Florida Estate Planning Basics

carol grant florida estate planning

Building wealth is only half the job. Protecting wealth for your loved ones and yourself is equally important. Through estate planning, our firm can help you protect everyone and everything you love — family, friends, and favorite charities.

Estate planning is the ongoing process of preparing for incapacity and death. Essentially, an estate plan is also used for tax planning, conveying wishes for medical care, end-of-life decisions, and post-mortem directions. While estate plans should include a last will, a last will by itself is not an estate plan.

Creating an estate plan requires time and effort. Without an estate plan, children can be disinherited, end-of-life decisions can be made by strangers and wealth can be consumed by taxes, legal fees, or go to the wrong person.

If you believe that estate planning is one of those things “other people” need to do, then you may not have a firm grasp on what “estate planning” is. Perhaps you think only “rich” people need an estate plan. Sound familiar? In reality, every adult from age 18 to 110 needs an estate plan.

When a person dies without a valid last will or revocable living trust, that person is said to have died intestate. As a result, any of the decedent’s assets subject to probate will be distributed according to the state “intestate succession” law. For example, even though the decedent would have intended otherwise, an antique artwork inherited from a cherished grandmother, or a valuable guitar collection may be ordered sold, so the cash proceeds may be distributed equally to the statutory heirs.

Think for a moment about the assets you treasure the most. Now consider how you would want them distributed after you pass. Unless you memorialize your wishes for those treasured assets in the last will or revocable living trust, those assets will not be distributed according to your specific wishes.

Estate Plans are for the living. What people seldom realize is that an estate plan is for the benefit of the individual making the plan while he is alive, as well as to provide for and protect his loved ones after he is gone.

5 Steps to Create an Estate Plan for you and Your Family that makes the Estate Planning Process Easier

 1. Estate plan begins with discussions and goal setting:

  • Who will make critical medical and financial decisions in the event of incapacity?
  • Will all assets pass to your spouse upon your death?
  • Who will raise your minor children to adulthood, if they are orphaned?
  • Should children receive a large lump sum when you die?
  • Will federal or state estate taxes present a problem for heirs?

How you and your spouse, if married, answer these and other questions will guide the preparation of your estate plan. Different goals require different strategies. A modest estate plan will be simpler than one comprised of significant assets, properties in multiple states, or children from different marriages.

Once goals have been established, strategies can be developed. If taxes are a concern, trusts can pass assets across generations. If the family includes a family member with special needs, a Special Needs Trust (SNT) will be needed to protect his or her eligibility to receive government benefits while having access to an inheritance. To keep a vacation home in the family, it may be productive to create a legal entity to own the property and pay for maintenance and taxes.

2-Create an Estate Inventory

An inventory of assets should be created. In addition to assets like real estate, savings, investments, life insurance, retirement funds, personal property, and even “digital assets,” be sure to include account numbers, institutional information, and contact information. Calculate your net worth, which will be used to determine if your estate may be subject to federal or state estate taxes. Some states also have inheritance taxes.

3-Develop a Plan for the Family

If there are minor children, the last will is used to name a guardian in many states. Review the family budget to ensure that enough money would be available to support the family in the event of the death of one or both parents. Life insurance is a great financial tool for this purpose.

4-Know the basic Estate Planning Documents that you will need

  • Last Will and Testament. A last will provides for the distribution of property, nominates a personal representative to administer the estate, and nominates guardians for minor children. Jointly owned assets, Payable on Death (POD) assets, and assets controlled by beneficiary designations are not governed by a last will.
  • Durable Power of Attorney. This document names the person who is called an “agent” or “attorney in fact,” who will act on your behalf, if you are incapacitated. The Power of Attorney lists the duties of the agent when it comes to your financial affairs.
  • Designation of Healthcare Surrogate. This names a person who may make treatment decisions, if you are incapacitated.
  • Trust. The size and complexity of the estate determine which type of trust may be most appropriate.

5-Final Steps to Completing an Estate Plan

Once the estate planning documents are prepared and executed, the estate plan is not done. There are two final steps: checking beneficiary designations and funding trusts.

Assets having a designated beneficiary, like IRAs and pensions, need to be reviewed and updated. This should happen every few years and more often if there is a divorce, death, or remarriage in the family.

Assets placed into trusts must have the ownership status changed. If real estate is placed into a trust, the deed must reflect the change in ownership. If trusts are not funded, the goals of the estate plan will not be achieved.

Documents Used to Design Your Estate Plan

  • Last Will Testament

A last will usually is easier and costs less than a revocable living trust to create. Last wills only control assets that are subject to probate (i.e., have no surviving joint owner or designated beneficiary). The probate court process required to administer a last will can tie up your estate longer than a revocable living trust. In addition, a last will must be filed with the probate court and becomes a matter of public record.

  • Revocable Living Trust

A trust is defined as a legal contract that lets an individual or entity (the trustee) hold assets on behalf of another person (the beneficiary). The assets in the trust can be cash, investments, physical assets like real estate, business interests, and digital assets. Generally speaking, a revocable living trust is never filed with the probate court and does not become a matter of public record.

Benefits of a Revocable Living Trust:
  • Protection against possible incompetency. To protect yourself, you can create trust and move your assets into it. You can be the trustee, so you’ll control the assets and enjoy the income.
  • Probate avoidance. Assets held in trust also avoid probate. In the trust documents, you can state how the trust assets will be distributed at your death.
  • Protection for your heirs. After your death, a trustee can keep trust assets from being squandered or lost in a divorce.
  • If your heirs are young, you can set up a trust to stay in effect until they are older and can handle their own finances. Another option is to keep the trust in effect for the lives of the beneficiaries.

A trust can be revocable or irrevocable. A revocable trust must be created during your lifetime. If you change your mind, you can revoke the trust and reclaim the assets as your own. A revocable trust can offer incapacity protection and probate avoidance but not tax reduction.

An irrevocable trust can be created while you’re alive or at your death. A revocable trust may become irrevocable at your death. Assets transferred into an irrevocable trust during your lifetime will be beyond the reach of creditors and divorce settlements. The same is true of assets going into an irrevocable trust at your death.

Your family members can be the beneficiaries of an irrevocable trust, while a trustee or co-trustees you’ve named will be responsible for distributing funds to those trust beneficiaries.

The trustee will be responsible for protecting trust assets.

Note: Deciding if you need a Last Will or a Revocable Living Trust?

One of the most significant decisions in estate planning is whether you will have a last will or a revocable living trust. Both documents have advantages and disadvantages.

In summary, whether you choose a last will or a revocable living trust, both roads eventually lead to Rome. The former is easier to create, costs less now and more later when administered. The latter is more involved to create, costs more now and less later when administered. An estate planning attorney will help you decide whether you need a last will, or a revocable living trust based on your specific needs.

  • Durable Power of Attorney

Through this document, you designate someone to act on your financial behalf, if you cannot or no longer want to act for yourself. Imagine for a moment that you decide to travel around the United States in an RV, go on a mission trip, or serve a tour in the Peace Corps. You will not always have access to a telephone or the internet. You could ask someone to deposit your checks, pay your bills and file your tax returns while you are away. However, unless you appoint them as your “attorney in fact” (also known as an “agent”) under a Durable Power of Attorney, they will not have the legal authority to take care of things for you.

This document is essential if you were severely injured or ill and could not make or communicate your wishes. Without a Durable Power of Attorney that legally appoints someone as your attorney in fact, your family will have to go to court to have a formal guardianship created with a court-supervised guardian appointed. The guardian does not have to be a family member. The expense of doing so and potential conflicts about who should serve as your attorney in fact can damage relationships among your loved ones.

Although having a Durable Power of Attorney is essential to your estate plan, extreme care and consideration must be given to the agent you will name. In Florida, a Durable Power of Attorney is effective immediately. Naming the wrong agent could cause financial abuse.

  • Health Care Surrogate Designation

As with the Durable Power of Attorney for financial decisions, you can appoint someone you know and trust through a Health Care Surrogate Designation (also known as a “Health Care Proxy”) to make your medical decisions, if you cannot. Through this document, you may indicate medical treatments you would or would not want under a variety of scenarios. Your health care “agent” will have no decision-making authority, as long as you can act for yourself unless you indicate otherwise. Your Health Care Surrogate Designation should include a HIPPA medical records release so your doctors can talk to your agent, and the hospital can share your records. You do not want your agent to make any decisions without full access to your doctors and your essential medical information.

  • Living Will

A Living Will allows you to direct the type of care you want if you are incapacitated and have a terminal condition, an end-stage condition, or in a persistent vegetative state. The Living Will, if desired, should go along with your Health Care Surrogate Designation or be a stand-alone document.

  • Preneed Guardian

The above-described documents, namely the revocable living trust, durable power of attorney, and Health Care Surrogate Designation should avoid guardianship. However, there are circumstances where guardianship might be appropriate. A Preneed Guardian Designation allows you to name a preneed guardian in the event of the declarant’s incapacity.

Estate Planning and Dementia

The fact that people are living longer means that more people will need assistance caring for their person and property due to old age diseases. Proper estate planning is essential for every adult American, but especially for those in the early stages of Alzheimer’s disease and other forms of dementia. Action must be taken sooner rather than later, if you want to participate in the planning process itself.

While you might not think you are at risk for dementia, one in three adults over the age of 65 develops dementia. Even if you do not experience dementia yourself, the odds are that someone close to you will.

Estate Planning for Seniors without Dementia

Knowing the numbers, it would be a wise decision to create your estate plan before there is any question about whether you have sufficient legal capacity. Still, if you are 65 or older, you might want to include a letter from your primary care physician confirming that you are of sound mind at the time you prepare and sign your legal documents.

Estate Planning for Seniors in the Early Stages of Dementia

Even after a diagnosis of dementia, you may still prepare or update your estate plan. However, the estate planning process must carefully assess and memorialize your mental capacity. As noted above, it is always a good idea to have a medical doctor evaluate and certify in writing your ability to understand the content of your estate planning documents and the consequences of signing them.

The medical evaluation and certification of mental capacity should be kept with your important legal papers, including your estate planning documents.

What to Do When a Person with Dementia Lacks Mental Capacity?

We do not always have the luxury of knowing that there is a “problem” before there is a problem, especially when someone close to us experiences diminished mental capacity. Unfortunately, at some point, someone loses the legal capacity to participate in preparing and signing legal documents. In hindsight, loved ones should have recognized the warning signs of dementia. Nevertheless, whether due to denial or the business of daily life, no action was taken to create an appropriate estate plan.

If you find yourself in this situation with a close loved one, you will need to initiate a guardianship proceeding to be formally appointed as a guardian by the court. Once appointed, you will be able to make personal, health care and financial decisions for your incapacitated loved one under the ongoing supervision of the court. You will need the assistance of an attorney to process this legal action.

Final Thoughts

As with most things in life, prevention is always more prudent than cure. Estate Planning begins at 18 years of age and must be evaluated and revised as needed throughout one’s lifetime. It is imperative not to wait until you have signs of Alzheimer’s or dementia disease. If you have not taken care of your legal business, then there is no time like the present. While you are at it, share this advice with those near and dear to you.

If you live in the state of Florida and would like to talk to an estate planning attorney, click here to book a consultation with Attorney Carol Grant.

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