The Florida Estate and Tax Blog : Becker & Poliakoff Law Firm : Florida Probate, Wills & Trusts, Gift & Estate Taxes Lawyer & Attorney

As you can imagine, a large part of my practice as a Florida estate planning attorney is devoted to working with new retirees who have decided to give up their residency up north and become permanent residents of Florida.  Aside from helping them overcome the hurdles created by their former northern state of residence that still wants to collect tax dollars from retirees who maintain what they now consider to be their second home, another obstacle that must be overcome is an estate plan drafted in their northern state that will most likely not work very well in Florida.  Here is a list of the problems with northern estate plans that I run into frequently:
 

1.  The last will and testament is not self-proved.  F.S. §732.503 provides that a last will and testament can be made self-proved when the testator signs an affidavit in front of two witnesses and a Notary Public who also sign the affidavit in front of the testator and Notary.  The affidavit can then be used as evidence that the testator and witnesses signed the will with proper legal formalities required by Florida law.  Unfortunately many wills I review that were not created under Florida law lack a self-proving affidavit.  What does this mean?  It means that before the will can be admitted to probate in Florida, at least one of the people who witnessed the will must be located and asked to sign an affidavit attesting to the fact that they actually witnessed the testator signing the will.  This, in turn, will create extra steps and expenses and can significantly delay the appointment of a personal representative.

2.  Disqualified personal representatives are named in the last will and testament.  Florida law requires that the person named to serve as the personal representative of a Florida estate must either be a Florida resident or related to the testator by blood or certain marital relationships (see F.S. §733.304).  This means that if a friend who isn't a Florida resident or the attorney from up north who drafted the will is named to serve as the personal representative, then he or she will be disqualified from serving in Florida.  And that's it, there isn't any argument that can be made or exceptions to the rule, the disqualified person will simply not be allowed to serve.

3.  Revocable living trusts ignore Florida homestead laws.  Many northerners who buy a second home in Florida title the home in the name of their revocable living trust in order to avoid Florida ancillary probate after they die.  But then when the owner decides to make their Florida second home their primary residence and apply for the Florida homestead exemption with regard to real estate taxes, their northern drafted revocable living trust won't contain any references to Florida homestead laws, and so the Florida property appraiser will have to reject the homestead application.

4.  Revocable living trusts of married couples ignore Florida homestead laws.  What happens when the northerners are married and decide to title their Florida second home in the name of their revocable living trusts, and then, as above, the couple decides to make the Florida home their primary residence?  If the couple's northern drafted revocable living trusts contain typical estate tax planning through the use of AB trusts, then when one spouse dies the Florida home will not pass into the A trust or B trust but will instead be distributed as provided by Florida law.  This, in turn, will completely defeat the couple's estate planning goals and may very well land the surviving spouse and children in court, particularly if the deceased spouse had children from a prior marriage.  For more on this problem, refer to Married Couples Alert:  Is Your Florida Home Owned by Your Revocable Living Trusts?

 5.  Durable Powers of Attorney are inadequate.  On October 1, 2011, Florida enacted a new power of attorney law that made sweeping changes to the laws governing durable powers of attorney.  Florida law now requires that the powers delegated to an agent under a power of attorney must be very specific.  In other words, a catch-all phrase such as "my agent can do anything that I can do as if standing in my shoes" won't cut it anymore.  Instead, the powers given to the agent must be enumerated in detail.  Anyone who owns assets in Florida should consider signing a new power of attorney that complies with the new Florida power of attorney law.  For more on the new law, refer to Top 6 Things You Need to Know About Florida's New Power of Attorney Law.

The bottom line:  Many wills, trusts, powers of attorney and other estate planning documents drafted in northern states won't cross state lines into Florida very well.  If you're making the move to become a Florida resident, or if you've already become a Florida resident but haven't updated your estate plan, then it's very important to have your northern-drafted wills, trusts and other documents reviewed by a Florida attorney estate planning attorney to insure that your estate plan will work in Florida the way you expected it to work up north.

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On January 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act (TRUIRJCA for short) into law.  What does this federal law have to do with Florida estate taxes?  Everything - you see, without the enactment of TRUIRJCA, Florida's estate tax was scheduled to reappear on January 1, 2011.  Instead, TRUIRJCA suspends collection of Florida's estate tax for deaths occurring in 2011 and 2012.

According to the Florida Department of Revenue website, for the estates of Florida residents or nonresidents who own real estate in Florida and the death occurs between January 1, 2011 and December 31, 2012, the Personal Representative will need to file one of two forms in order to release any Florida estate tax lien:

Estates that are NOT required to file a federal estate tax return (IRS Form 706).  For estates that are not required to file a federal estate tax return (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return), the Personal Representative will need to file DR-312, Affidavit of No Florida Estate Tax Due, in each Florida county where the decedent owned real estate.

Estates that ARE required to file a federal estate tax return (IRS Form 706).  For estates that are required to file a federal estate tax return (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return), the Personal Representative will need to file DR-313, Affidavit of No Florida Estate Tax Due When Federal Return is Required, in each Florida county where the decedent owned real estate.

To find out when a federal estate tax return must be filed, refer to When is a Federal Estate Tax Return Required to be Filed?

With regard to deaths occurring on or after January 1, 2013, unless Congress intervenes, then the Florida estate tax will return.  For more information on Florida estate taxes, refer to Does Florida Collect an Estate Tax?

Additional Information from the Florida Department of Revenue website:

• Florida's Estate Tax
• Estate Tax Return Zero Filing Requirements Have Been Extended     

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Florida residents, snowbirds who have not made Florida their permanent residence, and anyone else who owns assets located in Florida need to be aware that the new Florida Power of Attorney Act goes into effect on October 1, 2011.  This new act completely replaces current law governing Powers of Attorney made by individuals, so it is important for residents and non-residents alike to be aware of the new Florida rules governing Powers of Attorney. 

For some highlights of the new Florida Power of Attorney Act, refer to Top 6 Things You Need to Know About Florida's New Power of Attorney Law. 

To read the new act, see F.S. Chapter 709, Powers of Attorney and Similar Instruments, Part II, Powers of Attorney.

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On October 1, 2011, a new Florida probate law will go into effect that will drastically change what happens to the estate of a married Florida resident (or a married nonresident who owns real estate in Florida) who dies without a will, which is referred to as dying "intestate."  But before discussing the new law, here is a summary of what current Florida law says will happen to the estate of a married person who dies intestate:

1.  If a married person dies without a will and is survived by a spouse and children all of whom are the children of the surviving spouse, then the surviving spouse will receive the first $60,000 of the deceased spouse's probate estate and the remaining probate estate will be divided so that the surviving spouse will receive 50% of the remainder and the deceased spouse's children will equally divide the other 50%.

2.  If a married person dies without a will and is survived by a spouse and children all of whom are not the children of the surviving spouse, then the surviving spouse will receive 50% of the deceased spouse's probate estate and the remaining 50% will be divided equally among the deceased spouse's children.

3.  If a married person dies without a will and is survived by a spouse but no children, then the surviving spouse will receive 100% of the deceased spouse's probate estate.

So what will change on October 1, 2011?  Only situation #1 will change:  Under the new law, if a married person dies without a will and is survived by a spouse and children all of whom are the children of the surviving spouse, then the surviving spouse will receive 100% of the deceased spouse's probate estate.

The reasoning behind this change is that a married couple with children born from their marriage will most likely want the surviving spouse to inherit 100% of the deceased spouse's estate.  But not so fast - frequently I run into situations where one spouse has inherited significant assets from his or her own family and, in turn, only wants the children to inherit the inheritance.  If this is the case, then the couple will need to establish an estate plan that takes into consideration the inherited property and each spouse's ultimate wishes.

Also note that this new law does not apply to the protected homestead real estate of a married Florida couple.  For more on the rules governing Florida protected homestead real estate, refer to A Quick Guide to Florida Homestead Laws.

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Back in June 2010 the Florida Supreme Court handed down its decision in the Olmstead vs. Federal Trade Commission case, thereby throwing the asset protection benefits of Florida LLCs into question (for more on this, see Florida Single Member LLCs - Buyer Beware).  It didn't take long after the decision was released for a task force of Florida attorneys from the business, tax, real property, probate and trust law sections of the Florida Bar to be formed to work on an Olmstead legislative fix.  The diligent work of the task force resulted in several changes to F.S. section 608.433 that were signed into law by Gov. Rick Scott in May 2011.  These revisions provide for the following:

1.  F.S. section 608.433(5) now states that a charging order is the sole and exclusive remedy by which a judgment creditor of a member of a Florida multi-member LLC may satisfy its judgment from the member's interest in the LLC.

2.  F.S. section 608.433(6) provides that if a judgment creditor of the member of a single member LLC establishes to the satisfaction of a court that distributions under a charging order will not satisfy the judgment within a reasonable time, then a charging order is not the sole and exclusive remedy available to the creditor.  If this is the case, then the court may order the sale of the sole member's interest through a foreclosure sale.

So there you have it - the Olmstead "fix" appears to give multi-member Florida LLCs protection from outside creditors while single member LLCs have been left vulnerable.  But not so fast - there is an important omission from the Olmstead fix that could still leave multi-member LLCs vulnerable too:  The new law does not address nominal interests in multi-member LLCs, such as one owner holding a 1% interest and the other owner holding a 99% interest.  This type of arrangement could be made to create a multi-member LLC on paper, thereby theoretically giving it full protection from outside creditors under the new Florida statute.  But will this type of lop-sided, multi-member LLC work?  Perhaps not - equitable arguments could be made to disregard the nominal interest as being a sham interest, thereby resulting in the reclassification of the multi-member LLC into a single member LLC.  This, in turn, would allow a judgment creditor to foreclose on the entire LLC. 

So what's the bottom line when it comes to Florida LLCs?  If asset protection from outside creditors is a concern, then consult with an attorney who has expertise in asset protection strategies to insure that you have properly addressed both inside and outside creditors.

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Last week Andrew Berger and I presented a live webinar titled "New Estate Tax Laws - What You Need to Know Now."  Here are the five key points that we wanted attendees to take away from the presentation:

1.  How the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) shaped the laws governing estate taxes, gift taxes, and generation-skipping transfer taxes and estate planning in general from 2001 to 2010.

2.  How the Tax Relief Unemployment Reauthorization and Job Creation Act of 2010 (TRUIRJCA) changed the laws governing estate taxes, gift taxes, and generation-skipping transfer taxes for 2010 and what is currently in effect for this year and next year.

3.  What is supposed to happen with estate taxes, gift taxes, and generation-skipping transfer taxes in 2013 and the five possible scenarios for what could really happen.

4.  Techniques that can be used to deal with the continued uncertainty surrounding the laws governing estate taxes, gift taxes, and generation-skipping transfer taxes.

5.  What estate planning is really all about.  Hint:  It has very little to do with estate tax planning.

We would like to thank everyone who attended and all who helped to make the event a success.  If you would like to listen to a replay of the webinar, please follow this link:

New Estate Tax Laws - What You Need to Know Now

If you previously registered for the webinar but were unable to attend the live presentation, then simply enter your email address. 

If you did not previously register, then fill in the requested contact information so that you can be provided with the required internet link.

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This is a common belief of Florida residents - that if they're married, then even without making a will their spouse will inherit all of their property.  The answer is maybe yes and maybe no - it all depends on how your property is titled at the time of your death and whether or not you have children. 

Here is what the Florida intestacy laws say will happen to your probate estate if you don't have a will:

1.  Married with children from the current marriage.  If you're married and all of your children are from the current marriage, then your spouse will inherit the first $60,000 of your probate estate and the balance will be divided so that 50% will go to your spouse and the remaining 50% will be divided equally among your children.

2.  Married with children from a different marriage.  If you're married but some or all of your children are from a different marriage, then your spouse will inherit 50% of your probate estate and the remaining 50% will be divided equally among your children.

3.  Married without children.  If you're married but you don't have any children, then your spouse will inherit 100% of your estate.

On the flip side, if you attempt to leave your spouse out of your will or revocable living trust, then your spouse will be entitled to receive a 30% share of your estate and either a life estate or 50% interest in your protected homestead.  The only way that you can completely disinherit your spouse is for your spouse to agree to be disinherited in a valid prenuptial or postnuptial agreement.

NOTE:  Florida probate laws governing the estate of a married person will change on October 1, 2011:  Florida Probate Alert - New Law Gives Surviving Spouse 100% of an Intestate Estate.

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Recently I was interviewed for an article for Vanguard.com about why it's so important for single people to make an estate plan.  Because the legal definition of single simply means "not legally married," if you're single but have children and/or are in a committed relationship, then you need an estate plan in order to protect you, your family, your property and your ultimate wishes in the event you become incapacitated or die.  And even if you're single without children or a significant other, then you need an estate plan for the very same reasons.  To read the interview, follow this link:  I'm single. Do I really need a financial plan?

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If you live in Florida and you don't have an estate plan, then the laws of our fine state will make an estate plan for you.  Great, right?  Absolutely not.  Why?  Because Florida laws governing guardianship and probate, like the laws of most states, are antiquated since they're based on the traditional definition of what makes up a family and outdated concepts about who is the most qualified to take care of you and your property.  Aside from this, a judge, who knows nothing about you, your finances or your family, will be put in charge of making all of the really important decisions.

In order to opt out of the mediocre, or in some situations downright pathetic, estate plan that the state of Florida provides for all of its residents, here are the four essential estate planning documents that you will need and why:

1.  Power of Attorney.  A good Power of Attorney gives the agent of your choice the legal authority to manage all of your finances, including paying bills, buying, selling and mortgaging property, dealing with the IRS, and making retirement plan elections. A special type of power of attorney, called a Durable Power of Attorney, gives the agent of your choice the authority to manage your finances even if you become mentally incapacitated. Without a Power of Attorney, you and your property will become wards of the court through a court-imposed guardianship, which means that a judge will not only make all of the important decisions, but will also decide who to put in charge of taking care of you and all of your day-to-day needs.

2. Designation of Health Care Surrogate.  A Designation of Health Care Surrogate gives the agent of your choice the power to make your health care decisions if for any reason you can't make them for yourself.  This document should also provide the appropriate releases under HIPAA.  Without a Designation of Health Care Surrogate, Florida law dictates who should make these important decisions for you and if your family members disagree, then they'll end up in front of a judge who will make all of the decisions.  Do you remember Terri Schiavo?

3.  Living Will.  A Living Will gives instructions to your loved ones and doctors with regard to whether or not you want to receive life-sustaining procedures if you become terminally ill or are injured in an accident and not expected to recover.  Without a Living Will, Florida law dictates who will make these important decisions for you and, once again, if your family members disagree, then they'll end up in front of a judge who will make all of the decisions.  Back again to Terri Schiavo ...

4.  Last Will and Testament.  A Last Will and Testament allows you to make three important decisions:  (1)  Who will receive your property after you die; (2) Who will be in charge of settling your final affairs and making sure that your beneficiaries get what they're entitled to receive; and (3) If you have minor children, then who will take care of your children and their inheritance if you die while the children are still minors.  Without a Last Will and Testament, Florida law dictates who gets what, when they'll get it, how they'll get it, and who will be in charge of sorting it all out, including who will take care of your minor children and their inheritance.  And surprise, surprise - if you're married and have children and don't think that you need a Last Will and Testament because your spouse will inherit your entire estate, think again.  In certain situations Florida law will force your spouse and children to divide your estate so that your spouse will receive 50% and your children will split the remaining 50%.

Without these four essential estate planning documents - a Power of Attorney, Designation of Health Care Surrogate, Living Will, and Last Will and Testament - you and your property will be controlled by what Florida legislators, not you, believe is in your best interest.

And aside from these four essential estate planning documents, there may be others that you will need, including a Revocable Living Trust and an Irrevocable Life Insurance Trust.  If you don't have a Power of Attorney, Designation of Health Care Surrogate, Living Will, and Last Will and Testament (you need all four, not just one, two or three), then sit down with an estate planning attorney so that together you can determine what documents are appropriate for your particular family and financial situations.

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