Sarasota Estate Planning Frequently Asked Questions

General Questions

Wills

Trusts

General Questions

What is estate planning and why is it important?

     When a person dies, that person’s property must pass to someone else. A mentally competent adult has the legal right to choose how his/her assets are distributed after his/her passing. Estate planning involves various strategies designed to minimize estate taxes and settlement costs, as well as to determine what will happen to your property and investments in the event of your death. A good estate plan would also include clear directions regarding your wishes in the area of health care matters, in the event that you are unable to give such directions yourself.

     Estate planning is very important, even if you believe you don’t have a lot of assets or if you believe your children can appropriately divide your assets on their own. Without proper legal arrangements for the management of your assets after your death, Florida’s intestacy laws will take over upon your death, which often results in higher estate taxes, and sometimes results in the unintended persons receiving your assets.

What is a Living Will?

     A Living Will is a document where you indicate your desire not to be maintained on life support procedures if you are suffering from an incurable and terminal condition and you would be unable to survive without such procedures. This should not be confused with a Last Will & Testament, which is a document that provides distribution of your estate upon your death.

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Are there other documents that should be considered in addition to a Will?

A person may want to consider executing one or more of the following documents In addition to a Will:

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Wills

What is a Will?

     A will is a written direction controlling the disposition of property at death. The laws of each state set the formal requirements for a legal will. In Florida:

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Is a Will necessary if the value of the estate is small?

    Anyone wishing to implement control in the final disposition of their property after their death should have a will regardless of the value of their estate.

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Is it really necessary for me to have a Will?

    Yes, if you want to ensure that the people you want to receive your property actually receive it. If you want to ensure that an appropriate person is appointed to administer your estate, then the answer is “yes” also.

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How does a Will become “self-proving”?

     A Will can be made self-proving at the time of its execution. This can save valuable time, as well as the expense of locating a witness and obtaining their oath after death. To establish a Will as self-proving the named “Testator/Testatrix” (i.e. The person executing their Will) must acknowledge the Will before an officer authorized to administer oaths; the witnesses must make affidavits before the officer; and the officer must then verify the acknowledgement and affidavits by attaching a certificate to the will as prescribed by Florida law.

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Are you new to Florida?

     If you have recently relocated to Florida, your Will may need to be revised in accordance with Florida laws. You should contact a Florida attorney to review your Will to insure that it can be properly probated in Florida, that witnesses are available to establish the validity of your Will in Florida, and that your Personal Representative is qualified under Florida law to carry out your final wishes.

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What could happen if I don’t revise my out-of-state Will?

      If you die with a foreign will (any will from a State other than Florida), the costs of administering your estate may be higher because: 1). you will have to have probate in two different states (if you own property in that other state); and 2). your will, while being administered in Florida, will be administered according to that different state’s laws, thereby creating the need for hiring not only a Florida attorney but also an attorney in the other State.

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Can I change my Will after it has been created?

     Yes. You can create a new will whenever you want. The creation of the new Will revokes your prior will. You can amend a will by a ‘codicil’, which is simply an addition executed with the same formalities of the will. A will’s terms cannot be changed by physically amending the will after the will is executed. Writing on the will after its execution invalidates part or all of the will.

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What happens when a person dies without a Will?

     If you die without a will, your property will be distributed to your heirs according to a formula decided by law. Your property does not go to the State of Florida unless there are absolutely no heirs. In other words, if you fall to make a will, inheritance law (which is called intestacy) determines who will get your property. The intestacy inheritance laws contains rigid formulas and makes no exceptions for those in unusual need.

     When a person dies without a will, the court appoints a personal representative, known or unknown to you, to manage your estate. The cost of probating may be greater than if you had planned your estate with a will, and the administration of your estate may be subject to greater court supervision.

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How long is a Will valid?

    The will is valid until it is changed or revoked. Your will may be changed as often as you desire as long as your are mentally competent and not under undue influence, duress, or fraud. Changes in circumstances after the execution of the will, such as tax law amendments, deaths, marriage, divorce, birth of children, or even a substantial change in the nature or amount of your estate, may raise questions as to whether your will is still appropriate. All changes require a careful analysis and reconsideration of the provisions of your will. It may make it advisable to change the will to conform to the new situation.

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May I transfer my property any way I wish by a Will?

     While any sort of property may be transferred by Will, there are some particular property interests which cannot be willed because the right of the owner terminates automatically upon his/her death. Some examples of these types of property rights or interests are:

      A person may not disinherit his or her spouse without a properly executed marital agreement. The law gives a surviving spouse a choice to take either his or her share under the will or a portion of the decedent’s property determined under Florida’s “elective share” statute. This statute uses a formula to compute the size of the surviving spouse’s elective share, which includes amounts stemming from the decedent’s jointly held property, trust property, life insurance, and other non-probate assets. Because this formula is very complicated, it is usually necessary to refer this matter to an attorney with experience in this area of law. Also, if your will was made before the marriage and the will does not either provide for the spouse or show your intention not to provide for his/her, then your spouse would receive the same share of your estate as if you had died without a will (at least one-half of your estate) unless provision for the spouse was made or waived in a marital agreement.  Please be advised that this law firm does not take estate planning cases which involve attempts to intentionally disinherit an existing spouse during marriage or any person’s child and/or children due to fundamental ethical differences with assisting someone in engaging in such estate planning actions. 

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Who should prepare a Will?

      The drafting of a will involves making decisions that require professional judgment which can be obtained only by training, experience, and study. Only the practicing lawyer can advise the course best suited for each individual situation. In addition, an attorney will be able to coordinate the use of other skilled professionals, such as an investment advisor, insurance specialist, and accountant to complete a proper estate plan. There is no such thing as a ‘simple will’. Even smaller estates can have problems and complexities only foreseeable by an experienced attorney.

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Does my Will have to be filed with the Court prior to my death?

     No. Your Will can be held confidential until your passing. After your death, it will be filed with the Probate Clerk.

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Does a Will automatically send the Estate to probate?

     Before your Will is effective to settle issues pertaining to your Estate, it must be confirmed through the probate court. If self-proving, a Will may be admitted to probate without further documentation. However, if it is not self-proving, it may be necessary to provide the oath of a witness in order to proceed through probate. The oath must be given before a Circuit Court Judge, Clerk of Court, or a Commissioner specially appointed by the Court for this purpose. (In the event of certain situations, the Court may consent to proving the Will by other means.)

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Does a Will increase probate expenses?

     A will frequently reduces probate expenses. If there is real or personal property to be transferred at your death, the probate court will have jurisdiction to ensure that it is transferred properly, either according to your will, or in accordance with the Florida intestacy law. Even if you have no will, your heirs must go to court to administer your estate, obtain an order determining your legal heirs, or obtain a determination that administration is unnecessary. These procedures are often more expensive than administering your will, since a properly drawn will names the beneficiaries and delineates procedures to simplify the administration process.

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Can a Will reduce estate taxes?

     A well-drawn will can reduce estate taxes that may arise when someone dies. Estate taxes are often the largest cash expense an estate can have. Proper planning must be made for tax advantages and is indispensable in taking these benefits in the tax codes.

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Can I substitute a life insurance policy for a will?

     Life insurance is just one kind of property that may be owned by a person. A will is necessary to dispose of assets and/or property that a person owns at death. The will has no effect on the proceeds if a life insurance policy is payable to an individual. If the policy is payable to the estate of the insured, the disposition of the proceeds may be directed by the will. Life insurance can be useful in providing cash at death for payment of expenses, but like most strategies for insurance, the careful person will consult a lawyer, a life insurance agent, and a financial advisor. Mistakes in ownership and beneficiary designations in these policies can cause great increases in estate taxes owed.

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Is Joint Tenancy with Right of Survivorship a suitable alternative to a Will?

     Joint tenancies with right of survivorship can be established when two or more people hold title to bank accounts and other assets collectively in their names. The purpose of this is to insure that real estate ownership is passed to the remaining named owner, upon the death the other owner.

     A “Tenancy by the Entireties” is the same concept but pertains only to situations where the parties are legally married. In this instance, probate of accounts and other assets can be avoided in the event that one of the persons becomes deceased. While in some cases this can be efficient, quite often it can cause problems such as increases in estate taxes, or double probate in the event of simultaneous death. It may also create issues with regard to unresolved claims against the decedent.

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Trusts

Can I set it up so that a beneficiary doesn’t receive property immediately after my death?

     Yes. This is referred to as a Spendthrift Trust and is used to protect the beneficiary’s share of the estate by not distributing all of it until the beneficiary attains a mature age.

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Can I substitute a trust for a will?

     A trust can handle only the property that has been put into it. Any property of a person that is not placed in the trust either during life or at death in most instances escapes the control of the trust. A trust may be used in addition to a will. The will controls all property in a decedent’s name at the time of death if the will is drafted properly. Trusts can be helpful to speed administration and save taxes if they are drafted properly and funded during life with the property intended to be transferred by the trust. Often, however, improperly drafted or incorrectly funded or administered trusts can add to the cost of settling estates. Furthermore, it is the probate of the will that can clear creditors’ claims, which is not possible with just a trust administration.

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What is a Revocable Living Trust Agreement?

     A Revocable Living Trust Agreement is a legal document created by an individual to manage his/her assets throughout his/her lifetime and to dispense the remaining assets to their beneficiaries upon his/her death. This document allows the creator of that trust, or “Grantor”, to assign themselves, another person, bank, or trust company as the “Trustee” to manage the trust assets. During a person’s lifetime, the Trustee may invest and manage the trust property. It also allows the Trustee to continue managing trust assets, pay the Grantors bills, and make investment decisions in the event that the Grantor is unable to do so. An advantage to this process is that the need for a court-appointed guardian is eliminated. When the Grantor dies, the Trustee, or his/her appointed Successor Trustee, is responsible for paying any claims or taxes of the decedent, and disbursing the remaining assets to beneficiaries in the manner set forth by the trust agreement. As with most trust agreements, the Grantor has the right to withdraw money or assets in any amount from the trust at any time. They may also modify or terminate (i.e.“revoke”) the trust at anytime provided they are mentally competent to do so.

     To get the maximum benefit from this type of trust, most assets, such as bank accounts, real estate, and most investments must be legally transferred to the trust. Any remaining assets that are not transferred may be subject to the probate process. Conversely, some assets such as IRA’s and annuities, if transferred into a trust can cause income tax issues. The help of an attorney, tax advisor, and investment advisor is recommended to establish if certain assets are suitable for trust ownership.

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What are the advantages and disadvantages of a Revocable Trust over a Traditional Will? How do I decide which is better for my circumstances?

     Some advantages of a Revocable Trust include:

     Some disadvantages of a Revocable Trust may include:

The decision of whether to create a Revocable Trust or a Traditional Will is one that must be made on an individual basis after consultation with an attorney.

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How do you know if your assets are properly titled to a trust?

     Some information may be found on your account statement, stock certificate, title or deed and may mention the Trust or Trustee. You can also choose to fund the trust by naming it as a beneficiary of a life insurance policy. An attorney and financial advisor can help you make the appropriate choices for your estate. Also, if real estate is owned by your trust, it is very important to contact an attorney to properly prepare the deed. An attorney will consider the impact of existing mortgages, title issues, and homestead restrictions when preparing the deed.

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How are creditors satisfied?

     Trust laws in Florida do not specify an exact process for discovering and fulfilling creditor claims upon a person’s death. In fact, creditors have two (2) years after a person’s death to file a claim against the estate. For this reason a Trustee may be hesitant to distribute the trust assets until satisfied that all claims have been paid. Some people choose to create a probate estate as well, to take advantage of the three month limitation it places on creditor claims, and the claim objecting process it provides.

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Does a trust provide protection from creditor claims?

     In Florida, trust assets are not necessarily shielded from creditors’ claims. While living, assets in a revocable trust are basically treated as if they were owned by you. Therefore, creditors are able to make a claim against them essentially as if they were titled in your own name. If the assets remain in the trust after the death of the Grantor, the beneficiary’s interests may be safe from creditors due to a “spendthrift provision” written into the trust.

     Florida law allows special protection for many types of assets, including those owned by husband and wife. An attorney will advise you on which assets can be protected by from creditor claims and can effect the funding of a trust. An attorney will give these types of assets special consideration in deciding how to fund a trust.

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Does the trust guard against the elective share law?

     Florida law mandates that a surviving spouse is entitled to 30 percent – or an “elective share” – of the estate, including assets passed outside of probate. Assets held in revocable trusts are still subject to the elective share rule, but there are exceptions and elective shares can be waived. Ask your attorney whether the elective share rule applies to your situation.

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Is trust income subject to federal income taxes?

     Revocable trusts are usually ignored when it comes to federal income taxes during a grantor’s lifetime. However, revocable trusts become separate entities for income tax purposes when made irrevocable. When that happens, the trustee is required to file a fiduciary income tax return. Taxable income, credits and deductions are calculated in the same way as for individual filers. Trusts are permitted a deduction for distributions to beneficiaries. Income passed from a trust to beneficiaries is taxed on their individual income tax returns. Income not passed to the beneficiaries is taxable to the trust only.

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Can trusts reduce estate taxes?

     Revocable trusts can save on estate taxes, but your authority over the trust causes it to become part of your taxable estate at death. Trusts can be written to minimize estate taxes. However, similar planning strategies may also be available to people who choose to use a Will.

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What exactly is the role of a Trustee?

     Careful investing is an important duty; but it’s not the only one that Trustees perform. Your trust agreement may stipulate other duties. Among the general duties of trustees are: managing trust property, investing trust assets, distributing trust income to beneficiaries, setting tax strategies, careful record-keeping and answering beneficiaries’ questions.

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Why should I choose a Trustee?

     Almost anyone can be named as a Trustee, including non-relatives and persons outside of Florida. Choosing a Trustee can have tax and income implications, so making a careful selection is important. When choosing a friend or relative, take time to consider whether that person is the prudent choice. Will that person cause friction among the beneficiaries? Will his/her appointment prove burdensome to the person? Remember, the trust agreement should also allow this person to hire qualified experts for legal and financial advice.

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