Everyday Estate Planning

Everyday estate planning

Most people dread the thought of estate planning. It’s not hard to understand why. Thinking about where your assets should go after you die is an uncomfortable reminder of the inevitability of death. Many put it off until it’s too late and end up leaving their heirs and family members with a financial and administrative mess. Those who you want to inherit your assets, those people you love most, may not receive them or may receive less because of expenses like court costs and taxes. This is why estate planning is so important, no matter what the size of your estate.

There are a few essential documents in any estate plan. The most basic estate planning document is a Last Will and Testament. A Will is a legal document which allows you to direct exactly where your assets are to be distributed when you die. If you die without a Will, your property will be distributed by the state intestacy statute, which determines where the state thinks your money should go, without regard to your actual wishes or your family’s needs. All of your property could go to a family member that you don’t speak to or even know. Making a Will is especially important for people with young children, as a Will is also the best place to name a guardian for your children in case anything should happen to you.

The problem with a Will is that when you die your assets must go through probate before they are passed on to your named beneficiaries. Most people living in Florida want to avoid probate and the most common way to accomplish this is with a Revocable Trust, also referred to as a Living Trust. The Trust acts similarly to a Will. It allows you to direct or put conditions on who gets your assets and when they get them. The biggest advantage of a Trust is that it avoids probate. This means that you avoid expensive court proceedings, you preserve the privacy of your estate, and you minimize the emotional stress on your heirs. They key to a Revocable Trust is that it must be funded prior to your death. That means your assets must be re-titled into the name of the Trust. If they are not re-titled, then they must be probated. You can also make Amendments and changes to the Trust as necessary during your life. Additionally, a Trust can be used to help protect your assets from in-laws or from the creditors of your beneficiaries.

The Durable Power of Attorney is another extremely important estate planning tool. This legal document allows you to select someone to handle your finances in the event that you cannot. No one can predict the crises that can occur in life. If something happens that leaves you unable to handle the business side of your life, this document can allow someone you trust to step in. That person can pay your bills, keep up your investments, or make key financial decisions in your best interests. If you become incapacitated without naming a Durable Power of Attorney, then the court will have to step in and through an expensive and time consuming proceeding, name a guardian to act on your behalf. Florida has a new Durable Power of Attorney statute. If you already have this document, you should have it reviewed to make sure that it is up to date and in accordance with the new law.

A Health Care Surrogate is a legal document which allows someone to make medical and health related decisions on your behalf if you are not able to. It is sometimes known as a Medical Power of Attorney. It applies to all instances in which you are incapacitated.

The Declaration Under Florida Life Prolonging Procedure Act, commonly called the “Living Will,” is a statement of your wishes for what kind of life-prolonging treatment you want, or don’t want, in the event that you become terminally ill and unable to communicate. This is an essential part of any estate plan. Making a decision about this is very personal. It is best to have a document which communicates your wishes. Otherwise, the decision will be left to your close family members to make, which can be tremendously difficult and stressful for them.

Having these documents prepared is not the end of your estate planning. When you move to Florida from another state, there are still concerns. Laws that affect estate planning decisions are different from state to state. Your Will and supplementary estate planning documents from another state are still valid and recognized in Florida. However, there are differences in state laws that might make certain provisions invalid or prevent them from achieving the desired estate planning goal. When you move to Florida, you should consider updating your documents, or at the least having them reviewed by a local attorney in case any specific changes need to be made to accommodate Florida’s laws. Furthermore, laws governing estate planning may change over time. Every few years you should consider updating or reviewing the documents you have done to make sure you are still current.

Having a solid estate plan can set your mind at ease. It is not only for your benefit, but for the benefit of your loved ones.

Article Prepared by: Robert D. Schwartz, Attorney at Law

Problems with Probate

problems with probate

When the majority of people hear the word “probate,” they can tell you with certainty that they definitely want to avoid that-but why? Many people don’t even know what probate is and fortunately, have not had to experience it for themselves. In fact, probate is the name for the court proceeding through which a judge declares a Will to be valid and appoints an individual, sometimes called a Personal Representative, or Executor, to be responsible for carrying out the administration of an estate. Probate administration allows assets to be transferred from a decedent to that decedent’s heirs. The probate process here in Florida has many negative aspects that your family would surely want to avoid.

The most commonly cited negative about probate is the expense. In Florida, to initiate most types of probates, a decedent’s heirs must first hire a lawyer. This is a state requirement for all administrations unless very specific factors are met. Under Florida Law, as compensation for administering a probate estate, a lawyer can charge up to 3% of the entire estate value. That is money that your heirs would have been able to keep for themselves had you planned to avoid probate. The Personal Representative is also allowed to take a 3% fee for their services under Florida law. In addition to these fees, there are court costs and can also be fees for the upkeep of the estate throughout the probate process. That probably does not sound like much but when you consider the amount of bills you pay every month to keep your assets in order, and the amount of time that a probate can take, this amount can add up very quickly.

Probate can also be an exceptionally time-consuming process. The most simple of probate administrations usually takes 6 to 8 months. Any sort of complication at all can make the process take even longer than that, up to multiple years. The court-required creditor claim period, which is the mandatory time allows for creditors to file claims against the estate, is ninety days itself. On top of that is the time it takes to find a lawyer, have the necessary family members participate and cooperate, pay off all claims, sell any necessary estate property, and only then, finally get to distribute the assets to the beneficiaries. All the while, the decedent’s bills need to be paid and the heirs are getting antsy. The probate process puts those involved at the mercy of the legal system.

Involving the legal system also means that probate is a very public process. Everything that gets filed with the court becomes a part of the public record and gives those outside your family a glimpse into your financial and family situations. The court is now involved in paying off the debts and expenses you accumulated during your lifetime and in determining who rightfully deserves your assets. With the advance of technology within the court system, each probate court has a website, which anyone can search to find out about estate administrations from anywhere in the world.

Proper estate planning will allow you to avoid many of these negative issues. When used correctly, estate planning tools can help you to avoid the probate process entirely. The most common and effective way to avoid probate is through the use of a Revocable Living Trust. Alternative probate avoidance tools can be used, but may have unintended adverse consequences that many people are unaware of. For example, one might read about using joint tenancy, or adding another person’s name to your assets, as a probate avoidance solution. However, adding additional people to your property, even if they are your children, lessens the control that you have over your property and increases the chances that it could be passed to unintended beneficiaries.

Probate is expensive, time-consuming, public and stressful on your heirs. It is important to consult an estate planning professional when making decisions concerning your best interest based on your specific circumstances. By utilizing the proper tools and guidance in estate planning, the whole probate process can be avoided and your family will be forever thankful.

Common Misconceptions about Wills and Trusts

misconceptions with wills and trusts

It is difficult to sort through all the confusion about estate planning documents and the probate process. You hear different and conflicting information from your neighbors, television programs and the internet. There are many frequently perpetuated myths about Will and Trusts circulating around. It is important to make sure you have your facts straight. If not, you may accidentally leave your family in a troublesome position. For instance, many people believe that if they have a Last Will and Testament prepared, their estate will avoid probate. This is incorrect. The primary purpose of the probate court is to make sure that a decedent’s assets are passed to the proper heirs and beneficiaries. The Will serves as a statement to the court of the decedent’s wishes with regard to where that person wants his or her assets to be distributed. The Will names chosen beneficiaries and the probate court makes sure that the named beneficiaries are the parties to receive the assets. In Florida, even with a Will, your heirs may be required to get a lawyer and go to court in order to receive their proper inheritance. Everyone should still have a Will, but additional estate planning, including the use of a Revocable Living Trust, is necessary to avoid the probate process.

It is also typical for people to think that they do not need to do any estate planning because they are not worth enough money. Many people think that if their estate is under $5,250,000, the amount of the Federal Estate Tax Exemption amount, then there is no need to do a Revocable Trust. That could not be further from the truth. Five million two hundred fifty thousand dollars ($5,250,000) is the amount that can pass to beneficiaries free of federal estate tax, but there are still many issues that may come up as a result of one’s passing. Any amount of money, no matter how much or how little, will have to go through some form of probate without proper planning. As most people are aware, probate can be expensive and time consuming. Additionally, there are many other reasons to do proper estate planning. Estate planning documents are the best place to name a guardian for your minor children or a disabled child. They are also used to make arrangements for taking care of elderly family members or a surviving spouse.

Commonly, people are concerned that putting their property, especially their homestead, into a Revocable Trust will limit what they can do with the property during their lifetime. A properly drafted Revocable Trust is completely amendable and revocable during the lifetime of the person who creates it. Anything that you put into the Trust is under your complete control as Trustee of the trust. Therefore, you have no limit to what you can do with a property that is put into a Revocable Trust. You can sell the property, encumber the property, decide who you want to inherit the property and even change your mind and choose someone else to inherit it.

Another issue that is frequently asked about is that of filing a separate tax return for a Trust. Many people think that if you have a Trust, you have to file a completely separate tax return. A Trust is not a separate entity for tax purposes, therefore filing a separate tax return is not necessary. During your lifetime, you file the same individual or joint tax return that you are file now.

Lastly, it is usual for people to believe that once they complete their estate planning documents, they are all done and they never have to think about them again. This is definitely not the case. An estate plan is something variable and can change over your lifetime as the circumstances of your life change. This can be a change in your family situation, like a birth, death, or marriage. It can be a change in the kinds of assets that you own. It can also be a change in the state or federal laws. A proper estate plan is one that keeps up with the your life as it evolves over time. It is recommended that you review your estate planning documents with a professional every few years to make sure that nothing needs to be updated or changed.

The proper planning can make things easier and less expensive for your loved ones. Wills and Trusts are tools that can be extremely helpful in accomplishing your estate planning goals. Make sure that you ask a professional and do not fall victim to the misconceptions and incorrect information that is constantly circulating around.

Planning for incapacity

Preparing your finances for incapacity and old age

There may come a point in your life where you are no longer able to take care of your own affairs. It is one of those tough realities of life that no one ever wants to consider. The circumstances of incapacity can be unpredictable. If you do not take the proper precautions, incapacity can become a burden on those around you. Though you can never fully predict the possible ramifications of incapacity, there are many things you can do to be as prepared as possible.

If you become incapacitated without any planning or preparation of these documents, someone will still have to be named to take care of your financial and medical decisions, at which point a court proceeding called a guardianship will be necessary. This type of proceeding requires a lawyer, can be very time consuming, and very costly. Other concerns include that family members will fight over who should be your guardian, a guardian could be restricted in acting on your behalf, or the court could get involved in making decisions about your life.

The first way to be prepared for incapacity is to make sure that you have an up-to-date and properly executed Durable Power of Attorney. A Durable Power of Attorney is a document that allows you to name someone to handle your finances if you are unable to do so. That person can pay your bills, manage your investments, or make key financial decisions that are in your best interests. They would also be able to help you become enrolled in any government aid you are eligible for, including but not limited to, the Medicaid Program. As of October, 2011, the Durable Power of Attorney statute in Florida (Chapter 709, Florida Statutes) has been changed and updated. If your document was executed before then, you should have it reviewed and most likely updated.

Additionally, if you have a Revocable Living Trust, you should make sure that it includes an incapacity clause or provision. A Revocable Living Trust is set up so at death your assets don’t go through probate, but a Revocable Living Trust can also guard against incapacity. The Trust allows your appointed representative to step in and control those assets if you are unable to do so. This person is called a Successor Trustee. The Successor Trustee would not be able to do so without proof of your incapacity. This proof is typically a letter from your doctor, but it can be a court order declaring your incapacity as well. This provides protection for you in that no one can step in and control your assets without showing that it is a necessity.

A Health Care Surrogate document is also important in planning for incapacity. This type of document allows your to nominate someone to make medical decisions on your behalf and in your best interest if you are no longer able to make those decisions. This is also sometimes known as a Medical Power of Attorney. Having a properly executed Health Care Surrogate allows you to make sure that the person(s) you want to be making medical decisions on your behalf, can.

A Declaration Under Florida Life Prolonging Procedure Act, more commonly known as a “Living Will”, is another document you should have in preparation of incapacity. It is a statement of your wishes for what life prolonging procedures you want, or don’t want, in the event that your become terminally ill and unable to communicate. It is commonly asked for by doctors offices and hospitals when providing treatment, even if it is not normally a life threatening procedure itself.

Incapacity is a scary reality, however, it is important not to wait to prepare for it. Many people do not prepare for incapacity until it is too late. Proper planning can make sure that your continued care and well-being is provided for both medically and financially.

The Advantages Of A Revocable Living Trust

Many people believe that if they have a Last Will and Testament, their estate planning goals have been accomplished. If their goal is solely to express their wishes onto where their assets go when they die, then they may be right. If their goal is to accomplish this while also making it as easy as possible for their family and friends, with the least amount of expense, then they might consider a Revocable Living Trust. A Revocable Living Trust is a legal document that acts similarly to a Will, but does much more. There are many advantages to using a Trust.

A major advantage of a Revocable Trust is that it avoids probate. When a person just has a Will, their family has to obtain a lawyer and go through the probate system in order to transfer and distribute their assets to the beneficiaries. The probate process in Florida can be expensive and time-consuming. When correctly using a Trust, the probate process can be avoided all together. This means that the family does not have to pay a lawyer, wait for the completion of all the court deadlines, and get judicial approval for every action that they need to take.

A Revocable Trust is also advantageous in that it keeps your wishes and affairs private. A Will has to be deposited with the clerk of court. This means that the Will becomes part of the public record. Anyone who wants to see your Will is able to. Probate and court proceedings are also public. This could invite those who you want to exclude to come forward and contest the Will. The assets in the estate also become public knowledge. A Trust does not have to be recorded with the Court. This can help ensure that the only people involved in administrating the Trust are those that you want to be involved. It makes it more difficult for unwanted people to come forward and try to contest. A Trust allows you to put your affairs in the hands of the people that you trust and there is no need for the court system to get involved.

Another positive aspect of a Trust is that it accelerates the process of estate administration so that your family does not have to wait such a long period of time before they receive their inheritance. A probate proceeding can take anywhere from a few months to many years to complete. There many steps involved and it can be time-consuming for the Personal Representative or Executor. Distributions of the assets to the beneficiaries cannot be accomplished until the end of the probate process. This could create hardship for those in your family who need the assets the most and may also make beneficiaries antsy. Often times, this can lead to arguments and even litigation.

A Trust makes the administration process less expensive. This means all of the assets you own at your death actually go to the people you intend them to go to, instead of going to others. The probate process requires payment to lawyers and court costs. This can add up quickly. By statute, a lawyer can charge up to three percent (3%) of the entire estate as a fee for the probate administration. All of these fees would be things that your Executor would have to pay out of your estate before any of your beneficiaries would be allowed to receive their shares.

Using a Trust also gives you flexibility in how you want to plan your estate. You can customize the document to fit your family’s particular needs and concerns. A Trust allows you to hold money in trust for a child who is a spendthrift or a minor, make sure no money goes to a specific son or daughter in-law, or ensure that a family member with special needs will be provided for throughout the rest of his/her life, even after you are gone.

A Revocable Living Trust can be an extremely useful estate planning tool. Nevertheless, a Trust is a legal document that should be prepared by a proper estate planning professional. It requires knowledge of the law and how particular assets should be handled. When used correctly, it accomplishes all of the goals that most people have in estate planning while additionally making it as easy as possible for their family after they pass away. Most importantly, it allows your estate to completely avoid the probate process.