1. What are the basic estate planning documents I may need in Florida?
The basic documents are:
  • Last Will and Testament
  • Durable Power of Attorney
  • Durable Health Care Power of Attorney (also known as a "Health Care Surrogate Designation")
  • Living Will
  • 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 Aself-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:
  • Specific distributions of property or cash
  • Provision for a separate writing for personal items
  • Trust provisions to control how the property is to be distributed after your death
  • Name of a guardian for your minor children
  • 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 accounting must 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?
  • Locate your will
  • Confer with the lawyer who will serve as attorney for your estate and arrange with the lawyer for probate of your will
  • Talk with family members to determine their immediate financial needs
  • Make tentative arrangements for support and maintenance payments to be paid to your loved ones during the settlement period
  • Seek court authority to serve as your executor
  • Manage your property, including your business, during the settlement period
  • Distribute your property according to the directions in your Will
  • File your final personal income tax return
  • Choose a tax year for your estate
  • File your estate's federal income tax returns
  • File any state income and death tax returns
  • Complete and file the federal estate tax return
  • Become a party to litigation relating to the estate
  • Sell assets, such as real estate, stocks and bonds
  • Invest assets that are not needed immediately for distribution or expenses
  • 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 titled in the name of 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 springing 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 attorney-in-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 attorney-in-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 probably will not use Aspringing@ 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 artificial means 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 rate is currently 40% on the value of assets in excess of the applicable exclusion amount. 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 "applicable exclusion amount." This amount is currently $5,250,000.

    15. How can married couples minimize estate taxes?
    Married couples often leave all their assets to the surviving spouse. If you give all your assets to your surviving spouse outright 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 $6,000,000 in 2013. 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 $5,250,000 in the year 2013.

    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 $5,250,000 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 $750,000 is less than the applicable amount.

    Further, under current law “portability” is allowed. This generally means that if the predeceased spouse’s exemption is NOT used via the family trust as noted above the surviving spouse can still take advantage of her predeceased Spouse’s Unused Exclusion amount (or “DSUE”). This DSUE is “ported” to the surviving spouse. The surviving spouse, however, has to make sure that a Form 706 is filed for her predeceased spouse to elect portability and to use the DSUE even though the predeceased spouse’s estate may not otherwise be taxable.

    16. How can lifetime gifts help me reduce my estate tax?
    Gifts can ultimately reduce the size of your estate and thus, the corresponding estate tax. You can currently make gifts of $14,000 each year to an unlimited number of recipients. Currently, there is no limit to the number of these gifts that can be made in any given year. Of course, when you make a gift, you must relinquish control of the assets to the recipient (i.e., "no strings attached"). Gifts valued in excess of $14,000, per recipient, will count against your applicable exclusion amount and reduce the amount that will be available to you at your death. This amount is used for both estate and gift tax purposes. Gifts to your spouse are generally not subject to gift tax if your spouse is a U.S. citizen. The current limitation on lifetime gifts is $5,250,000.

    17. How can charitable gifts be used in my estate plan?
    Your estate plan can include charitable gifts in your will and trust to create a charitable deduction for estate tax. You can also give charitable gifts during your lifetime in a number of ways. These lifetime gifts have the dual benefit of providing a current income tax deduction as well as estate tax benefits at your death.

    18. How can I make a charitable gift during my lifetime and still use the assets?
    Charitable gifts made during your lifetime can provide a lifetime income to you, save on income and estate taxes, and give you the satisfaction of seeing the benefit of the gift. Lifetime charitable gifts can take a variety of forms, including charitable remainder trusts, charitable lead trusts, pooled income funds, gift annuities, life estates and insurance.

    19. What is a Charitable Remainder Trust?
    A Charitable Remainder Trust is an irrevocable trust where you (or persons you designate) will receive distributions from the trust periodically during your lifetime or the lifetime of others designated to receive distributions. The distribution amount is determined at inception based on income needs, age, value of the property and other relevant factors. The trust can be a Charitable Remainder AUnitrust@ or a Charitable Remainder "Annuity Trust."

    Distributions from a Unitrust are calculated as a percentage of the asset value with the value redetermined annually. Distributions from an Annuity Trust are a fixed amount each year based on the value of the asset at inception.

    Upon your death, or at the death of the designated income recipients, the remaining trust assets will be distributed to the charities selected by you. You can retain the right to change the charitable beneficiaries during your lifetime. The amount distributed to the charities will be a deduction in your taxable estate. If the trust has other noncharitable beneficiaries, then the deduction will be based on the anticipated remainder value to the charities.

    You can place a highly appreciated asset in a Charitable Remainder Trust and avoid capital gains tax on the sale of the asset. For transfers made during your lifetime you will receive an immediate income tax deduction, subject to an annual limitation of 50% or 30% of your adjusted gross income, depending on the charity and the type of asset involved. Any excess deduction not allowed in the year of the gift can be carried over for 5 years. This deduction is based on the value of the interest that the charity will ultimately receive and depends on a number of variables. Transfers made at your death will receive an estate tax deduction rather than an income tax deduction.

    20. What is a Charitable Lead Trust?
    The Charitable Lead Trust is just the opposite of the Charitable Remainder Trust and provides for the charity to receive the income first and your beneficiaries to receive the principal at the expiration of the trust term. The Charitable Lead Trust can be a Unitrust or an Annuity Trust.

    21. How does a Pooled Income Fund work?
    The pooled income fund is useful if you do not have sufficient assets to contribute to a Charitable Remainder Trust or Charitable Lead Trust or if you prefer to make smaller contributions over a period of time. Contributions from many individuals are pooled together and shares of the fund are given to each contributor. An income tax deduction is available in the year the contribution is made. Income is paid until the last income beneficiary dies and then the shares transfer to the charity.

    22. How can I use a Gift Annuity in charitable giving?
    A direct gift is made to a charity and a designated beneficiary receives income for life. Part of the income received from the annuity is a return of the gift so only a portion is taxable as income. A charitable income tax deduction is available in the year the contribution is made. Upon death the charity keeps the remaining principal and undistributed income.

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    Additionally, the comments, statements and articles contained herein are general in nature and should not be relied upon as a basis for any legal opinion, action or conclusion on the part of the reader with respect to any particular set of facts or circumstances.
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