Estate Planning:

Estate planning is the process of determining how your assets will be distributed and debts will be paid upon your death. While it may seem grim to consider these decisions, particularly if you are young and healthy, it is important to begin your planning as early in life as possible. For example, without a will, your property is distributed to heirs according to a formula fixed by law with no exceptions. The court will appoint a personal representative to manage your estate and the cost of probate may be higher than if you had a will, reducing the assets which go to your beneficiaries. While the standard formula may work fine for some people, it often does not account for personal circumstances such as:

• A step-child you want to provide for
• Paying debts from specific assets
• A distant relative you want to have inherit
• The desire to have a trust formed upon your death
• Close relatives you prefer to disinherit

These are just a few of the circumstances for which you must have a will to protect your wishes. A will is a written document which controls the disposition of property at death. In Florida, to make a will you must be at least eighteen and of sound mind. The document must be written, witnessed and notarized in a particular way. A will can be changed up until the maker’s death but as with the original document, it must be executed in a certain manner. [Changing your will].

It is also important to understand that some property cannot be transferred by will following your death, common examples include a homestead property, a life estate, and some types of jointly owned property. Similarly, disinheriting a spouse can be done but only if certain requirements are met. Although disinheriting a spouse may seem crass, there are times spouses agree to take a lesser share, for example to provide greater assets to children, other relatives, or charity. It is not necessary to meet any special requirements to disinherit your children. [estate planning for parents]

The estate planning process can be complex if you are trying to accomplish it alone. Although drafting a simple will is sufficient for many people, it can be difficult to ascertain whether you have the circumstances which require review of tax and legal counsel to craft a different arrangement which meets your wishes. An experienced probate and estate planning attorney can assist you in crafting a plan to meet your goals that comports with Florida law.   

Major Assets to Consider

There are a few common, major assets to consider as part of the estate planning process. An experienced estate planning attorney can guide you through the process of including these and how to deal with making changes to them. 

Life Insurance

Life insurance is one type of property you may own that makes a payment at your death. These policies are one of the most common estate planning devices – in fact many people will purchase a policy without having a will or any other plans in place. The benefits are incredibly useful by providing a payment to your next of kin, spouse, children, or another designated person upon your death. However, it can also be a tool by which you fund your estate and final wishes. Beneficiary designations can do that for you, for example:

If the policy is payable to a person – your will has no effect on where proceeds go

If the policy is payable to your estate – the proceeds are distributed as directed in your will

Making the choice of where your life insurance proceeds should be paid should be made under counsel of a lawyer, insurance counselor and/or financial advisor. Mistakes in beneficiary designations, out of date designations can cause increases in estate taxes and delays in payment.

Trust

A trust is a fiduciary arrangement by which assets are held and managed on behalf of a beneficiary or beneficiaries. Assets in a trust often pass outside of probate which saves time, court fees, and can reduce taxes. In addition, by avoiding probate, the beneficiaries usually receive the assets faster. 

There are several types of trusts, including:

• Totten Trust – Totten trusts are payable-on-death (POD) accounts set up at a bank by a benefactor for a specified beneficiary that is payable to that individual upon the benefactor’s death. The beneficiary is named, and they inherit the money when the benefactor dies.  
• Charitable Trust – Charitable Trusts are set up for the fulfillment of a philanthropic purpose of your choice. These may include relief of poverty, advancement of arts, sciences, education or religion, promotion of health, governmental, or municipal purposes. These are often used as a tool to reduce your estate’s value and the tax payable upon your death. 
• Land trust – A land trust keeps property ownership private, protect property from entering probate.
• Revocable Living Trust – A Revocable Living Trust is established while grantor is alive and may be freely amended or revoked. These are often used to dispose of assets and avoid probate.
• Irrevocable Living Trust – With an Irrevocable Living Trust control of assets is transferred fully out from property owner so they become property of the trusts. This is a permanent decision which cannot be changed. These trusts often protect beneficiaries from probate and estate taxes.
• Testamentary Trust – A testamentary trust is part of a persons will and goes into effect at their death. These often designate a point in time for beneficiaries to receive the assets. 
• Medicaid Trust – A Medicaid trust is typically designed to ensure children can receive an inheritance. These serve an important function for elder care planning because assets sheltered in this type of trust cannot be taken to cover nursing home costs. 

The establishment of a trust can be an important part of your estate plan. While you may decide on your own that a trust is the best way to protect your assets and ensure your wishes are fulfilled, executing the necessary documents should be done with a lawyer and after receiving the advice of a tax expert. In most circumstances, a trust is made in addition to a will but not as a substitute for it, even if most assets are passing under the trust.

Trusts are not only for those with substantial assets, for example the revocable living trust is a very common mechanism in Florida to avoid probate while giving the grantor lifetime control over the asset and protecting it the beneficiaries. 

Although in a trust arrangement the assets are commonly held by a third party as trustee, it is possible for things to be more closely held. The trustee may be the same person who established the trust and the beneficiary or one of the beneficiaries. Alternatively, professional trustee such as a financial institution may serve as trustee rather than a family member or friend. 

Accounts

Checking, savings, investment, and retirement accounts may all become a part of your estate and distributed via the probate process according to your will or the statutory defaults. There are a few factors which determine whether they do and to what extent. 

One major factor is whether the account has a POD (pay on death) designation to a third party, a trust, or even your estate. These accounts pass outside of probate to the designated person or entity unless they are POD to the estate.  

Second, whether the account is jointly owned or solely yours. For accounts that are jointly owned, the value added to your estate is typically your fractional share of the asset. For example, 50% of a checking account jointly owned by you and a spouse. 

Third, for calculation of the elective share. The elective share is a principle, written into Florida law, that the decedent’s spouse should receive a minimum share of the estate, at least 30%. If, under the estate planning documents, the surviving spouse would receive less than 30%, that spouse may “elect” against the estate to receive their share. To calculate the estate and what the surviving spouse should receive, a certain group of assets are counted forming what is called the “augmented estate”, one of the assets included is bank accounts with a POD designation. Note: a spouse can waive their right to the elective share.

Homestead Property

Most Floridians who are homeowners are familiar with the benefits of the state’s generous homestead protections and exemptions. Having a primary residence in Florida means you are likely eligible for reduced property taxes from the homestead property tax exemption.  In addition to the exemption, there is a limit on the amount your home’s taxable value may increase annually. What you may not know is that enjoying the homestead protections comes with some restrictions which will affect your estate plans.

Florida has restrictions on how a married person may transfer homestead property after death.  If the home is owned in only one spouse’s name, generally upon that spouse’s death, the surviving spouse receives a life estate and the deceased spouse’s children will receive the remainder interest.  The surviving spouse may alternatively have the right to elect to receive a one-half interest as tenants in common with the deceased spouse’s children. For many Florida residents, either result may not be desirable. It can be avoided by reviewing the title to your home and preparing accordingly with an experienced estate planning attorney. Common plans include devise of the homestead to the surviving spouse or entry into a valid pre-or post-nuptial agreement. But there may be additional options depending on your circumstances.