Florida Law
Florida Trusts & Estate Planning Law
- Trusts & Estate Planning Law
Trusts & Estate Planning Law
Although no one likes to think about dying, there are good reasons to prepare for this inevitable event by setting up a plan to distribute one's estate after death. A person's estate consists of all of his or her property and possessions, including bank accounts, real estate, furniture, automobiles, stocks, bonds, life insurance policies, pensions and death benefits. Often, probate, which is the court-supervised process of identifying, gathering and distributing a person's assets after death, is a complicated and expensive process. However, with proper planning, the distribution of a person's estate can be accomplished with fewer costs and complications. Two of the most common tools used in estate planning are wills and trusts. Both of these legal devices are discussed in this chapter, as well as other issues a person should consider when planning his or her estate.Wills
A will is a written document specifying how and in what manner a person's estate is to be distributed after his or her death. A person making a will is known as a testator. Anyone designated to receive property under a will is called a beneficiary. A will can be simple or elaborate, depending on the size of the estate and the wishes of the person making the will. A will can designate who receives artwork, jewelry, cars, real estate or any other property. A will can name a guardian to take care of minor children if there is no surviving parent and can disinherit a child if the testator does not want the child to receive any part of the estate. A will can also create a trust, make gifts to charity or authorize the selling of real estate without court proceedings.Requirements of a Valid Will
Under Florida law, there are a number of requirements for making a valid will. A testator must be at least 18 years old and of sound mind and body when he or she signs the will; the will must be written and witnessed by two competent people, both of whom must sign the will in the presence of the testator and each other; the testator must sign the will at the end and in the presence of the two witnesses; and the will must be approved by a probate court.The manner in which a will is witnessed and signed is known as the will's execution. If a will is not executed according to the formalities mentioned above, a probate court will not approve the will and the estate will be distributed under the state's intestacy laws (see Dying Without a Will below). Similarly, property owned by the testator but not included in the will is distributed according to the intestacy laws.
A testator can revoke or change a will at his or her discretion (see Revoking or Changing a Will below). A will has no legal effect until the death of the testator. While Florida requires that a will be written, it does not have to be typed. A handwritten will, sometimes referred to as a holographic will, is valid as long as it is properly executed under Florida law.
It is important to note that if there is a mistake in the preparation or execution of a will, resulting in the will being denied probate, Florida courts have ruled that the attorney who negligently prepared the will or negligently supervised its execution may be sued by the beneficiaries. The amount of recovery could be substantial, depending on the amount the beneficiaries would have received had the will been properly prepared and executed.
Personal Representative
A will typically appoints someone called a personal representative or executor to carry out the wishes of the testator as stated in the will. The personal representative should be a trusted friend or family member and should be made aware of his or duties before the testator dies. Under Florida law, a personal representative must be at least 18 years old and a resident of Florida. Convicted felons or persons incompetent to fulfill the duties of a personal representative are ineligible for the position.The duties of a personal representative are many. Depending on the nature of the estate, he or she may have to identify, gather and safeguard the testator's assets, provide notice of the estate's administration to all interested persons, contact creditors, settle valid claims, pay state and federal taxes on the estate and pay administrative expenses. Florida law provides that a personal representative can be compensated out of the estate for his or her efforts. If a testator does not name a personal representative in his or her will, the probate court may appoint a professional administrator to perform the requisite duties.
Appointing a Guardian for Children
A person with minor or dependent children can designate in a will a guardian for the children should there be no surviving parent. If a person fails to name someone to the role of guardian, the probate court appoints someone. The person chosen by the court is usually a close friend or relative. As with the selection of a personal representative, it is important that the potential guardian understand the provisions of the will and agree to accept the responsibilities of being a guardian. It is also wise to name an alternate guardian should the primary guardian be unable to accept the responsibility. Of course, the selection of a guardian for children is likely to influence how the parent distributes his or her property.Restrictions on Wills
In the interest of protecting the family, particularly the surviving spouse, Florida law places some restrictions on what a testator can do under the terms of his or her will. For example, a testator cannot disinherit his or her spouse without a properly executed prenuptial or postnuptial agreement. The state gives the surviving spouse a choice of either his or her share under the terms of the will or 30 percent of the decedent's estate, less any valid claims against the estate, real property located outside of Florida, state and federal taxes and administration expenses. The surviving spouse, therefore, is always entitled to at least 30 percent of the decedent's net estatethis is known as an elective share. The testator is free, however, to disinherit his or her children.There are also restrictions on what a person can do with his or her homestead (i.e., residence, as defined by state law, owned by a decedent who is survived by a spouse or minor child). In most cases, the surviving spouse or minor child retains some form of ownership of the homestead, thereby ensuring that they at least have a place to live. The surviving spouse and any dependent children are also entitled to what is known as a family allowance. Florida law authorizes a family allowance of up to $6,000 for a surviving spouse or dependent children, which is paid in addition to the amount passing to the spouse or children by will, intestacy or elective share.
Any real or personal property jointly owned with another person (with a right of survivorship) cannot be given away by the testator since ownership of the property shifts to the other person upon the testator's death. Similarly, a testator cannot specify that someone other than the beneficiary of the testator's life insurance policy receive the benefits of that policy. Once the testator dies, the benefits of the life insurance policy immediately become the property of the beneficiary.
Finally, the Cuban Assets Control Regulations, promulgated by the U.S. Treasury Department, prohibit distributions by will or inheritance from any state to a Cuban national or resident of Cuba.
Revoking or Changing a Will
A will can be revoked or changed up until the death of the testator. To revoke a will, a person can simply tear it up, burn it or otherwise destroy the document. A person may also execute a new will, which automatically revokes an earlier will. If a person wishes to make a few changes to a will, he or she can have a codicil drawn up. A codicil is an addition or amendment to an existing will and must be signed and witnessed in the same manner as a will. Anyone wanting to change his or her will should never simply cross something out or otherwise write on the will. Writing on a will may invalidate it.A will can also be changed by operation of law. If, after executing a will, a person marries, divorces or has a child, and then dies without making changes to the will, the will is considered by Florida law to nonetheless have been amended, taking into account the new family situation. For example, if a person marries after executing a will and the spouse survives the testator, the new spouse is entitled to an intestate share (approximately 50 percent) of the testator's estate, even though he or she is not mentioned in the will.
A person should review his or her will approximately every three years; a person's financial or personal status may have changed, beneficiaries may have died, or a favorite charity may no longer exist. Countless lawsuits have been waged over what to do with a person's estate in these situations; an up-to-date will avoids such problems.
Dying Without a Will
If a person dies without a willknown as dying intestatehis or her property will be distributed according to a formula defined by Florida law governing intestate inheritance. The law is rather rigid; it only recognizes relatives (thereby excluding a decedent's friends, lovers or favorite charities) and makes no exception for anyone in unusual need. Moreover, the intestate distribution process is often more complicated, time-consuming and costly than distribution under a will, and the process is administered by court-appointed personnel, not the decedent's family or friends. Briefly, Florida's intestate law provides as follows:*If there is a surviving spouse and no lineal descendants (children or grandchildren), then the surviving spouse takes all of the estate.
*If there is a surviving spouse and lineal descendants of both the surviving spouse and the decedent, then the surviving spouse receives the first $20,000 of the estate, plus one-half of the rest of the estate and the lineal descendants share the remaining half.
*If there is a surviving spouse and lineal descendants (one or more of which are not lineal descendants of the surviving spouse), then the surviving spouse receives one-half of the estate and the lineal descendants share the remaining half.
*If there is no surviving spouse, but lineal descendants, then the lineal descendants share the estate.
*If there is no surviving spouse and no lineal descendants, then the estate goes to the decedent's surviving parents, and if none, then to the decedent's brothers or sisters or descendants of the decedent's brothers or sisters.Living Wills
A living will does not involve the distribution of property. Instead, a living will is a written document specifying what medical procedures should be taken to prolong a person's life in the event that he or she is incapacitated. A living will must be signed in the presence of two witnesses, one of whom is neither a spouse nor blood relative. If a person is physically unable to sign his or her own living will, one of the witnesses may sign for the person at his or her direction.Trusts
A trust is an arrangement wherein one person (the trustee) manages and holds legal title to property owned by another (the settlor or grantor) for the benefit of a third party or parties (the beneficiary). An example of a trust would be where Person A delivers $100,000 to Person B to hold in an interest-bearing account for 10 years, at which point Person B will pay the entire $100,000 plus interest to Person C.There are many different kinds of trusts, each with its own particular characteristics. Testamentary trusts are trusts created by a person's will and take effect after his or her death. One of the reasons a person may want to create a testamentary trust is that it permits him or her to control how trust property is given to the beneficiary. For example, the beneficiary may be a minor at the time of the settlor's death. Rather than receiving all of the inheritance immediately, a trust would insure that a trustee hold and manage the inheritance until the beneficiary is 21 (or whatever age the settlor decides) and presumably responsible enough not to squander the inheritance.
Living trusts, also known as inter vivos trusts, are trusts created during a person's lifetime. The fact that living trusts are created before a person dies gives them particular benefits unavailable to testamentary trusts. One principal benefit is that the property included in a living trust is not subject to probate should the settlor die. Since the trust is created before the settlor's death and the trust property already transferred to the trustee, the trust property is not considered part of the settlor's estate, and therefore avoids the costs, complications and taxes of the probate process. Testamentary trusts are created after the settlor's death, and the trust property is subject to probate. If a living trust includes all of a person's property, a will may be unnecessary, and the person's beneficiaries may be able to avoid probate altogether.
Another benefit of a living trust is that it can be used to protect the trust property in the event of the settlor's mental incapacity. For example, if a person becomes confused or otherwise mentally incapacitated, he or she may make foolish purchases or sign over property to unscrupulous individuals. If the property is held by a trustee in a revocable trust, the trustee could petition the appropriate court to refuse the purchase or property transfer, thereby protecting the property. Living trusts which are irrevocable have the added benefit of receiving certain income and estate tax savings.
The principal disadvantage of a living trust is that the settlor no longer has full control over the property put into the trust, unlike the property in a testamentary trust, which is under the unrestricted control of the settlor.
Probate
As noted above, probate is a court-supervised process concerning the final disposition of a person's estate after death. Florida law provides a Formal Administration process for larger and more complicated estates, as well as Family Administration and Summary Administration for smaller estates. Formal Administration can take years to complete, particularly if there is litigation involved. Family and Summary Administrations may last five to six months, depending on the issues involved.Florida's circuit court has jurisdiction over probate matters. If a person dies with a will, the court will determine whether the will is valid; then the personal representative designated by the testator will take over administration of the estate. If a person dies without a will, the court will appoint an administrator to dispose of the estate according to Florida's intestate laws after all taxes and expenses have been paid and claims settled. Both personal representatives and court-designated administrators, as well as any other individuals involved in the disposition of an estate (e.g., accountants, lawyers) are entitled to reasonable compensation for their efforts. How much compensation is reasonable may be determined by the will, by a contract between the personal representative and the decedent, by an agreement between the personal representative and the persons bearing the impact of the fee, by Florida law or by the probate judge.
Death Taxes
Unlike a number of other states, Florida has no state inheritance tax (a tax paid by those receiving property from a decedent's estate) or state estate tax (a tax paid by the decedent's estate for the privilege of transferring property). Therefore, the only death taxes that Florida residents have to pay are federal estate, gift (if applicable) and income taxes. The personal representative or court administrator is responsible for filing the requisite tax returns.Inheritance Litigation
Florida's substantial population of senior citizens has made it one of the nation's centers for disputes over wills and trusts. These disputes take the form of will and trust contests, and civil actions brought by families seeking damages for third party interference, such as when a family claims an outside person exploited or took advantage of a loved one.A person can raise both procedural and substantive objections to a will or a trust. A procedural objection to a will could be that the testator did not sign the will in the presence of two competent witnesses or otherwise failed to follow the execution procedure required by Florida law. If a court determines that a will was not properly executed, the will is invalid.
Substantive objections involve the testator's (or settlor's, in the case of trusts) intent and capacity to create a will. For example, a dissatisfied beneficiary might object that, at the time of the will's execution, the testator lacked the mental capacity to make a will or was subject to some undue influence, such as a third party. A beneficiary could also claim the will was a product of fraud and the testator a victim of deceit. If a probate court determines that a testator lacked the required intent or capacity, the will (or portions of it) is invalid and the testator's estate subject to distribution through intestacy.
Court proceedings in a will or trust contest generally require expert medical testimony and factual testimony by the lawyer who supervised the execution of the document and by the relatives, neighbors and friends of the person making the will or trust.
Resources
The Florida Bar has pamphlets discussing both wills and probate. For a copy of these pamphlets, call (904) 561-5834. You can also call Florida Call-A-Law to hear recorded information on wills and probate at (904) 561-1200.Florida Law: A Layman's Guide, Gerald Keane, Pineapple Press, Sarasota, FL, 1993.
The Essential Guide to Wills, Estates, Trusts & Death Taxes, Alex J. Soled, AARP, Glenview, IL, 1988.
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