Estate and Disability Planning in Florida

As many of us conclude our hurricane repairs and related expenses, there seems to be a noticeable renewed interest on the part of clients in learning more about organizing their financial affairs and protecting the lifetime assets they have acquired. With that in mind let’s review some resources and planning techniques that we have at our disposal.

As professionals who sit down with their clients to discuss the various issues that affect their asset management concerns, we must make a distinction between the clients planning needs as they evolve from developing their businesses and investment portfolios to a more settled stage where the protection of those assets becomes paramount.

We must distinguish between lifetime gifts and transfers that a client may be interested in making while he/she is alive and well, and testamentary wishes communicated through a will or trust to be followed by surviving family members at the time of their death. Under Florida law a person may use an assortment of planning devices that are readily available to accomplish their wishes.

Wills vs. Trust

It is said that a person may die testate, in other words, having left a Last Will and Testament or intestate meaning that the person left no will at all. The Florida Statues Chapters 731,732 and 733 provide the legal frame work for the administration of probate estates.

A will is a document that only comes to life, in a matter of speaking, when a person passes away. It amounts to a set of instructions on how to dispose of assets after the Personal Representative takes care of all the debts and obligations of the estate after the decedent’s demise. If there are minor children left, a guardian may be nominated to care for their personal and financial needs within the will.

A will is very important in that it takes away a lot of the guess work typically associated with intestate cases when the family members, lawyers and CPA’s are forced to sometimes wonder and speculate what the decedent’s actual wishes were.

When a person dies intestate there is sometimes the misconception that the family is left with nothing and that all existing assets go to the State of Florida. Nothing could be farther from the truth. In intestacy cases, essentially 50% of all property left by the decedent goes to the surviving spouse and the remaining 50% is to be divided equally among the children. Only in the remote situation where a person dies without any surviving family members does the property go to the state of Florida.

In both testate and intestate cases, additional protection from creditor’s attacks exists for the surviving family members by way of the Family Allowance and Exempt Personal Property set-asides. Through the Family Allowance the surviving family members that were dependents of the decedent are entitled to receive up to $18,000.00 for family expenses through the somewhat lengthy probate process. Under exempt personal property provisions the family of a deceased individual may enjoy creditor protection in all the furniture, furnishings, and personal automobiles owned and left by the decedent.

All devises, legacies and other gifts are subject to the effective and complete discharge of the decedent’s debts. All known and existing creditors must be notified that an estate is being probated, and a notice of administration must be published in a local newspaper to cover all those creditors unknown to the Personal Representative and the decedent’s survivors. Having said this much about the probate process, it must be pointed out that there are certain inherent limitations to this estate planning approach. Once the estate administrations process is opened and closed, a period typically lasting between 6 months to a year, there isn’t much more that can be done to project the testamentary wishes of an individual beyond that point in time.

Should a person wish to retain some strings over the affairs of the remaining family members, a different device may provide a more flexible and comprehensive strategy, namely, the Revocable Living Trust. Trusts have been used for hundreds of years. The basic trust relationship that allows a Grantor to appoint a Trustee to manage the assets of an estate for the benefit of certain named individuals is a recognized legal arrangement found throughout Great Britain, the United States and the former British colonies. Once a trust is created, distinct legal entity comes into existence that will continue to enforce the Grantor’s wishes according indefinitely after he/she is gone.

Should a client wish to insist that his widow, son, or daughter enter into a premarital agreement sometime in the future a trust is the perfect vehicle for such plan. Likewise, if the Grantor decided that he/she wants to provide specific incentives to motivate beneficiaries to attain certain stated goals, the trust once again, living far beyond its original maker comes to the rescue by achieving the Grantor’s intended wishes.

As practitioners in the estate planning field, we concern ourselves primarily with designing strategies that minimize a client’s exposure to creditor’s attacks during their lifetime while we also try to reduce the overall estate tax liability at the time of death.

This discussion covers primarily those situations where a potential client is concerned about the management of assets throughout his/her lifetime, and ways in which they may express testamentary wishes to benefit survivors upon their death.

There are more advanced planning techniques for the elderly to qualify for Medicare/Medicaid benefits, as well as, additional asset protection tools available for high net-worth individuals that may be more interested in creditor protection.