Florida Estate Planning Lawyer Blog

Only five weeks before his death Leonard R. Brener made a change to his will. He decided to change his beneficiaries form four local charities to his niece and her husband who took care of him while he was dying.

The non-profits were stunned and file a suit to battle over the money. The case took more than five years that the state appeals court recently ruled that Brener was mentally competent and his decision to leave the money to his family should stand.

The charities tried to argue that his change was unnatural because it would trigger significant estate taxes which he had previously stated he wanted to avoid.
(Estate taxes on 8M today are 2.7 Million Dollars) with proper estate planning its possible to have reduced the tax to 1.8 Million or less) Although the estate taxes from 2001 were significantly more than they are today.

This lengthy estate battle could have been avoided with the privacy afforded by a Florida Revocable Trust and some explanation within the will as to why the changes were being sought. In addition a Florida Revocable Trust would help to avoid the costs associated with a Florida Probate. If you would like more information on how a Florida Revocable Trust could benefit your or your family, Contact a Florida Estate Planning Lawyer for more information.

When one dies the value of their estate is subject to an Federal Estate Tax. This rate is currently 45%. In 2008 the Federal government has an exemption of the estate tax on the first 2 million dollars in value. In addition, many states have additional state taxes that are due when a resident of their state dies. Florida use to have an estate tax, but repealed it when the federal government stopped allowing you to deduct the amount of state estate tax paid from the federal estate tax due.

You should check on the estate tax in your state and consider costs and benefits of your state versus those with no estate tax. One of the reasons so many wealthy people move to Florida is the lack of income tax and estate tax.

How much are estate taxes?

Your estate will have to pay estate taxes if its net value when you die is more than the "exempt" amount set by Congress at that time. Here is the current schedule for the federal estate taxes:

Year of Death.........Estate Tax "Exemption"
2008................................$2 million
2009................................$3.5 million
2010................................N/A (repealed)
2011 and thereafter..........$1 million

In addition you may have to add your states taxes on top of the numbers above.
Although 2010 looks like 0, it really is higher, in 2010 the plan is tax on the increase in value of one's estate. Under the current plan, most assets are able to take advantage of a free stepped up value based upon the fair market value at the time of the decedents death.

A Florida Life Insurance Trust is an irrevocable trust that allows an individual to make the proceeds of a life insurance poliicy free from income taxes and estate taxes. Typical life insurance policies are income tax free, but many increase the value of one's estate to the point that the federal and or state income taxes are due. By using an ilit one can avoid these taxation issues.

In 2008 the Federal tax exemption is $2,000,000. Lets take a client with 1.5M in assets and a 1M life insurance policy.

If they were to die in 2008 their estate would be valued at 2.5M and 500,000 would be subject to estate taxes. The current estate tax rate is 45% so this estate would have to pay a tax of $225,000.

In 2011 the estate tax exemption is only $1M. With an estate valuation of $2.5M, 1.5M would be subject to estate taxes. Using the same tax rate, this estate would have to pay $675,000.

To find out if or how a Florida Life insurance trust can help you please Contact a Florida Estate Planning Lawyer.

The Florida Bar has released consumer information on Florida Probate where they describe many of the issues related to Probate in Florida. They discuss the following:

1. WHAT IS PROBATE?
2. WHAT ARE PROBATE ASSETS?
3. WHY IS PROBATE NECESSARY?
4. WHAT IS A WILL?
5. WHAT HAPPENS TO PROBATE ASSETS IF THERE IS NO WILL?
6. WHO IS INVOLVED IN THE PROBATE PROCESS?
7. WHERE ARE PROBATE PAPERS FILED?
8. WHO SUPERVISES THE PROBATE ADMINISTRATION?
9. WHAT IS A PERSONAL REPRESENTATIVE, AND WHAT DOES THE PERSONAL REPRESENTATIVE DO?
10. WHO CAN BE A PERSONAL REPRESENTATIVE?
11. WHO HAS PREFERENCE TO BE PERSONAL REPRESENTATIVE?
12. WHY DOES THE PERSONAL REPRESENTATIVE NEED AN ATTORNEY?
13. HOW ARE ESTATE CREDITORS HANDLED?
14. HOW IS THE INTERNAL REVENUE SERVICE ("IRS") INVOLVED?
15. HOW IS THE FLORIDA DEPARTMENT OF REVENUE INVOLVED?
16. WHAT RIGHTS DO THE SURVIVING FAMILY HAVE IN THE PROBATE ESTATE?
17. WHAT RIGHTS DO OTHER POTENTIAL BENEFICIARIES (OTHER THAN THE SURVIVING SPOUSE AND CHILDREN UNDER CERTAIN CIRCUMSTANCES) HAVE IN THE PROBATE ESTATE?
18. HOW LONG DOES PROBATE TAKE?
19. HOW ARE FEES DETERMINED IN PROBATE?
20. WHAT ALTERNATIVES ARE AVAILABLE TO FORMAL ADMINISTRATION?
21. WHAT IF THERE IS A REVOCABLE TRUST?

If you have questions about a Florida probate case please contact a Florida Probate Lawyer.

A recent article on Your Louisiana Estate Planning Blog, For Families With More Than $2 million of Assets: Bad Wills Can Cost You $1,000,000 talks about how poorly drafted wills can quickly cost your over $1Million in estate taxes. I see several clients a month that would have tax bills in excess of 1 Million dollars upon their death.

For those of you who have assets in excess of 2 million or expect to have assets in 2011 in excess of 1 million dollars, did you know that almost 1/2 of your estate will go to pay the tax bill?

If you have substantial assets and want to leave them to your family instead of the government, talk to a Florida Estate Planning Lawyer about how to structure your assets.

Professor Gerry W. Beyer author of the Wills, Trusts, & Estates Professors Blog, as reported on a mistake in estate planning where a Another Self-Help Estate Plan Gone Awry. In this case a man decided not to consult with anestate planning lawyer. He transferred the family home to his stepchildren son and $150,000 of securities to his son.

The house was highly appreciated and as such was a poor asset to select to use as a lifetime gift. Because it was transferred during life, the children had to use the father's basis instead of the price of the home at the death of the father. This resulted in over $80,000 in capital gains liability.

In addition the house, because it was transferred within 3 years of death, was still included in the father's estate value and did not reduce his estate taxes.

The moral of the story: Spontaneous self-help by a Testator / Grantor can backfire and deprive heirs of large percentages of an estate and prompt family tensions. Professional planning would have made a huge difference to this man's family.

Some other examples of Do it your self wills and bad news are covered in my articles listed below

Do it Yourself Wills? More bad news and
Do it Yourself Wills? a Good Idea or Not?
Do it yourself Estate Planning: Bad News Part 3
Do it yourself Estate Planning: Bad News Part 4

This is a common mistake found in Florida Probate cases, when people try to make their own wills, or transfer their assets without getting professional help from an attorney or accountant who is familiar with the effects of gifting and estate planning.

If you have used software, a form, or an online service to prepare your will, you should have it reviewed by a Florida Estate planning Attorney for potential problems.

Mitchell Port a California lawyer posted a link to an article on the California Tax Attorney Blog about an article on the State Bar Website which provides information on estate planning. Although this is a California bar website, many of the same issues and considerations are important to Florida residents interested in Florida Estate Planning. Much of the information is also found on The Florida Estate Planning Lawyer Blog which primarily deals with Florida issues.

1. What Is Estate Planning?
2. What Is Involved in Estate Planning?
3. Who Needs Estate Planning ?
4. What Is Included in my Estate?
5. What Is a Will?
6. What Is a Revocable Living Trust?
7. What Is Probate?
8. To Whom Should I Leave My Assets?
9. Whom Should I Name as My Executor or Trustee?
10. How Should I Provide for My Minor Children?
11. When Does Estate Planning Involve Tax Planning?
12. How Does the Way in Which I Hold Title Make a Difference?
13. What Are Other Methods of Leaving Property?
14. What If I Become Unable to Care for Myself ?
15. Who Should Help Me With My Estate Planning Documents?
16. How Do I Find a Qualified Lawyer?
17. Should I Beware of Someone Who Is a "Promoter" of Financial and Estate Planning Services?
18. What Are the Costs Involved In Estate Planning?

If you or a family member fees that a Florida Estate Plan will benefit you please contact a Florida Estate Planning Lawyer.

Last month the IRS released a newly revised Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and Instructions to Form 706. The new form is to be used for estates of decedents dying after December 31, 2006 and before January 1, 2008, and reflects changes in law as well as indexing changes.

According to the instructions, the following items are new:

• Use of the revision is only for the estates of decedents dying in calendar year 2007.
• The maximum tax rate for the estates of decedents dying in 2007 has decreased to 45%.
• The Small Business and Work Opportunity Tax Act of 2007, P.L.110-28, extends the application of income tax return preparer penalties to all tax return preparers, including estate tax return preparers.
• The decedent's authority over certain financial accounts in a foreign country must be reported on Part 4 - General Information.
• Various dollar amounts and limitations are indexed for inflation, and the following amounts have increased:
1. The ceiling on special-use valuation is $940,000, and
2. The amount used in computing the 2% portion of estate tax payable in installments is $1,250,000.
• Beginning with the estates of decedent's dying and generation-skipping transfers occurring after December 31, 2003, the generation-skipping transfer (GST) exemption is equal to the applicable exclusion amount. ($2,000,000 for 2007).

Visit the IRS website at www.irs.gov and look under Forms and Publications.

Source: Internal Revenue Service, Form 706 (United States Estate / and Generation-Skipping Transfer Tax Return) and Instructions for Form 706, Forms and Publications - September 28, 2007.

Your Florida Estate Planning Lawyer will tell you that being appointed the PR / executor of an estate is not easy. The PR takes a personal risk and large responsibility to the estate of the decedent, the IRS, and the beneficiaries.

The main job of the PR is to manage the administration of an estate. Many small estates in Florida are distributed without the need of a Personal Representative or Executor. If the decedent had valid Florida Will, the PR can be name from the will, if not the court will appoint a PR based on qualifications and an order of priority. Generally the spouse is the first to be chosen as a PR, next the adult children along with any children who have legal guardians can be the PR. There is a statutory scheme to determining who will be the PR in a Florida Probate Case.

The PR will be responsible for locating the will, and additional documents to help determine what the debts and assets of the decedent are. In Florida probate requires a Florida Attorney. Once you are appointed as the PR, the court will issue you Letters of Administration. This document allows you to act on behalf of the estate. When you take actions, you will have to notify any interested parties (beneficiaries and creditors). The assets of the estate may be used to pay valid claims. One very important job of the PR is to file all current and final tax returns. This is one area where the PR has personal liability for unpaid taxes, penalties, and interest. Once all of the assets have been accounted for, creditors paid, and beneficiaries determined, the PR will distribute the remaining assets as instructed in the will or by the intestate statutes. The PR is also responsible for filing the accounting (a balance sheet showing the amount of the assets and whom they belong to).

The personal representative is entitled to compensation for the work that they do. The personal representative is also able to hire professionals or others to advise and administer aspects of the estates.

When you die, someone has to know hot to determine or what the details of your financial life are

It is important to make a comprehensive list of assets, liabilities, life insurance policies, power of attorney, Florida will, credit cards, details of bank accounts and all other important financial information.

The problem is that once you pass away, an executor or personal representative has to go through all of your document to figure out where assets may be located.

Recently a range of self-help products have emerged. The paper, and computer based products are available in many office supply stores. Many people who have a Florida Will or other Florida Estate Planning Documents, do not have a system for keeping the other information organized so that after passing, the Florida Probate process can be simplified.

Think about someone unfamiliar with your filing system trying to figure out where you have banks, stocks, Cd's, private investments, loans, debts, and everything else you keep in your mind but not on paper. Often the lack of an organized system increases the cost of the Fees associated with using a Florida Probate Lawyer.

Your Florida Estate Planning Lawyer, should be able to give you advise on what you need to make a list to simplify the Florida Probate process.

To discuss how this case may affect you, talk to your Florida Estate Planning Lawyer
In the recent case of Stone v. United States, No. 3:06-cv-00259, United States District Court for the Northern District of California (May 25, 2007), the declined to give a discount to the value of artwork.

The Court reasoned that artwork in not fungible. From that, and the testimony of the experts (and commenting that unlike this case, sales of fractional interests in real estate sales had comparable sales evidence of discounts) the Court concluded, in general, that a hypothetical willing seller of an undivided interest in art would rather sell the whole piece and split the proceeds, then sell a fractional interest at a discount. Such a sale might be by agreement or might be by partition. But, because a partition could be sought, no hypothetical willing seller would accept anything less than full value.

Turning to specifics, after dissecting the testimony of estate’s expert asserting a 51% discount, the Court said that “a small discount is appropriate to account for legal fees” (here, legal fees would have been about 1%) and a further discount of 2% for costs of sale should be added. No appraisals would be necessary. “Some discount” would be appropriate for the uncertainties involved in waiting to sell the art. The Court would give no discount for lack of control, lack of marketability, lack of liquidity, the time value of money or other discounts commonly discussed in such cases.

The Court stopped short of making a final determination of the appropriate discount. Instead, it ordered the parties to seek to reach an agreement on valuation. But the tone of the Court’s opinion suggests that, if pushed to decide, the Court would “just say no” to big discounts.

Letters Of Administration: In a Florida probate that involves full or ancillary administration, Letters of administration are issued by the probate judge to a personal representative, showing that the personal representative has the authority to act on behalf of an estate.

Once letters are issued the Personal Representative many not do anything they want. The letters, while allowing the PR to act create liability for the PR as well as a fiduciary duty to the beneficiaries and creditors of the estate including the IRS. A PR should not forget to file the 1040 tax return for the last year, the 1041 tax return for income made during the administration of the estate, the 709 estate tax return, and make sure that any minimum required distributions from IRA's or other retirement accounts are removed by December 31 in the year that the decedent died. The PR becomes personally liable for any unpaid or late filing fees including interest that are due to the failure to file these returns timely.

4. What are the general myths about Florida revocable trusts?

"Revocable Trusts Save Taxes."

Revocable trusts do not save income taxes or estate taxes. Typically during the life of the grantor the tax id of the grantor is used and any tax flows through to the grantor at his rates. Following the death of the grantor if the trust continues and is not immediately distributed outright to the beneficiaries it must then get a tax identification number and the retained income is taxed to the trust which has a more compressed rate schedule often resulting in a higher tax rate then if the individual beneficiaries were paying. This is not a potential problem until after the passing of the grantor though and then with proper planning the income can be distributed to the beneficiaries and there will be no adverse tax issues.

"Revocable Trusts Protect Assets from Creditors." - Myth

This is generally not correct as it relates to the grantor themself. Creditors may reach the assets of the grantor. Some asset protection could be achieved for other beneficiaries though. A Florida trust attorney could further help explain the details of how a trust could help with asset protection for other beneficiaries.

The primary benefit of creating a revocable trust is that it allows for continued management and preservation of your assets, should you become disabled. It can also help avoid probate and set forth all of the dispositive provisions of your estate plan including delayed distributions to beneficiaries if desired and professional management of such assets.

3. What Are some disadvantages of Florida Revocable Trusts

Re-Registration of Property and Changes to Beneficiary Designations
In order for the trust to ensure the continuity of management of the assets and Florida probate avoidance
the trust must be funded through a process of retitling assets of the estate. Depending on if there is a change in beneficial interest, there may be fees due when the new Florida Deeds are filed. If there is no change in the beneficial interest there are no additional document taxes due.

Increased initial costs

The costs to initially prepare a trust is more then a will given it is typically a more complicated and extensive document although the ultimate costs of having the trust and saving on the probate administration and other expenses is less.

2. What are the general advantages of revocable trusts?

Continuity of Management During Disability

Creating a Florida revocable trust is probably the best way to ensure that your property remains available to be used for your benefit, should you become physically or mentally incapable of managing your own affairs. While continuity of management is also possible when a Florida durable power of attorney is signed, third parties such as banks, brokers, and transfer agents often have more difficulty in dealing with a durable power of attorney than with a trust and do not always accept the authority of the agent.

If you become disabled and you have neither a revocable trust nor a durable power of attorney, (power of attorneys are controlled in Florida by the Florida Durable Power of Attorney Statute 709.08 an expensive, lengthy, and potentially embarrassing court proceeding is generally required to appoint a guardian before your property can be used to benefit either you or your family. Even after a guardian has been named, continued court supervision over the management of investments and disbursements is usually required. This can include annual bond fees, annual accounting, and additional legal, accounting, and other professional fees. It was also require a restricted depository account in which the court must approve of the transactions from.

Flexibility
Using a funded revocable trust may allow you to name unrelated, out-of-state individuals and out-of-state trust companies to act as the primary administrator of your property at death. Without a trust, Florida and other jurisdictions limit your flexibility in this regard. To serve as a non corporate Personal Representative in Florida a person must be a Florida resident or a close family member (as defined by Florida Statute) of the Florida decedent

Avoiding Florida Probate
Because Florida probate can be costly and time-consuming, the avoidance of probate in Florida is often cited as one of the primary benefits of a revocable trust. Depending on the assets that are funded in the Florida Trust may determine how great a benefit avoiding probate may be. If you own real estate in more than one state such as in Florida, California and Pennsylvania you can avoid multiple probate proceedings. If the decedent was a Florida domicile and owned property in Southern California, another piece of real estate in Philadelphia, and also owned real estate in Manhattan New York for example then putting the real estate in the trust can help avoid a California Ancillary Administration, avoid New York Ancillary Probate as well as helping to avoid Ancillary Probate Administration for the Pennsylvania property. The property can be distributed to the beneficiaries in a quicker manner and with far less administration costs.

Continue reading "Florida Trust Advantages" »

With a Florida Wills you can appoint guardians for your children and arrange to manage their property for them until they're legal adults. Making a will is a critical first step in your plan.

But in Florida a will must go through the probate process, a lengthy and expensive court procedure in which a judge determines that your will is valid and supervises the distribution of your property. In most Florida counties including Duval, Clay, and St. Johns it can take 6 to 18 months and cost up to 3% of your non exempt portion of your estate. There can be additional fees for dealing with non-probate assets (that includes your Florida Homestead when you die, even if the bank really owns it).

If you have a house worth $300,000 and $200,000 worth of other assets, probate costs could be close to $7,000 and could easily be even higher. An estate of 500,000 could be looking at fees around $15,000. You can avoid probate costs by establishing a Florida Living Trust, Make sure you use a Florida living trust attorney to ensure that you comply Florida laws and regulations.