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1.
What are the basic estate planning documents I may need in Florida?
The basic documents are:
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Last Will and Testament
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Durable Power of Attorney
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Durable Health Care Power of Attorney (also known as a "Health Care Surrogate Designation")
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Living Will
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Revocable ("Living") Trust
2.
What is a Last Will and Testament?
A will describes how your property is distributed upon your death. It must be in writing,
signed by you, and properly witnessed by two persons. A will should also be "self-proving" to
avoid having to find witnesses upon death. A self-proof is an affidavit stating that the
testator/testatrix signed the Last Will and Testament and that the witnesses and the
testator/testatrix signed the will in the presence of each other.
A Last Will and Testament may contain:
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Specific distributions of property or cash
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Provision for a separate writing for personal items
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Trust provisions to control how the property is to be distributed after your death
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Name of a guardian for your minor children
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Name of a personal representative to handle payment of bills and coordination and distribution of your estate
3.
What is probate?
Probate is the legal process to ensure that all assets are transferred in accordance with a
will or by law. Florida law contains detailed instructions for the handling of the probate of an
estate. Once the personal representative is appointed then he or she is responsible for gathering
all the assets and filing an inventory with the court. Taxes and creditors must be paid, and the
remaining assets are distributed in accordance with the will or by law. A full accountingmust be
rendered to the residuary beneficiaries and the court unless it is waived by all interested parties.
*Linda Suzzanne Griffin, Esq., wishes to thank the various members of the Pinellas County
Estate Planning Council who initially prepared these questions and answers to present to the
public at seminars in association with St. Petersburg Junior College. Ms. Griffin has edited and
added to those questions and answers.
4.
Who can be the Personal Representative of my estate?
You can name anyone you want as your executor or personal representative, as
long as that person is over the age of 18, mentally competent, and a resident of Florida.
The designated personal representative must meet statutory relationship requirements if
the person is not a resident of Florida. If you do not want to name an individual as personal
representative, then you can name a professional fiduciary, such as a bank trust
department, your attorney, or your accountant.
5.
What are the responsibilities of a Personal Representative of an estate?
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Locate your will
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Confer with the lawyer who will serve as attorney for your estate and arrange with the lawyer for probate of your will
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Talk with family members to determine their immediate financial needs
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Make tentative arrangements for support and maintenance payments to be paid to your loved ones during the settlement period
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Seek court authority to serve as your executor
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Manage your property, including your business, during the settlement period
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Distribute your property according to the directions in your Will
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File your final personal income tax return
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Choose a tax year for your estate
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File your estate's federal income tax returns
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File any state income and death tax returns
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Complete and file the federal estate tax return
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Become a party to litigation relating to the estate
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Sell assets, such as real estate, stocks and bonds
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Invest assets that are not needed immediately for distribution or expenses
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Account to the beneficiaries for all actions taken during administration
6.
How can I avoid probate?
There are a number of techniques which can be used to avoid the probate process.
Some of these techniques may have significant potential problems. Here are a few of the
techniques:
Use jointly-owned property with rights of survivorship
. The probate process is
avoided until there are no more joint owners surviving. The property is then exposed to the
probate process. In the situation where your gross estate is in excess of the available
unified credit the use of jointly-owned property may cause federal estate tax problems.
Because of the Adangers@ discussed in Section 3 above use of joint property might be the
least advantageous way to avoid probate.
Use a Revocable Trust
. Property which is titled in the name of the trustee is not
exposed to the probate process. See other questions and answers which discuss
revocable trusts in more detail. Note that a revocable trust only avoids probate for those
assets retitled to the trust. Assets that remain in your individual name may still require a
probate proceeding.
Name beneficiaries and provide for contingent beneficiaries for all life insurance
policies and retirement plans, including IRAs
. Life insurance policies and retirement plans
all have provisions for naming beneficiaries when the insured or retirement plan owner
dies. If the named beneficiary predeceases the insured or retirement plan owner, then the
beneficiary usually becomes the probate estate of the insured or retirement plan owner. It
is important to provide for contingent beneficiaries in all such situations.
Use "in trust for" or "pay on death" designations for bank accounts and stocks
. Many
assets can be titled in your name but with a designated beneficiary at your death. This
avoids many of the problems associated with joint ownership but also avoids probate. A
typical designation would read "John Jones in trust for Mary Able" or "John Jones I/T/F
Mary Able."
7.
What is a guardianship?
A legal process whereby a person with debilitating physical or mental conditions is
declared incapacitated, and a guardian of the person or property is appointed by the court.
This process is usually very expensive as court appearances are required with expert
testimony and there is ongoing court supervision and accountings.
8.
What is a Durable Power of Attorney (DPOA) and how can it help me avoid guardianship?
A DPOA permits you to name an "agent" or "attorney-in-fact" to handle your
financial affairs if you become incapacitated which can be defined in the document. For
example, a person can be deemed incapacitated upon the writing of two (2) doctors. The
DPOA can authorize the agent or attorney-in-fact to transfer property, borrow money,
handle bank accounts and pay bills. This document can be very useful to avoid the time
and expense of a court appointed guardian. The agent or attorney-in-fact named should
be a person who you trust and who is capable of carrying out your wishes.
9.
What is the difference between a "non-springing" DPOA and a Aspringing@ DPOA.
Before 2002 Florida only allowed "non-springing" DPOAs which meant that a DPOA
became effective upon signing and, when necessary, could then be used by the attorneyin-
fact. Many lawyers would have clients sign an Escrow Instruction Letter which allowed
the release of the DPOA only upon the signer=s oral or written instructions or a written letter
signed by a physician.
A "springing" DPOA is defined in Florida Statute 709.08 and permits the attorneyin-
fact to assume control of your business affairs
only
when certain affidavits are signed,
including an affidavit sworn to by a doctor (not just a letter signed by your doctor) stating
that you are unable to handle your affairs. Unfortunately, many individuals probablywill not
use "springing" DPOAs as many doctors will be reluctant to sign an affidavit.
10.
What is a Living Will?
A Living Will is a document that expresses your desire not to be kept alive by
artificialmeans and/or nutrition or hydration. It describes what levels of care you do and do
not want if you have a terminal condition. The Living Will must be in writing and have two
witnesses.
11.
What is a Durable Health Care Power of Attorney (also known as Health Care
Surrogate Designation)?
A Durable Health Care Power of Attorney allows you to name an individual to make
medical decisions for you if you become unable to do so yourself. The declaration must be
in writing and signed by two witnesses. Currently a health care power of attorney is only
effective if you are determined to be incapacitated.
12.
What is a Revocable ("Living") Trust and how does it avoid probate?
A Revocable ("Living") Trust is a document created by you to provide for
management of your assets during your lifetime and you can designate to whom your
assets will be distributed at your death. You can amend or revoke this document at any
time as long as you are not incapacitated. If you are the initial trustee, then the document
will name a successor trustee to administer the trust upon your death or incapacity.
Upon your death the successor trustee is responsible for paying all claims and taxes
and then distributing the assets in accordance with your instructions contained in the trust
agreement. This avoids the costs, time and necessity of going through the probate
procedures.
Ownership of assets must be formally transferred to the trust before your death to
get the maximum benefit from the trust. If assets are not properly transferred to the trust,
then the assets may be subject to probate. However, certain assets should not be
transferred to a trust because income tax problems may result.
13.
How do I know if my assets are in my Revocable Trust?
The account statement, stock certificate, title or deed will make some reference to
the trust or to you as trustee. Some examples are:
James Smith, U/T/D 2/3/98
James Smith, as Trustee FBO James Smith
James Smith, TTE
James Smith Trust dated February 3, 1998
14.
How is an estate taxed for federal estate tax purposes?
If the value of all assets owned by you (net of deductions) exceeds your available
"applicable exclusion amount," then federal estate tax must be paid. The federal estate tax
rates begin at 18% and increases to 45%. Your taxable estate includes everything you
own, no matter how you own it. For example, all assets held in your sole name, a portion
or all of jointly held assets, assets held in your revocable trust's name, life insurance and
certain other property will be part of your taxable estate.
The amount that each individual can distribute, without paying an estate or gift tax,
is called the Aapplicable exclusion amount.@ This amount is scheduled to increase through
the year 2009 as follows:
2006, 2007 & 2008 2,000,000
2009 3,500,000
2010 no estate tax
2011 1,000,000
15.
How can married couples minimize estate taxes?
Married couples often leave all their assets to the surviving spouse. By doing so you
do not use the available applicable exclusion amount of the first spouse to die. If the value
of the assets that remain for the surviving spouse exceed his or her available applicable
exclusion amount, your beneficiaries will owe estate taxes. For example, Joe and Mary
own assets worth $3,000,000 in 2007. All assets are either in joint names or have the
spouse as designated beneficiary, such as an IRA. Upon Joe's death Mary becomes the
owner of the entire estate and at her death there will likely be estate taxes because the
amount in her estate exceeds her applicable exclusion amount of $2,000,000 in the year
2006.
However, your estate plan can provide for a special trust to be created at the death
of the first spouse that can pay all income to the surviving spouse and distribute principal
as he or she may need for health, support and maintenance. Your spouse can even be the
trustee of this special trust. This special trust can generally be funded with an amount of
money or assets equal to the deceased spouse's applicable exclusion amount. This
arrangement is often referred to as a "credit bypass trust," "family trust" or an "A-B trust" if
a marital trust is used for the balance.
For Joe and Mary, at Joe's death we could put $2,000,000 in this special trust. The
assets in this trust are not counted as part of Mary's taxable estate at her death and the
estate tax is reduced to zero because her estate of $1,000,000 is less than the applicable
amount.
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