Most people assume when they receive an inheritance, either through a will or a trust, that they must accept it. This is actually not the case as a beneficiary is also allowed to disclaim, or not to accept, the inheritance. Refusing an inheritance may seem like an alien concept, but can actually be the best course of action for many beneficiaries in some situations.

There are many reasons to disclaim an inheritance, with the most common reason being to avoid costly taxes. A common example of this might happen when parents leave money to affluent adult children. In this case, the children could disclaim the inheritance in order for the grandchildren to receive the inheritance instead. The money would then be taxed at the grandchildren’s tax rate rather the adult’s rate, which could save a large portion of the inheritance from being taxed. In addition, if the disclaimed assets would not be subject to the estate taxes of the parent.

Letting the inheritance pass to the next beneficiary through a disclaimer can be a much more efficient process compared to the beneficiary accepting the gift and passing the gift to the next beneficiary herself.   This is especially true if the gift is real property as is does not require the first beneficiary to go through the re-titling process. Someone with a large estate can also use a disclaimer to save on gift taxes, which will be incurred if the beneficiary takes the inheritance and passes it to another person.

A disclaimer can also be used for personal reasons, such as when a beneficiary knows another beneficiary needs the money more than she does. A good example of this occurs when a parent leaves her estate to two children, and names each child the alternative beneficiary.   In this scenario lets assume one child is a doctor and the other is a school teacher who supports a large family. The doctor may disclaim the inheritance so the schoolteacher receives her share of the inheritance because she knows the schoolteacher needs the money more.

In some cases there are restrictions on funds or assets that make them much more valuable to the children and a disclaimer can be used to remove the restrictions.

A beneficiary may wish to disclaim an inheritance if she is facing bankruptcy. In Florida, the bankruptcy law is complicated and may not allow a beneficiary to become a disclaimant.   We recommend consulting with a bankruptcy attorney before disclaiming an inheritance in order to avoid any fraudulent transfers of assets.

Beneficiaries often disclaim property that has become undesirable. A property might become undesirable for many reasons such as when extensive repairs are needed, or the property has incurred large debts.   It might often cost the beneficiary more to use or sell the property, and in taxes, than it would be worth. A disclaimer would allow the property to go to another beneficiary or back to the settlor’s estate.

All disclaimers should be done according to the Internal Revenue Code § 2518 to be valid, and should be prepared by an experienced estate-planning attorney. For more information, contact The Law Office of David Goldman at 904- 685-1200.

A common estate-planning problem arises when parents with young children die or become incapacitated. Usually when one parent dies, the second parent assumes custody, but if the second parent is also not available the issue is who has the right to and who will raise the minor children.

The best solution to avoid this issue is to plan ahead by naming a guardian through a will. A guardian should be someone who is willing to raise the minor children in the event something happens to the parents. To qualify as a guardian in Florida, the person must be at least 18 years old and of sound mind.

In the will, a personal guardian should be named for each of the parent’s children. It is also a good idea to name an alternative guardian in the event the first guardian is unable to serve. Besides the age requirement, a guardian must be a Florida resident unless a close blood relative or spouse of one. A testator, or one who executes a will, may also name co-guardians if they prefer that two people care for the child. This could allow another couple to raise the children, and would give each guardian the ability to make important decisions for the child.

The parents can select one guardian to raise the child, and another to take care of their property.

Selecting a guardian is not a process that should be taken lightly and there are many factors we urge clients to consider before naming a guardian in the will. The most important factor is whether the prospective guardian has a genuine desire to care for the children. A parent should have an honest discussion with the guardian to determine if this person is fully prepared to take on this big responsibility.

Even if the guardian is 100 percent on board with the idea, we urge clients to weigh other factors as well, such as if the prospective guardian is physically capable of raising the children. A parent might also want to consider how much time the guardian has to be a parent, and whether the guardian would be able to afford raising the children.   The latter factor may also depend on if the parent can leave the guardian any assets to help. A parent might also wish to factor whether the guardian already has children, and if their children would need to move out of state.

The majority of the time, parents will wish for their children to stay together with one guardian. However, it is possible for different guardians to be appointed for different children. This might be a good idea if children have become attached to different adults within the extended family. For instance, the older child may like spending the majority of her time with the grandmother, while the other child may prefer an uncle. This situation arises most commonly when a parent has children from different marriages.

If one parent dies, the default rule in most jurisdictions is that the other parent will retain custody of the child.   This will happen unless the other parent has legally abandoned the child or the parent is deemed unfit by a judge. It is often difficult to prove a parent is unfit, however, courts may rule a parent to be unfit if they have a serious problem such as habitual drug or alcohol abuse, a mental illness, or a history of child abuse.

For more information on how to name a guardian through a will, contact Florida estate-planning attorney David Goldman at 904-685-1200.

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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