sometimes unnerving process. Within the privacy afforded a trust, the management and control of assets is far less stressful, assuming that the trust has been funded and all assets have been placed properly within the trust beforehand.

Naming a successor trustee so the grantor may remain in control during his or her lifetime is an easier concept for most people. However, adding a co-trustee rather than a successor may be a wiser move. A successor trustee requires the grantor, if still living, to formally resign and allow the successor trustee to take control of the trust and its assets.

If a co-trustee is named, he or she may step into control instantly, if the grantor becomes incapacitated.

Trusts fall into two basic categories:

Irrevocable Trusts—A permanent arrangement in which assets going into the trust are out of control of anyone but the trustee. Giving up this control comes with benefits: the assets within the trust may not be tapped by creditors and they are not considered part of the estate, also lowering tax liability. Irrevocable trusts are generally used to protect loved ones, who are named as beneficiaries.

Revocable Trusts—The grantor retains control of assets and may collect investment income from assets in the trust. If the grantor decides to have the assets back in his or her personal accounts, they can be reclaimed into his or her own name.

The revocable trust protects the grantor against incapacity, as the successor trustee or co-trustee can take over management of trust assets and assets pass to designated recipients without having to go through probate.

Determining which of these trusts is best for your family depends on many different factors, including control of assets.

Speak with an experienced estate planning attorney to learn how trusts might work within your unique estate plan.

Reference: FED Week (Jan. 21, 2021) “Control of Assets a Key Issue in Deciding on a Trust”

 

Unmarried Couples and Planning

For unmarried couples, having an estate plan might be even more important than for married couples, especially if there are children in the family. The unmarried couple does not enjoy all of the legal protection afforded by marriage, but many of these protections can be had through a well-prepared estate plan.

A recent article “Planning for unmarried couples” from nwi.com explains that in states that do not recognize common law marriages, like Indiana, the state will not recognize the couple as being married. However, even if you learn that your state does recognize a common law marriage, you still want to have an estate plan.

A will is the starting point of an estate plan, as is a revocable trust, and for an unmarried couple, having it professionally prepared by an experienced estate planning attorney is very important. An agreement between two people as to how they want their assets distributed after death sounds simple, but there are many laws. Each state has its own laws, and if the document is not prepared correctly, it could very easily be invalid. That would make the couple’s agreement useless.

There are also things that need to be prepared, so an unmarried couple can take care of each other while they are living, which they cannot legally do without being married.

A cohabitating couple has no right to direct medical care for each other, including speaking with the healthcare provider or even seeing their partner as a visitor in a healthcare facility. If a decision needs to be made by one partner because the other partner is incapacitated, their partner will not have the legal right to make any medical decisions or even speak with a healthcare provider.

If the couple owns vehicles separately, the vehicles have their own titles (i.e., the legal document establishing ownership). If they want to add their partner’s name to the vehicle, the title needs to be reissued by the state to reflect that change.

If the couple owns a home together, they need to confirm how the home is titled. If they are joint tenants with rights of survivorship or tenants in common, that might be appropriate for their circumstances. However, if one person bought the home before they lived together or was solely responsible for paying the mortgage and for upkeep, they will need to make sure the title and their will or revocable trust establishes ownership and what the owner wants to happen with they die.

If the wish is for the surviving partner to remain in the home, that needs to be properly and legally documented. An estate planning attorney will help the couple create a plan that addresses this large asset and reflect the couple’s wishes for the future.

Unmarried cohabitating adults need to protect each other while they are living and after they pass. A local estate planning attorney will be able to help accomplish this.

Reference: nwi.com (Jan. 24, 2021) “Planning for unmarried couples”

 

Changing Your Personal Representative

If you are wondering about changing your personal representative (or executor) of a will after the fact, KAKE.com’s recent article entitled “How to Change the Executor of a Will” says that the process is pretty simple. Even so, you should work with an experienced estate planning attorney to make certain that it is completed correctly, and it’s legal.

The personal representative (or PR) of a will is the individual you name to be responsible for carrying out the terms of your will. By designating a PR, you’re giving him or her the authority to handle certain tasks related to the distribution of your estate. In Florida, your personal representative must be a resident of Florida or related to you.

It’s okay to name a beneficiary of your will a personal representative. A personal representative must undertake certain tasks, such as the following:

  • Getting death certificates
  • Starting the probate process
  • Making an inventory of the decedent’s assets
  • Notifying the decedent’s creditors of his or her death
  • Paying any outstanding debts and closing bank accounts; and
  • Distributing assets to the beneficiaries named in the will.

The personal representative can’t change the terms of the will. They can only make sure that its terms are carried out.  A PR can be paid a fee for their services, which can be a percentage of the value of the estate or a reasonable hourly rate. State laws vary on this compensation approach.

There are a few reasons why changing your personal representatives may be necessary, such as if:

  • Your original PR dies or becomes seriously ill and can’t fulfill his or her duties
  • You named your spouse as PR but you divorce
  • The individual you originally designated as PR no longer wants the responsibility or is not a resident of Florida
  • Your relationship with your PR has deteriorated; and
  • You think someone else would be better equipped to administer your will.

Note that you don’t need to give a specific reason for changing your personal representative. There are two ways to do this: (i) add a codicil to an existing will; or (ii) draft a brand-new will. A codicil is a written amendment that you can use to change only the provisions of your will needing changes without having to write a new one. The codicil must be executed with the same formalities as your original will.

If you need to change more than just changing your personal representative, you might want to draft a new will, which entails the same process as the one you followed when making your original one. You should also destroy all copies of the original will to avoid confusion and potential challenges to the terms of the will after you die. It’s wise to use an experienced estate planning attorney to help you replace an existing will and when changing your personal representative.

Reference: KAKE.com (Dec. 29, 2020) “How to Change the Executor of a Will”

 

Fund Your Trust

Funding your trust is vital to the success of an estate plan. Thinking you have divided assets equally between children by creating a trust that names all as equal heirs, while placing only one child’s name on other assets is not an equally divided estate plan. Instead, as described in the article “Estate Planning: Fund the trust” from nwi.com, this arrangement is likely to lead to an estate battle.

One father did just that. He set up a trust with explicit instructions to divide everything equally among his heirs. However, only one brother was made a joint owner on his savings and checking accounts and the title of the family home.

Upon his death, ownership of the savings and checking accounts and the home would go directly to the brother. Assets in the trust, if there are any, will be divided equally between the children. That’s probably not what the father had in mind, but legally the other siblings will have no right to the non-trust assets.

This is an example of why creating a trust is only one part of an estate plan. You must also fund your trust or it will not work.

Many estate plans include what is called a “pour-over will” usually executed just after the trust is executed. It is a safety net that “catches” any assets not funded into the trust and transfers them into it. However, this transfer requires probate, and since probate avoidance is a goal of having a trust, it is not the best solution.

The situation as described above is confusing. Why would one brother be a joint owner of assets, if the father means for all of the children to share equally in the inheritance? When the father passes, the brother will own the assets. If the matter went to court, the court would very likely decide that the father’s intention was for the brother to inherit them. Whatever language is in the trust will be immaterial.

If the father’s intention is for the siblings to share the estate equally, the changes need to be made while he is living. The brother’s name needs to come off the accounts and the title to the home, and they all need to be funded (re-titled) in the name of the trust. The brother will need to sign off on removing his name. If he does not wish to do so, it’s going to be a legal challenge.

The family needs to address the situation as soon as possible with an experienced estate planning attorney. Even if the brother won’t sign off on changing the names of the assets, as long as the father is living there are options. Once he has passed, the family’s options will be limited. Estate battles can consume a fair amount of the estate’s value and destroy the family’s relationships.

We can help you fund your trust as part of a successful estate plan.

Reference: nwi.com (Jan. 17, 2021) “Estate Planning: Fund the trust”

 

Inheritance and Estate Taxes

The District of Columbia already moved to reduce its estate tax exemption from $5.67 million in 2020 to $4 million for individuals who die on or after Jan. 1, 2021. A resident with a taxable estate of $10 million living in the District of Columbia will owe nearly $1 million in state estate tax, says the article “State Death Tax Hikes Loom: Where Not To Die In 2021” from Forbes. It won’t be the last change in these taxes.

Seventeen states and D.C. levy their own inheritance or estate taxes in addition to the federal estate tax, which as of this writing is so high that it effects very few Americans. In 2021, the federal estate tax exemption is $11.7 million per person. In 2026, it will drop back to $5 million per person, with adjustments for inflation. However, that is only if nothing changes.  Florida has no state estate tax or inheritance tax.

President Joseph Biden has already called for the federal estate tax to return to the 2009 level of $3.5 million per person. The increased tax revenue purportedly would be used to pay for the costs of fighting the “pandemic” and the “infrastructure improvements” he plans, but many believe such a move would potentially destroy family businesses, farms and ranches that drive and feed the economy in the first place. If that were not troubling enough, President Biden has threatened to eliminate the step up in basis on appreciated assets at death.

This change at the federal level is likely to push changes at the state level. States that don’t have a death tax may look at adding one as a means of increasing revenue, meaning that death tax planning as a part of estate planning will become important in the near future.

States with high estate tax exemptions could reduce their state exemptions to the federal exemption, adding to the state’s income and making things simpler. Right now, there is a disconnect between the federal and the state tax exemptions, which leads to considerable confusion.

Five states have made changes in 2021, in a variety of forms. Vermont has increased its exemption from $4.25 million in 2020 to $5 million in 2021, after sitting at $2.75 million from 2011 to 2019.

Connecticut’s exemption had been $2 million for more than ten years, but in 2021 it will be $7.1 million. Connecticut has many millionaires that the state does not wish to scare away, so the Nutmeg state is keeping a $15 million cap, which would be the tax due on an estate of about $129 million.

Three states increased their exemptions because of inflation. Maine has slightly increased its exemption because of inflation to $5.9 million, up from $5.8 million in 2020. Rhode Island is at $1,595.156 in 2021, up from $1,579,922 in 2020. In New York, the exemption amount increased to $5.93 million in 2021, from $5.85 million in 2020.

The overall trend in the recent past had been towards reducing or eliminating state estate taxes. In 2018, New Jersey dropped their tax, but kept an inheritance tax. In 2019, Maryland added a portability provision to its estate tax, so a surviving spouse may carry over the unused predeceased spouse’s exemption amount. Most states do not have a portability provision.

Another way to grab revenue is targeting the richest estate with rate hikes, which is what Hawaii did. As of January 1, 2020, Hawaii boosted its state tax on estates valued at more than $10 million to 20%.

Let us help you plan your move to Florida and avoid estate taxes and inheritance taxes.

Reference: Forbes (Jan. 15, 2021) “State Death Tax Hikes Loom: Where Not To Die In 2021”

 

What is an Intestate Estate?

Intestate estates can make the administration of a probate estate very confusing.  Imagine a scenario where three brothers’ biological father passed away a decade ago. The father wasn’t married to the brothers’ mother, plus, he had another family with three children, grandchildren, and great grandchildren. The father never publicly acknowledged that the three boys were his children. They’ve now heard rumors that he left them something in his will—which may or may not exist. The father’s wife has also passed away.

Nj.com’s recent article entitled “How can we find out if our father left us something in his will?” explains that a parent isn’t required to leave his or her adult children an inheritance.

If a person doesn’t leave a will when they die, the intestacy laws of the state in which he or she dies will dictate how the decedent’s property is divided.

For example, if you die intestate (without a will) in Florida, there is a surviving spouse and the decedent has no living children or grandchildren or great-grandchildren (lineal descendants), then the surviving spouse gets the entire probate estate. If the decedent has lineal descendants, and all of them are also lineal descendants of the surviving spouse, then the surviving spouse gets the first $60,000 of the probate estate and half of the balance of the probate estate. The lineal descendants split the remaining half. If the decedent has lineal descendants, and one or more of them are not lineal descendants of the surviving spouse, then the surviving spouse gets one-half of the probate estate and the lineal descendants divide the other half equally among themselves.  You can see what happens in other situations at EstatePlanningInFlorida. com

Note that an intestate estate doesn’t include property that’s in the joint name of the decedent and another person with rights of survivorship or payable upon death to another beneficiary. In our problem above, the issue would be whether the three boys would’ve been entitled to a percentage of the property permitted under the state intestacy statute, or under a will if you could prove there was one.

However, the time for the three boys to make a claim against their father’s intestate estate would have been at his death. A 10-year delay is a problem. It may prevent a recovery because there are time limitations for bringing legal actions. However, they may have other claims, and there may be reasons you are not too late.

Litigation is very fact-specific, and the rules are state-specific. The boys should talk to an estate litigation attorney, if they think there are enough assets to make at it worth their while.

Reference: nj.com (Dec. 29, 2020) “How can we find out if our father left us something in his will?”

Let us help you plan your estate.

Beneficiary Forms

Beneficiary forms are important.  It’s a simple question: do you know who your retirement account beneficiaries are? These tax-deferred accounts are complex, with significant tax implications for heirs that become more challenging if key information is missing on beneficiary forms, which is often the case. According to this recent article from The Street, “Secure your IRA—Review Your Beneficiary Forms Now,” the SECURE Act was the biggest retirement law change in decades. As a result, there has never been a more important time to review beneficiary forms.

Start by requesting a copy of your beneficiary forms from all of the institutions that hold your IRAs, 401(k)s, 403(b)s, and any tax deferred savings accounts to check for errors and accuracy. Most people fill these forms out when the accounts are opened and never give them a second thought.

The courts see many cases where family dynamics changed, but beneficiary forms were never updated. The cost and stress of estranged or divorced spouses receiving a lifetime of retirement savings because no one thought to update the form cannot be overstated.

It is pretty easy for most of us to locate our wills, trusts and life insurance policies, but we tend not to keep copies of our retirement account beneficiary forms. This makes no sense, as these are the accounts where most people have saved the bulk of their wealth.

Account owners are generally unaware of how important the beneficiary form is, or the consequences of the information being out of date. These documents are more powerful than the will.

These assets pass outside of the will. No matter what your will says, the assets in the accounts pass to whoever is named on the beneficiary form.

If there is no beneficiary named on the form, the asset will likely be paid to your estate. When this happens, the account must be fully distributed within five years of the account owner’s death, if they died before their required beginning date of distributions. If there are no named beneficiaries and the account owner dies on or after the required beginning date, there may be less of a negative impact. An estate planning attorney will be able to help you and your heirs plan for this event.

The SECURE Act made this harder for anyone who dies after 2019. For retirement accounts inherited after December 31, 2019, there are classes of beneficiaries and each has their own distribution rules.

Many trusts named as beneficiaries of IRAs/retirement plans no longer work as planned. If your estate plan named a trust as a beneficiary for a tax-deferred account, speak with your estate planning attorney to make any necessary changes.

The SECURE Act eliminated the use of the “Stretch” IRA for most non-spouse beneficiaries. This means that most heirs will need to empty any inherited accounts within ten years of the death of the owner, rather than stretch the distributions over their own lifetimes. Failure to do so could lead to a 50% penalty of the amount not distributed plus taxes.

Your estate planning attorney may be able to create alternatives to the stretch IRA, but the first step to address this issue is to obtain your beneficiary forms. Once you have them in hand, you can make the necessary changes and begin to plan for the optimal distribution of your assets.  Let us help.

Reference: The Street (Dec. 28, 2020) “Secure your IRA—Review Your Beneficiary Forms Now”

 

Your Estate Planning Checklist for 2021

If you have an estate planning checklist or have reviewed or created your estate plan in 2020, you are ahead of most Americans, but you’re not done yet. If you created a trust, gave gifts of real estate, business interest or other assets, you need to address the loose ends and do the follow up work to ensure that your planning goals will be met. That’s the advice from a recent article “Checklist 2020 Planning Follow Through: You Have More Work To Do” from Forbes.

Here are few estate planning checklist items to consider:

Did you loan money to heirs? If you made any loans to heirs or had any other loan transactions, you’ll need to calendar the interest payment dates and amounts and be sure that interest is paid promptly as described in the promissory notes. Correct interest payments are necessary for the IRS or creditors to treat the transaction as a real loan, otherwise you risk having the loan recharacterized or worse, being disregarded completely.

Did you create an irrevocable trust? If so, you need to be sure that gifts are made to the trust each year to fund insurance premiums. If the trust includes annual demand powers (known as “Crummey powers”) to allow gifts to qualify for the gift tax annual exclusion, written notices for 2020 gifts will need to be issued. This can be way more complicated than you expect: if you have transfers made to multiple trusts and outright gifts made directly to heirs, those gifts may need to be prioritized, based on the terms of the trusts and the dates of the gifts to determine which gifts qualify for the annual exclusion and which do not.

If you made gifts to a trust that is exempt from the generation skipping transfer tax (GST), you may have to file a gift tax return to allocate the GST exemption, so the trust remains GST exempt.  Add a consultation with your estate planning attorney to your estate planning checklist to avoid any expensive mistakes.

Do you own life insurance? Or does a trust own life insurance for you? Either way, do not ignore your coverage after you’ve purchased a policy or policies. Your broker should review policy performance, the appropriateness of coverage for your plan, etc., every few years. If you didn’t do this in 2020, make it a priority for 2021. Many people create SLATS—Spousal Lifetime Access Trusts—so that their spouse benefits from the trusts. However, if your spouse dies prematurely, the SLAT no longer works.

Paying trustee fees. If you have institutional trustees, their fees need to be paid annually. If you pay the fees directly, the fee becomes an additional gift to the trust, requiring the filing of a gift tax for that year. If the trust pays the fee directly, there might not be a tax implication. Again, check with your estate planning attorney.

Did you make transfers to a trust with a disclaimer mechanism? If you made transfers to a trust that has a disclaimer mechanism and you want to reconsider the planning, it may be possible for beneficiaries or a trustee to disclaim gifts made to the trust within nine months of the transfer, thereby unwinding the planning.

Did you create any GRATs in 2020? If you created a Grantor Retained Annuity Trust, be certain that the trustee calendars the required annuity payments and that they are paid on a timely basis. Missing payments could put the GRAT status in jeopardy. You should also confirm also how the payment is calculated, which should be in the GRAT itself.

An estate planning checklist is vital because the best estate plan is one that is reviewed on a regular basis to ensure that it works, throughout changes that occur in law and life.  Let us help you.

Reference: Forbes (Dec. 27, 2020) “Checklist 2020 Planning Follow Through: You Have More Work To Do”

 

Homestead and Revocable Trusts

There is a lot of confusion surrounding the issue of homestead and Revocable Trusts. Some clients have said that they have been told that you cannot transfer homestead into a Revocable Trust. If this were the case, a major asset of most people’s estates would be left vulnerable to probate.  My website, Estate Planning in Florida addresses this issue.

In order to fully address this issue, we have to delve into the complexities of the Florida homestead law. The law regarding Florida homestead is set forth in the state constitution as well as various sections of the Florida Statutes. It cover three distinct areas.

The first area, which most people are familiar with, concerns the exemption from property tax of the first $25,000 in value, and the exemption from property taxes (except school taxes) the third $25,000 in value.

The second aspect involves the exemption of homestead from the claims of creditors.

The third area is what we will be discussing in this article. It deals with what happens to homestead property when its owner dies. The restrictions contained in this part of the law deal only with married persons or persons with minor children. If you are a single person without minor children, there are no restrictions and you may transfer your homestead to your Revocable Trust without any adverse consequences.

However, if you are married, Florida law regarding homestead and revocable trusts states that your homestead may not be devised if the you are survived by a spouse, unless it is devised to that spouse.  A devise is a distribution of property pursuant to a Will or Trust.

If a married person tries to leave his interest in the homestead to someone other than his spouse, that transfer would, under the law, be void. Instead, the law says that in this case, the spouse would receive a life estate in the property and at the spouse’s death the homestead would pass to the lineal descendants of the person who died first.

As you can guess, this creates huge title problems for the surviving spouse. She would not be able to sell the homestead or put a mortgage on it without the consent of the deceased spouse’s lineal descendants.

What, you may ask, does this have to do with my homestead and Revocable Trust? Some attorneys and title examiners believe that leaving the property in joint trust after the death of one spouse is different from leaving it directly to the spouse, as required by the homestead law. They contend that this causes the ugly life estate scenario and that any future transactions will require consent of the lineal descendants.

Because of this, I structure your Trust to distribute the deceased spouse’s share of the homestead directly to the surviving spouse. The surviving spouse would then deed that interest back into the Trust. In this way we comply with the homestead law and avoid probate.

One exception to titling your homestead into the Revocable Trust is when you have minor children. In this situation the law states, “the homestead shall not be subject to devise if the owner is survived by a spouse or minor child, except that the homestead may be devised to the owner’s spouse if there is no minor child.”  If a person dies leaving a minor child and tries to devise the homestead to his spouse, the spouse would only get a life estate and the property will pass to the deceased spouse’s lineal descendants upon the death of the second spouse.

Because property owned by husband and wife as tenants by the entireties is exempt from this provision, the property should not be put into the Trust if you have minor children.  Instead it should be titled in you and your spouse as husband and wife.  This will provide a right of survivorship upon the first spouse’s death.

Let us help you plan your estate.

D-I-Y Estate Planning

US News & World Report’s recent article entitled “Do-It-Yourself Estate Planning Mistakes” provides some issues that D-I-Y estate planners might encounter and why it is best to consult an experienced estate planning attorney.

What are the Right Questions to Ask?  Completing a simple and straightforward form—like a beneficiary designation for your IRA— is one thing, but what about tax consequences, probate law, new legislation and court procedures? Are you ready to take these on? The trick is that you may not know what you don’t know. D-I-Y estate planning could prove to be disastrous That’s why it’s money well-spent to employ the services of an experienced estate planning attorney.

Is My Situation Complex? Likewise, you may have property and assets all over the country (or world) that require expert advice. You must be certain that your planning, tax planning and financial planning all work together because they’re all interrelated. If you only work on one of these areas at a time, you may create complications in another area and unintentionally increase your expenses or taxes. It can also create headaches and expense for your heirs. If you have a child with special needs, a blended family, or want to control how and where a beneficiary spends your money, a D-I-Y estate planning approach won’t do. Instead, you should see an experienced estate planning attorney.

What are the Probate Laws in My State? Estate planning laws and taxes are different in each state.  Your state will have different rules and legal procedures for creating and administering an estate. There are many different state laws that govern inheritance taxes. There are 17 states plus DC that tax your estate, inheritance or both, and the tax laws can affect your situation when planning. Eleven states plus DC have only an inheritance tax. One state taxes both inheritances and estates.

If you mess up your D-Y-I estate planning documents, if could cause significant problems for your family. You best bet is to work with an experienced estate planning attorney in your state.

Reference: US News & World Report (Dec. 18, 2020) “Do-It-Yourself Estate Planning Mistakes”