Estate Planning in Florida

Few decisions in life are as distasteful, yet as important, as planning for its end. Those who do such planning save their heirs much anguish and frustration, and often a great deal of money. This article attempts to explain in broad terms various estate planning vehicles for the elderly, such as living wills, durable powers of attorney, the probate system, avoiding probate, and guardianship.

Probate’s Bad Reputation and the Ways to Avoid Probate

The probate system has a bad reputation, as something always to be avoided. Like most institutions, the probate system is sometimes wrongfully criticized by those who are misinformed. Probate is the process by which a decedent’s bills are paid and property held in the decedent’s name alone are transferred by court authorization, in accordance with the decedent’s will, if there was one, or by general law if no will is found. Contrary to what some people think, if you do not have a will, the State does not “take” your property. Rather, State law just writes a will for you, based upon what is generally accepted in our society as the standard will. However, if your assets are transferred properly prior to death, there is no need for judicial involvement. That is the purpose in “avoiding probate,” but there are pitfalls to be avoided. By “adding names” to property during one’s lifetime, it may be difficult to have the property returned to, or conveyed by, the donor, or to the donor’s intended beneficiaries.

The most common types of probate in Florida are formal administration and summary administration. Summary administration applies to probate assets less than $75,000 in total value, excluding the value of the homestead. The process takes approximately two weeks from beginning to end. Formal administration takes around five months, in large part because of the three-month period for claims to be filed against the estate. Attorney’s fees for formal administration are specifically set forth in the Florida Statutes.

There are many ways of avoiding probate of one’s assets. The major ones are a living trust, putting property in joint ownership with a survivorship interest, such as life estates on real property, or joint tenancy with right of survivorship for real property, bank accounts, stocks, and bonds. Again, beware of pitfalls. Even though one plans to avoid probate, it is still an excellent idea to have a current Florida will, to cover assets which inadvertently or unavoidably were not transferred into the name of the trustee, remainderman, or joint tenant. If even one titled asset is in the decedent’s name alone at death, probate would still be necessary to be transferred. Although out-of-state wills are generally valid in Florida, it is time consuming and therefore expensive to go out-of-state to find the witnesses to those wills. Life insurance proceeds also pass outside of the probate system unless your estate is a beneficiary of the policy.

One can avoid the probate of real property by signing and delivering a deed to the grantee, or to an escrow agent. You can keep the full homestead exemption by reserving a life estate, with the remainder to whomever you choose. Retaining an “enhanced life estate” enables you to sell the property without getting formal approval of the remainderman. You can place an automobile in joint names and do the same with bank accounts and stocks and bonds. You should use the magic phrase “joint tenancy with right of survivorship” in order to do so. Legal assistance is strongly advised; please don’t do it yourself.

Living Wills

One has the right to compel the termination of life support systems, if one is terminally ill, so long as that intention is expressed properly, preferably in writing. A living will may be obtained at your attorney’s office for a nominal charge, or from most local physicians or hospitals.

Durable Powers of Attorney and Designations of Health Care Surrogates?

A power of attorney is a vehicle whereby one may authorize another person to act on one’s behalf. By placing certain language in the power of attorney, the document becomes a “durable power of attorney,” and thereby one may authorize any person to act on one’s behalf, even though one is disabled. By signing a durable power of attorney, one can avoid or at least minimize the risk of a guardian being appointed. A separate Healthcare Surrogate form is usually used to authorize routine medical care.

The Usefulness of Trusts

The trust is an enormously flexible vehicle for all kinds of legal maneuvers. In the typical “revocable living trust,” the settlor (one who makes a trust) appoints himself as trustee until his death, disability, or resignation, and then appoints a successor trustee or trustees to manage trust property and dispose of it by giving the settlor the use of the property during his period of disability, and then distributing it to the settlor’s successor beneficiaries. Some non-tax benefits include:

1. Avoidance of probate delays and expenses;
2. Opportunity for professional asset management;
3. Permit distribution over time (probate without a testamentary trust requires immediate distribution to all adults);
4. Prompt transfer of management of assets at disability;
5. Avoidance of publicity;
6. Insulation from pleas for money (“Fred, I’d lend you the money, but it’s tied up in trust”);
7. Avoidance of mental blocks about signing wills;
8. Avoidance of guardianship;
9. Reduce the likelihood of will contests;
10. Restrict the wasting of assets by spendthrift beneficiaries and their creditors; and
11. Avoidance of surviving spouse deviating from predeceased spouse’s estate plan.

On occasion, the goal of avoiding probate is accomplished by a method simpler and less expensive than a living trust. After the trust declaration is executed, you still must transfer the assets into the name of the trustee. Again, by transferring the asset during one’s lifetime to a trustee (even oneself as trustee) one avoids probate of that asset. Many people prepare elaborate living trusts, but improperly fund the trust by failing to put all appropriate assets into the name of the trustee, thereby not implementing what was intended.

A corporate trustee would probably charge around one percent of principal per year as the trustee’s fee. Corporate trustees are held to a higher standard of care than an individual trustee, and for many reasons, the peace of mind created with a professional, independent, impartial, experienced, fully insured, fully regulated corporate trustee may be well worth the expense. For example, suppose your child is trustee for the benefit of your grandchild. If the trustee does not invest the money wisely, is the grandchild really going to sue the parent for negligence or breach of fiduciary duty?

This introduction is written with the hope that you will contact your attorney, accountant, and other advisers, to discuss these matters in more detail.  Estate planning is a constantly changing field, rife with loopholes and potholes. Please understand that the scope of this introduction is general in nature and should not be used as a basis to plan your estate matters without professional assistance. Each of us is unique, and the use of “do-it-yourself” estate planning or the use of a “will kit” is not much different from “do-it-yourself” hospital surgery.