Charitable donors are frequently in pursuit of a means for establishing a lifetime philanthropic legacy and effective estate planning. The utilization of a charitable trust provides a strategic option. The donor may choose to set up a trust during his or her lifetime (termed an “inter vivos” trust) or a trust set up to take effect upon death under a will (termed a “testamentary trust”).
Estate planners often focus on the tax benefits of making a gift, as smart planning can help reduce or eliminate a wide array of taxes on the estate and individual. But if you thought the primary motivation for donor gift-giving was related to taxation, you are mistaken. The reason behind the choice to make a gift to charity over a family member runs deep—it is about an emotional connection to the mission of the benefiting organization. Neuroscience has revealed that giving is hard-wired into our brains, perhaps giving validity to the aphorism that “it is better to give than to receive.” With the right estate planning, giving can actually lead to receiving, in the form of tax benefits.
Tortious interference with an expected inheritance occurs when someone intentionally prevents, through fraud, duress, or other tortious means, another person from receiving an inheritance or gift that other person otherwise would have received. Many states today, including Florida, recognize the tort of tortious interference with an expected inheritance. Even the Supreme Court of the United States has acknowledged tortious interference with an expected inheritance to be a “widely recognized tort.”
When you think of your “assets,” what are the first things that come to mind? Likely, your tangible assets: your home, car, cash, furniture, documents, clothes, etc. Not surprisingly, people often forget or do not realize that pictures they uploaded onto websites and applications like Facebook and Instagram, information in user accounts on web-based platforms like My Verizon and myAT&T, documents uploaded to the “Cloud,” and emails stored in your email accounts are also “assets” that must be accounted for after a person passes or becomes incapacitated.
Hippocrates wrote, “vita brevis, ars longa.” Translated, this means “life is short, art is long.” It is a common reference to how time limits life and how art may prolong those limits. In an article that explores what motivates people to make charitable gifts, one gift planner explained that “[s]ome donors are motivated to make a gift that will last forever.” (Alexandra P. Brovey, My Client, a Donor? TRUSTS & ESTATES: THE WEALTH MANAGEMENT.COM JOURNAL FOR ESTATE-PLANNING PROFESSIONALS, October 2013, at 19, 20.)
Often times, people are displeased by the terms of a family member’s will and would like to have a court set aside the will. This frequently occurs when relatives are left out of a will, and there is concern that the will does not reflect the actual wishes of the decedent. Based on the circumstances in which a will is created or the consistency of a will under applicable state law, some wills may be invalidated. According to Julie Garber’s recent article, “What Are the Grounds for Contesting a Will?” there are four legal grounds on which a party may contest the validity of a will: (1) non-compliance with signing formalities, (2) lack of testamentary capacity, (3) undue influence, and (4) fraud.
The consequences of will disputes range from the goals of the individual who created the will being greatly frustrated to failing completely, which is a shame because a will represents a person taking the time and energy to memorialize his or her last wishes in a testamentary instrument. However, poor estate planning combined with contentious litigation among family members can foil the best intentions of a testator.
In a recent article titled, “Look Who’s Moving In With Your Aging Parent,” author and mediator Carolyn Rosenblatt addressed concerns relating to the care of aging parents’ finances. In the article, Rosenblatt told the story of a 78-year old man named Arthur who suffers from early stage dementia, a mental illness common among men and women aged 65 and older.
A “guardian” is a person appointed by the court to act on behalf of the person and/or property of an individual whom the court has determined to be incapacitated, known as a “ward.” Guardians are appointed according to statutory criteria, outlined in § 744.309, Florida Statutes (2013). The guardian of an incapacitated person may exercise only those rights that have been removed from the ward and specifically delegated to the guardian. A guardian of a ward’s property has a fiduciary obligation to protect and preserve the assets of the ward, and is required to keep the court apprised of their actions through the filing of an initial guardianship inventory and annual accountings. A guardian of a ward’s person may, among other things, consent to medical treatment on behalf of the ward and, as with a guardian of property, must file an annual guardianship plan detailing the ward’s doctor visits and treatment plans for the coming year. Persons disqualified from becoming guardians include convicted felons, incapacitated persons, or persons who have been judicially determined to have committed abuse or neglect against a child or any of the other offenses prohibited under § 435.04, Florida Statutes (2013), such as acts of sexual misconduct, abuse or exploitation of an elderly person, and even indecent exposure. Additionally, prospective guardians must submit to a high level of background screening, including a credit history report and fingerprinting.
Based on Florida’s statutory scheme, it would seem that a Florida court, given the same underlying facts, would reach the same result as the Massachusetts court in Marsman. If a life beneficiary—on the verge of being destitute—requested a distribution from a trust with a clause that directed the trustee to make distributions that the trustee, in his or her discretion, deems necessary for the life beneficiary’s support, taking into account the life beneficiary’s income from all sources known to the trustee, a trustee under Florida law would presumably be duty-bound to make a distribution. Because the trustee would be required to “administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries,” it would seem that a failure to distribute funds would be an abuse of the trustee’s discretion. Clearly the trustee would be required to look at the financial situation of the life beneficiary to ascertain whether a disbursement was needed in order to “support” the life beneficiary. Upon discovering that the life beneficiary was destitute, a failure to invade the corpus and disburse funds would likely violate § 736.0803, Fla. Stat. Many settlors incorporate language into the applicable “support clause” that states something to the effect of “even to the exhaustion of the trust,” in order to ensure that the trustee has the discretion to completely disburse the trust’s assets if needed to support the life beneficiary.
What happens if the life beneficiary contacts the trustee and demands that the trustee invade the trust corpus and distribute funds for the life beneficiary’s maintenance and support, but the remainder beneficiaries object? Aside from being bound to “administer the trust in good faith” and “act impartially in administering the trust property,” the Florida legislature gives trustees little guidance as to what the best course of action is. The potential issues that the trustee faces include the following: (1) what level of maintenance and support is the surviving spouse entitled to; (2) must the trustee consider the standard of living that the surviving spouse had at the time the trust was created, at the death of the settlor, or at the time of the request; (3) how searching must the trustee’s review of the life beneficiary’s other assets be; (4) what situations must the trustee must distribute funds to the surviving spouse; and (5) are there certain situations where funds cannot be distributed to the surviving spouse?
When creating a trust as part of one’s estate plan, it is not uncommon for the settlor to include provisions designed to provide support for a spouse or other loved one for the remainder of his or her life, with the remaining trust assets going to the settlor’s children, or another designated beneficiary. These “support trusts,” as they are commonly referred to, will give the trustee the discretion to invade the trust corpus in order to provide for the “health, education, maintenance and support” of the “life beneficiary,” when in the trustee’s discretion it is appropriate. Then, upon the death of the surviving spouse, whatever is left of the trust corpus will go to whomever the settlor designates as their “remainder beneficiary.” Additionally, many of these support trusts specify that the trustee, in exercising his or her discretion, should look to the other assets that the life beneficiary has available to determine whether additional invasions of the trust corpus are needed to provide for their “health, education, maintenance, and support.”