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;

1. You, the maker of the will (called the testator), must be at least 18 years old.

2. You must be of sound mind at the time you sign your will.

3. Your will must be written.

4. Your will must be witnessed in the special manner provided by law for wills.

5. It is necessary to follow exactly the formalities required for the execution of a will.

6. To be effective, your will must be proved in and allowed by the probate court.

No will becomes final until the death of the testator, and it may be changed or added to by the testator by drawing a new will or by a “codicil,” which is simply an addition or amendment executed with the same formalities of a will. A will’s terms cannot be changed by writing something in or crossing something out after the will is executed. In fact, writing on the will after its execution may invalidate part of the will or all of it.

WHAT CAN BE ACCOMPLISHED BY A WILL?

1. You decide who gets your property instead of the law making the choice for you.

2. You may name the personal representative (executor) of your will as you choose, provided the one named can qualify under Florida law. A personal representative is one who manages an estate, and may be either an individual or a bank or trust company, subject to certain limitations.

3. A trust may be created in a will whereby the estate or a portion of the estate will be kept intact with income distributed or accumulated for the benefit of members of the family or others. Minors can be cared for without the expense of proceedings for guardianship of property.

4. Real estate and other assets may be sold without court proceedings, if your will adequately authorizes it.

5. You may make gifts, effective at or after your death, to charity.

6. You decide who bears any tax burden, rather than the law making that decision.

7. A guardian may be named for minor children.

WHAT HAPPENS WHEN THERE IS NO WILL?

If you die without a will (this is called dying “intestate”), your property will be distributed to your heirs according to a formula fixed by law. Your property does not go to the State of Florida unless there are absolutely no heirs at law, which is very unlikely. In other words, if you fail to make a will, the inheritance statute determines who gets your property. The inheritance statute contains a rigid formula and makes no exception for those in unusual need.

When there is no 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.

MAY A PERSON DISPOSE OF HIS OR HER PROPERTY IN ANY WAY HE OR SHE WISHES BY A WILL?

While any sort of property may be transferred by will, there are some particular interests in property which cannot be willed because the right of the owner terminates automatically upon his or her death, or others have been granted rights in the property by Florida law. Some examples of these types of property rights or interests are:

• Except in certain very specific circumstances a homestead (that is, the residence and adjoining lands owned by a person who is survived by a spouse or minor child up to one-half acre within limits of an incorporated city or town or up to 160 acres outside those limits);

• A life estate : property owned only for the life of the owner;

• Any property owned jointly with another person or persons with right of survivorship (a tenancy by the entireties, which is limited to joint ownership between a husband and wife, would be one of these).

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 and 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 extensive 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 him or 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.

MUST A PERSON LEAVE A CHILD AT LEAST ONE DOLLAR?

No. This is not necessary and can actually cause considerable added expense to the estate. It is better simply to state in the will that no provision is being made for that child.

HOW LONG IS A WILL GOOD?

It is “good” until it is changed or revoked in the manner required by law. Your will may be changed as often as you desire while you are sane and not under undue influence, duress, or fraud, provided it is changed in the required manner. 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 the adequacy of your will. All changes require a careful analysis and reconsideration of all the provisions of your will and may make it advisable to change the will to conform to the new situation.

DOES A WILL INCREASE PROBATE EXPENSES?

No. If there is property to be administered or taxes to be paid or both, the existence of a will does not increase probate expenses. A will frequently reduces 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, if there is no will, in accordance with the inheritance statute. Thus, 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.

ARE ESTATES BY ENTIRETIES OR JOINT TENANCY WITH RIGHT OF SURVIVORSHIP SUBSTITUTES FOR A WILL?

Joint tenancies with rights of survivorship can be established when two or more persons title bank accounts and other assets in their multiple names with the intent to have ownership pass directly to the surviving named owners when one dies. A “tenancy by the entireties” is much the same but involves only married persons. These forms of joint ownership can avoid probate of the account or other asset when an owner dies. While this can be very efficient in some cases, use of joint ownership can be fraught with problems at death and cause more problems than it solves.

Among other unforeseen problems, indiscriminate use of joint ownership can cause an increase in estate taxes over the joint lives of married persons, force double probates in the event of simultaneous deaths, create unfairness as to who pays for funeral expenses and claims against the decedent, raise undesired exposure during life to the debts of co-owners, and cause a shortage of funds for payment of estate taxes which can cause litigation with the taxing authorities.

IS A LIFE INSURANCE PROGRAM A SUBSTITUTE FOR A WILL?

No. Life insurance is only one kind of property that a person may own and a will is necessary to dispose of other assets that a person owns at death. If a life insurance policy is payable to an individual, the will of the insured has no effect on the proceeds. 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 taxes and expenses, but like most strategies for insurance, the careful person will consult a lawyer, a life insurance counselor, and a financial advisor. Mistakes in ownership and beneficiary designations in these policies can cause great increases in estate taxes owed.

IS A TRUST A SUBSTITUTE FOR A WILL?

No, in most situations. A trust may be used in addition to a will. This is because 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. It is the will that 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, not lower it. Furthermore, it is the probate of the will that can clear creditors’ claims, which is not possible with just a trust administration.

DO YOU HAVE TO GO TO COURT TO PROBATE A WILL?

No, personal court appearances are usually not needed to probate a will. However, documents must be filed with the court to procure a probate order and administer estates. In most counties, neither the estate attorney nor the interested persons ever appear in the courtroom.

CAN A WILL REDUCE TAXES?

A well-drawn will can reduce estate and income taxes that may arise when someone dies. Estate taxes are often by far the largest cash expense an estate can have. There is also the possibility that Congress may increase the impact of the estate tax in the future. In addition, proper planning must be made for income tax advantages. Proper planning with a will is indispensable in taking these benefits in the tax codes.

WHO SHOULD PREPARE A WILL?

No sensible person would employ “just anyone” to fill teeth, take out an appendix, or deliver a baby. The person who wants these services performed skillfully with the minimum risk to health, life, property, or the accurate execution of his or her wishes, will engage the services of a trained person. Except in dire emergency, these important tasks should not be performed by anyone except the professional.

The drafting of a will involves making decisions that require professional judgment which can be obtained only by years of training, experience, and study. Only the practicing lawyer can avoid the innumerable pitfalls and advise the course best suited for each individual situation. In addition, an experienced attorney will be able to coordinate the use of other skilled professionals, such as an investment advisor, actuary, insurance specialist, and tax accountant to complete a proper estate plan.

Moreover, there is no such thing as a “simple will.” Even smaller estates can have complexities only foreseeable by the experienced attorney.

SOME SUGGESTIONS CONCERNING WILLS

1. Marriage does not cancel a will in Florida, but a spouse acquired after the execution of a will may receive the same portion of your estate that he or she would have received had you died without a will (at least one-half).

2. If you have moved to Florida from another state, it is wise to have your will reviewed by a Florida lawyer in order to be sure that it is properly executed according to the laws of Florida, that the witnesses are readily available to prove your will in Florida, and that your personal representative is qualified to serve in Florida.

3. Before your will is effective to dispose of your property, it must be proved in the probate court. If the will is self-proving and otherwise valid, it may be admitted to probate without further proof. If the will is not self-proving, it generally must be proved by the oath of one of the witnesses. The oath must be given before a circuit judge, clerk of court, or a commissioner specially appointed by the court for that purpose. (Under certain circumstances, the court may permit the will to be proved by other means permitted by law.) A will can be made self-proving either at the time of its execution or later, which saves the time and expense of locating a witness and obtaining his or her oath after your death. For your will to be made self-proving, you must acknowledge the will before an officer authorized to administer oaths; the witnesses must make affidavits before the officer; and the officer must evidence the acknowledgment and affidavits by a certificate attached to or following the will. An appropriate form of certificate is prescribed by Florida law. The self-proving procedure is in addition to the normal execution and witnessing of the will, not in place of it.

4. No matter how perfect a will may be prepared for you, unless it is properly executed in strict compliance with the laws of Florida, the will may be entirely void. Be sure that you execute your will in the presence of your attorney, who knows exactly how and in what order the will should be signed.

5. Every person owning property who wishes to exercise control in the disposition of that property when he or she dies, should have a will regardless of the value of the property. Of course, the larger the estate the greater the tax consequences.

6. The following additional documents should be considered for signing when you make your will:

• Living Will: Florida Statutes now provide for a written declaration by an individual specifying directions as to use of life-prolonging procedures.

• Durable Power of Attorney: This document can assist in handling the property of a person who has become incapacitated without having to open a guardianship proceeding in court. This is especially valuable for paying the bills and protecting the assets of an incapacitated person.

• Health Care Surrogate: Florida law now allows individuals to designate a person to make health care decisions for them when the individual may not be able to do so. Included in this important appointment is the power to decide when to withdraw medical procedures.

• Pre-Need Guardian Designation: Florida law allows you to designate a person who could be appointed guardian over you should you become incapacitated and/or over your children should you become incapacitated or upon your death. If you fail to designate a guardian, the Court will do so for you if and when it becomes necessary.

Related posts:

1. Avoiding the Florida probate process . . . is it really that bad?
2. Do it yourself estate planning – PITFALLS!

Some individuals try to save money by not hiring an attorney when they should. Three of the ways they try to save attorneys fees, that elder law attorneys often see, are by trying to avoid probate, by self-help estate planning, and by doing their own Medicaid planning. I will discuss these three mistakes this week and next week. It amazes me at how many people simply do not own the real estate that they think they inherited from their parents. Recently a prospective client, Karen, was shocked to find out that the real estate that she believed she inherited from her mother, Sarah, is still owned by her deceased parent.

It amazes me at how many people simply do not own the real estate that they think they inherited from their parents. Recently a prospective client, Karen, was shocked to find out that the real estate that she believed she inherited from her mother, Sarah, is still owned by her deceased parent.

Karen showed me paperwork from Alabama, where her parents lived and died. A Cape Coral lot was originally purchased 20 years ago in the name of her parents. Her father died 15 years ago and her mother passed away 8 years ago. When her father died, Karen told me her mother had no problem obtaining sole title to the lot.

Soon after her husband died, Sarah phoned the tax collector’s office in Lee County and was told to send an original death certificate to be recorded at the Clerk of Court’s Recording Division. For the next 7 years, the real estate tax bills were sent to her mother who dutifully paid them. It worked because the deed which was titled in her parents’ names passed ownership to the surviving spouse automatically because of the tenants by the entirety, or husband and wife, character of the deed.

When her mother died in Alabama eight years ago, Karen called several attorneys in Florida who all told her she should hire an attorney to file for probate. Attempting to save attorney’s fees, she recorded the death certificate in Lee County and provided a new address to the tax collector to send the future tax bills.

Even though she had three other siblings, the four children agreed she could have the Cape Coral lot because she was the only child living in Lee County. The other three children divided various personal property among themselves in order to balance the value of the lot, which was only worth a few thousand dollars at that time.

Last year, when vacant lots in Lee County were selling for far more than ever anticipated 6 to 12 years ago, Karen received a generous offer to purchase the lot. Needing the money from a fast closing, she signed the sales and purchase agreement with the buyer’s real estate agent. It was contingent on closing in 30 days. The buyer then placed a rather large deposit with a local builder to start a new home on the lot. A few days before the anticipated closing, the title company told Karen she did not own the lot.

She soon received a letter from the buyer’s attorney notifying her that it was illegal for her to attempt to sell something she did not own and that she would be sued by the buyer for damages, including the buyer’s loss of the large deposit with the builder. The real estate agent’s attorney also sent her a letter demanding she pay the real estate commission or be sued.

How could she not own the lot when the Lee County government sent her the real estate tax bills every year? Well, it is not the Lee County government’s fault that she tried to save attorney’s fees by “doing it herself.”

The tax collector added her name to the tax bill so someone would pay the real estate taxes. And she did pay the taxes for years. The tax collector will not return your tax payments simply because you do not own the property.

What the public should know is that whenever real estate is owned only in the name of a person who is now deceased, title will not pass until a Florida probate judge says it does. That is one reason we deed the property to a trust, to avoid probate.

Sarah’s children would have to file a petition for probate administration, signed by a Florida attorney, which, since Sarah left no Last Will, would have to be joined in by all her children. That is where the problem became more complicated because one of Sarah’s sons was missing and another was deceased. The deceased son’s daughter did not agree that the lot should go to Karen. She said maybe 8 years ago when it was not worth as much, but now that it is worth over a hundred thousand dollars, the sales proceeds should be divided among Sarah’s children and the grandchildren of the deceased son and perhaps the missing son’s children. A probate judge would probably agree.

When there is a fight among the beneficiaries, one attorney is not permitted, by the ethical restrictions of the Florida Bar, to represent conflicting beneficiaries. Hence, we can expect several attorneys getting paid from the lot sale, after a Florida judge finally decides who really inherited the lot eight years ago. It makes no difference that Karen dutifully paid the real estate taxes from the bills sent her by the tax collector.

Whenever a Realtor, a mortgage broker, or a title company sees a tax bill being sent to a person in care of another person, often out of state, they should inquire about whether the original owner is still alive and also, if alive, whether the owner is competent to sign a deed. We have been reading stories about thieves who sign a fraudulent deed when they discover such a tax bill by searching on line.

If you believe you have inherited a piece of real estate from someone, but their name still appears on the tax bill, you need to make a diligent inquiry about what happened when the original owner died. If you think you inherited property, but do not have any legal paperwork to prove it, you need to consult a Florida attorney.

Once a client showed me a letter from an out-of-state attorney suggesting that the out of state personal representative sign a Quit-Claim deed to the Florida beneficiary. This deed was recorded and the tax bills sent to the “new owner” who is still not the legal owner. The out-of-state attorney who handled the probate in the northern state should have known better. He or she should have known that the deed would have no effect on change of ownership. An out-of-state probate judge cannot change ownership to Florida real estate. Only a Florida probate judge can do that.

Saving attorney’s fees by avoiding probate and just paying the taxes can backfire first, because legal fees have gone up in the last several years, as have most professional services, and second, because intervening events can further complicate the situation that additional fees may be reasonable. Trying to save attorney’s fees by avoiding probate may increase the legal fees that will be necessary to obtain marketable legal title.

Two other areas where we see persons trying to save legal fees are self-help Medicaid planning and self-help estate planning, both of which will be discussed next week.

— William Edy is a certified financial planner and tax attorney and a certified elder law attorney in Lee County. He may be contacted on line for article ideas and questions. This article should not be a substitute for advice from your own attorney.

Related posts:

1. “We can help! Our team of experts will guarantee that you pass away in 2010 and avoid federal estate tax.”
2. Uncontested Florida Probate – Your best bet!
3. Avoiding the Florida probate process . . . is it really that bad?

By ARDEN DALE
WALL STREET JOURNAL
April 5, 2007; Page D2

“We can help! Our team of experts will guarantee that you pass away in 2010 and avoid federal estate tax.”

Gallows humor about estate taxes — like this Internet spoof — is in vogue these days because changes in the so-called death tax have left even savvy financial planners puzzled. And hope of a total repeal is now dim because of the shift in power to Democrats in Congress.

“By far the most important estate-planning issue faced by clients and planners alike is the future of the federal estate tax,” said Jeffrey A. Baskies, a partner in the Fort Lauderdale, Fla., office of law firm Ruden McClosky.

The nearly century-old levy has meant heirs can see as much as half of their inheritance go to the Internal Revenue Service.

A 2001 law phased in a series of changes in the tax. In 2007 and 2008, a tax of up to 45% will be levied on estates over $2 million. In 2009, the threshold will rise to $3.5 million. In 2010, the tax will be lifted completely for a year, but reinstated in 2011 at up to 55% on estates over $1 million.

What happens next is anyone’s guess. Last month, Senate Finance Committee Chairman Max Baucus (D., Mont.) sponsored an amendment to a budget blueprint that would permanently extend the 2009 rates. But the budget resolution is nonbinding, and its future is up in the air.

The Fatal Accident Estate Planning Service, the fictitious group circulating a joke brochure on the Internet, sums it up like this: “If you don’t die on time, your legatees could lose millions of dollars. We guarantee that you will turn into worm food in 2010 or we pay the estate tax. That’s right. You don’t have to worry about lingering comas or miraculous resuscitation attempts delaying your death and creating havoc for your executor.”

Uncertainty has put a premium on keeping an estate plan up to date so changes in the law don’t create unnecessary taxes or even change how assets are parceled out among beneficiaries, said Perry Ganz, an attorney at Tarlow Breed Hart & Rodgers P.C. in Boston.

Rich or poor, facing up to making an estate plan means facing one’s mortality. Many advisers say that getting a client to focus on it is difficult under any circumstances.

Estate tax questions have provided yet another reason to balk, according to Len Adler, a wealth adviser in the Palm Beach, Fla., office of JPMorgan Private Bank.

Some held back in the hopes that an earlier Republican effort to repeal the tax would succeed. If the tax were to be repealed, why bother setting up trusts and other tools designed to pass assets on to heirs? Now, full repeal seems unlikely to many because of the recent Democratic victory in Congress.

“I think there’s less paralysis today than there was a few years ago, but there’s still enough uncertainty that it’s getting in the way,” said Mr. Adler.

A boom in trusts — meant to reduce or avoid the gift tax — has been one result of the fog. People once willing to whittle down their taxable estates by giving away money to friends and family now aren’t so willing. The logic: Don’t give away money if the estate tax is about to be repealed.

The federal gift tax exemption allows a person to give away a lifetime total of as much as $1 million to friends, relatives or others without paying federal tax. One may also give away an unlimited number of annual gifts of $12,000 to any number of individuals without eating into the $1 million gift exclusion.

“This was a fairly common strategy for affluent folk, but dipping into the gift tax exemption just to get money out of the estate, when the estate tax might be repealed didn’t make sense to some people,” said Rande Spiegelman, vice president of financial planning at the Schwab Center for Investment Research.

GRATs, or grantor retained annuity trusts, have boomed as a way to give lucrative assets to family and friends without paying a hefty gift tax. A GRAT allows its owner to discount the taxable value of a gift, and is used to transfer appreciation on hedge funds, private equity, real estate and other assets without paying gift tax.

Beyond trusts and taxes is the living will. Many people he advises indicate they don’t want life support if permanently unconscious or unlikely to recover, said Warren K. Racusin, a partner and co-chairman of the private client services group at McElroy, Deutsch, Mulvaney & Carpenter LLP in Morristown, N.J. “Should there be an exception if you’re right at the end of 2009?” said Mr. Racusin. “And the flip side is that, if it’s December 31, 2010, is it appropriate to emphasize that the client doesn’t want extraordinary measures taken to remain alive into 2011?”

Related posts:

1. Do it yourself estate planning – PITFALLS!
2. Till death do they part . . . A man and his dog!

The boommers of our generation are quick to educate themselves as their parents face the end stages of life and quite often I’ll get the call from the hospital to draft up a “quick and dirty” Last Will or Trust. I’ve yet to prepare an estate plan for someone on their proverbial death bed because I just don’t like the potential consequences of an estate contest, regardless of my confidence in the integrity of the execution/signing process.

The inevitable conversation follows:

Client: How on earth do I avoid probate in Florida?

LHD: How large is your estate?

Client: Well, I’ve got a house (my homestead), two cars and a bit of life insurance.

LHD: Why do you think you need to avoid Florida probate?

Client: So I don’t have to pay an attorney!

Is that the only reason everyone wants to avoid probate? Or is it that they’ve just failed to educate themselves about the process?? I choose the latter.

Come on people, it’s not jail time … it’s the court-supervised process of passing on your assets. Court supervision ain’t all that bad. Almost everyone has a family member they wouldn’t dare leave their children, rolex or porsche keys with… and if that very same person ended up with some influence on your Florida probate administration, wouldn’t you want it to be supervised by a judge??

But what about a living trust? Your brother in law raved about his fancy 100 page trust. 100 bucks says the eventual trustee, his wife, has NO idea how or why it may avoid probate.

Trusts are usually overkill for most estates. They are NOT asset protection and your trustee might need an attorney to properly administer the trust after your gone anyways!

Bottom line: There is no one size fits all for estate planning and probate just isn’t that bad … if you plan smart.

Related posts:

1. Do I need a Will?
2. Uncontested Florida Probate – Your best bet!
3. Do it yourself estate planning – PITFALLS!