A will is an important tool in the estate planning process that allows a testator, a person who creates a will, to distribute the assets of an estate in the manner is deemed most appropriate. If no will is present, a testator’s estate is executed by the rules of intestate succession and assets are distrusted to the testator’s predetermined beneficiaries at a certain percentage.

To create a valid will, Florida requires the testator to posses the intent to create a will. To make a will, Florida requires the testator to be of sound mind and at least 18 years old. Additionally, a court requires the testator to understand the extent of her property, and to know the nature and scope of the act of executing a will. The testator must also be able to sign the will with this intent.

Courts do not allow a will to be signed by a power of attorney, guardian, or conservator of the testator.

Often people do not think someone is competent, but they may still be able to execute a will. There is a difference between a court determining someone to be incompetent and a doctor saying it.

In Florida, case law has shown that even if a testator is deemed incapacitated, it can still execute a Will without a guardian. Generally, an incapacitated person does not have the testamentary capability to execute a will.   It must be proved that the testator returned to a state of testamentary capacity by demonstrating that the will was executed during a lucid moment. A “lucid moment” is a period of time during which the testator returned to a state of comprehension and possessed actual testamentary capacity.

If a will was executed while determined to be incapacitated by a court, the burden of proof lies with the proponent of the will, which means those who wish for the will to be executed must present some evidence that the testator was lucid and possessed the proper intent to execute the will. In Am. Red Cross v. Estate of Haynsworth, the proponents of the will provided two expert witnesses that stated they believed the testator to be lucid when the will was executed. However, only one of the witnesses had examined Mr. Haynsworth and the other had not examined him near the time he signed the will. The court did not buy the proponent’s argument because neither of the expert witnesses, or lay testimony, offered any evidence that Haynsworth was lucid near the time the will was executed.

Therefore, the proponents of a will should have the incapacitated testator examined by an expert or the will could be deemed invalid by a court. The court in Haysworth did not further define how near the examination by the expert should take place in regards to when the will is executed. The best course of action would be to have the testator examined by a physician and psychiatrist on the same date the will is executed, and to then seek a judicial determination of competence by the court.

For more information on how to execute a will, or the effects of an incapacitation in estate planning, contact The Law Office of David M. Goldman PLLC at 904-685-1200.

The estate executor or personal representative is one of the most important roles in managing a loved one’s estate after death.   Serving as an executor comes with many responsibilities, but knowing what to expect will make the transition into this important role much easier. The following checklist can be helpful in organizing your efforts.

The first step an executor should take is to look for records and important documents that relate to the deceased’s estate.

The common places to look for records

  • Personal filing cabinets: Many people keep physical copies of financial records in a home filing cabinet, safe, or in other types of physical storage. Financial records might also be kept near areas where bills are paid in the home.
  • Electronic storage: Search through the deceased’s home computer, laptops, and other electronic devices for folder names that might relate to the estate. A good place to look on a computer include the “my documents” and “downloads” folders on PC or Mac.   Important files are often times kept in storage devices such as an external hard drive or USB thumb drive.
  • Mail: Look for correspondence from banks and other investment companies. These institutions will periodically send financial statements or even checks.

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The duties of a trustee vary depending on the laws of the state in which the trust is situated and the extent of the trustee’s powers provided for in the trust agreement. In some cases where there are conflicts between the terms of the trust and the state laws, the duty or obligation can vary depending on what the state law permits. In some cases, the terms of the trust will prevail and in others, the default law cannot be modified by the terms of the trust. When you become a trustee of a trust, it is recommended that you sit down with a trust attorney to review the terms of the trust as well as how state law may impact the written terms of the trust.

In addition, the type of trust can change your obligations and the role of a trustee in dealing with beneficiaries. Below is a list of some of the typical duties that are contained in trust agreements and the laws of many states:

Fiduciary Duty. A trustee has a fiduciary duty to the beneficiaries of the trust, This includes both the current beneficiaries and any remainder beneficiary’s name in the trust. A fiduciary duty is a very high standard to do what is in the best interest of the beneficiary. This is not necessarily what the beneficiary asks for or what you want.

The Trust’s Terms. It is important to read the terms of the trust carefully and understand your duties and how state laws may impose additional provisions or remove or modify the terms of the trust. The trust is a flow chart of what actions you must take and when. Some states, like Florida, reduce the statute of limitations when certain disclosures are made. This can reduce the potential liability of a trustee to the beneficiaries. Continue reading

With the current estate tax exception of $5.43 Million for an individual and $10.86 Milliion for a married couple, some estate planners have begun to question whether gifting provisions in a Durable Power of Attorney pose more risk than reward.  While it is true, that these provisions can be abused by individuals, there are several situations when estate taxes is not the primary concern and removing gifting provisions could pose a substantial risk to the individuals.

In Florida, individuals must initial next to any gifting provision for them to be valid under current law.  Generally there are those provisions which permit the amount under the annual gift tax exemption (currently $14,000 a year per person) and those which permit larger gifting.  While many estate planners may not see a need for these anymore, elder law attorneys use them all the time to protect the assets from loss due to the need for nursing home coverage for the individual or their spouse.  So while it may be true that less than 0.2%  (2 in 1000) people are actually subject to estate taxes, many more will need long term care.  Without these important gifting provisions, individuals could end up being bankrupt or leaving little or no money for their surviving spouse to live on.

In addition, there is no guarantee that the estate tax exemption will continue to increase or remain the same. Congress could change the numbers in the future and without gifting provisions, your family may not be able to decrease the amount of your estate that would be subject to estate taxes.

For those clients who are subject to estate tax or who live in a jurisdiction where the state may charge an estate tax, gifting can significantly reduce the amount of estate tax that would otherwise have to be paid.

These gifting provisions are important when an individual or family has not planned to protect their assets from loss due to the need for long term care.  Many estate planning and elder law attorneys recommend that families should begin protecting assets by age 60 so that if care is needed later, the assets can be exempt from those used to disqualify one for coverage.  Today there are modern trusts where the individual does not lose control and has the flexibility to change beneficiaries, in much the same way as a with a revocable trust.  If you have a traditional estate plan that does not exempt assets from claims that may be made by the government or other creditors, or you would like to review your durable power of attorney to see if it complies with the current law and permits the right type of gifting for your family, contact a Jacksonville Florida estate planning lawyer to discuss your objectives.

In Florida, a trust is not valid until funded.  Many trusts need to be funded prior to your death to be used in the way intended.  Often, individuals create trusts and forget to fund them during their life and do not receive the benefits that their trusts were designed for. There are 4 major ways to fund a trust.

  1. Purchase items in the name of the trust.  New property or items can be purchased in the name of the trust.  When you purchase a new item or asset, the sale can be made out to the trust.  Anyone can purchase these items, it need not be the creator or settlor of the trust.
  2. Assign items to the trust. Generally, when a trust is created, many items can be transferred to the trust by the use of an assignment of personal property.  This document will transfer personal property which does not require a deed or title to the trust.  This is good for personal property like clothing, jewelry, and other minor issues. One needs to be careful not to assign firearms to your trust unless it is a gun trust as many traditional trusts do not properly deal with firearms issues properly and can cause legal and criminal issues for those who survive you.  If you sign an assignment of personal property, you should exclude firearms unless the firearms are being assigned to a gun trust.
  3. Change the ownership of an item to the trust. Bank accounts, stock accounts, life insurance, annuities and other assets can be transferred to a trust by changing the ownership of the account.  When the taxpayer ID remains the same, it is generally not a taxable event.  This is the case for revocable trusts and some irrevocable trusts like an iPug™ Asset Protection trust.  With some assets like real property or vehicles, the deed or title to the property will have to be changed.  In most cases, other than with Vehicle Trusts, it is not recommended to transfer a vehicle to a trust because of the liability that is associated with the ownership of a vehicle in many states like Florida.
  4. Change the beneficiary of an item to a trust. This does not initially fund a trust, but can be used for certain items like retirement accounts.  While in the past some lawyers, CPAs, and financial advisors might have recommended against naming a trust as a beneficiary of a retirement account, it is now recommended because of the additional flexibility and asset protection a trust can offer due to a Supreme court ruling that removed asset protection from inherited IRAs where the beneficiary did not live in Florida at the time of inheritance.

When you have multiple trusts it is important to understand which assets should be transferred to which trust.  Generally, if you only have a revocable trust, most assets will be transferred to the revocable trust.  When using an iPug™ trust, your checking or assets representing income and where your expenses are paid from should be transferred to a revocable trust and other remaining assets will be transferred to your iPug™ trust.  Because in Florida ones homestead has asset protection it is typically transferred using a deed to a revocable trust and other real estate is transferred to ones iPug™ trust.

Funding a trust can be complicated and should be discussed with a Florida estate planning or an Elder law attorney who help to design the trusts.

Last month the United States District court in Orlando found that the membership interest in a Nevis LLC was subject to Florida jurisdiction. The court also found that Florida law, not Nevis law, applies to the creditor’s application for a charging lien because the situs of the asset determines what laws are applicable to issues related to the charging lien.

This rationale would seem to apply to Foreign trusts as well as Foreign LLCs.  It appears that a Corporation or LLC where there were actual certificates for the membership interests that were not located within the state of Florida may have a different result.

The court rejected the claim that jurisdiction was in Nevis.  They stated that unlike with a corporation, a membership interest “accompanies the person of the owner.” and as a result is subject to Florida jurisdiction if the owner of the certificate is subject to the jurisdiction.  With some foreign LLCs a single member can have charging order protection, but under this court’s ruling, a single member foreign LLC would not receive charging order protection as only a multi-member LLC has charging order protection as an exclusive remedy.

Perhaps the bigger question is with good, strong, valid options for asset protection within the state of Florida, why spend the extra money, take the risk, or live with the results of the stigma of wrongdoing that is often associated with offshore planning?

To more about this case see WELL FARGO BANK, NA v. Barber, Dist. Court, MD Florida 2015

Asset protection was previously out of reach for most Americans.  Thanks to a new trust called the IPUG™ Trust, Asset Protection is affordable for the average family.  In the past many families created trusts to avoid estate tax, but with the recent increases in the Federal estate tax exemptions, many use trusts to manage assets, avoid probate, and protect assets from creditors.

The iPug™ Trust not only provides advantageous tax benefits, but it also provides asset protection, while retaining Grantor control,” explains David J. Zumpano, CPA, ESQ., President and Founder of MPS and creator of the iPug™ Trust. “iPug™ Planning will  apply to 99.5% of Americans.”

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Estate Planning for Digital Assets is becoming a more important part of our estate planning.  While most online accounts simply expire when you die, Facebook has recently incorporated some changes to your account so you can specify what happens when you die.

Until recently, loved ones of the deceased only had two choices:

  1. Keep the wall public so everyone could continue to post messages and thoughts on the wall, or
  2. Request to have the page “memorialized,” which meant the profile was no longer searchable or visible to those who were not already friends of the individual.

What Facebook did not allow to happen was for someone to manage the profile of the deceased owner without  having the password.  That just changed with the Facebook Legacy Contact feature.  A Facebook user can now choose a “legacy contact.”  The Legacy Contact can manage your account  or delete the account after you pass away.

Facebook’s Updated Options and Release Stated:

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The amount you can give anyone without having to file a gift tax return in 2015 remains the same as 2014 at $14,000.

Remember that you can give your children, their spouses, your grandkids $14,000 each. In addition, if you are married, your spouse can also gift $14,000 to each person.

Generally, families use gifting to reduce the size of their estate do not need Medicaid long-term care coverage, but if you or your spouse need care and you have gifted money in the past, it may affect your ability to obtain coverage.

The $14,000 figure is the amount of the current gift tax exclusion (for 2014 and 2015), meaning that any person who gives away $14,000 or less to any one individual does not have to report the gift to the IRS, and you can give this amount to as many people as you like. If you give away more than $14,000 to any one person (other than your spouse), you will have to file a gift tax return. Filing a gift tax return does not mean you will have to pay a gift tax. Taxes are only when your reportable gifts total more than $5.43 million (2015 figure) during your lifetime.

Many people incorrectly believe that if they give away an amount equal to the current $14,000 annual gift tax exclusion, this gift will be exempt from Medicaid’s five-year look-back at transfers that could trigger a waiting period for benefits.

The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medicaid’s asset transfer rules. While the $14,000 that you gave to your grandchild this year will be exempt from any gift tax, Medicaid will still count it as a transfer that could make you ineligible for nursing home benefits for a certain amount of time should you apply for them within the next five years.

If you think there is a chance you will need Medicaid coverage of long-term care in the foreseeable future, see your Jacksonville elder law attorney before starting a gifting plan.

If you have been told, don’t worry about your IRA it is protected because Florida has statutory protections for IRAs, you may have misunderstood or been mislead. While Florida does have statutory protection for inherited IRA’s, this protection only applies if your beneficiaries are residents of Florida at the time of your death.

Why take a chance with naming individuals as a beneficiary of your IRA. A properly designed trust should be the beneficiary of your IRA to protect the proceeds from the creditors of your beneficiaries at the time of your death.

In June of this year, the US Supreme Court in Clark V Rameker stated that children or other “non-spouse” individuals who inherit are at risk of loss to their creditors. This was not a close call, it was a 9-0 decision and clarifies that an inherited IRA is not protected from the creditors of its owners.

While a spouse can be named, the spouse has a unique option that other beneficiaries do not have. The spouse can do a rollover IRA. This protection does not help one who dies without a spouse or has serious risks if the surviving spouse is in need of long-term care.

While in the past, most financial professionals would object to naming a trust as a beneficiary, you will start to see them realize the benefit as they become aware of the new risks to the beneficiaries that they did not foresee. They also did not understand that it is possible to create a trust where the stretch out provisions are not lost.

To maintain the stretch out provisions in an inherited IRA where a trust is a beneficiary, the trust must be a qualified beneficiary. For a trust to be a qualified pass thru beneficiary of an IRA, it must meet 4 criteria:

  1. The trust must be valid under state law;
  2. The trust must have identifiable “human” beneficiaries;
  3. The Trust must be irrevocable after the death of the settlor; and
  4. a copy of the plan document must be provided to the plan administrator

It is important to comply with these rules when naming a trust as a beneficiary of an IRA or other retirement account.

If a spouse was to maintain the decedent’s IRA status and draw out funds over the life expectancy of the decedent, the IRA would not be protected as a Roll over IRA or a new IRA.

If you would like to discuss how to properly name a trust a beneficary of your IRA, please contact our Jacksonville estate planning lawyers.

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