Interest rates are currently at an all-time low, making it an imperative time to consider all the potential estate planning options that you may have. Low interest rates provide an advantageous opportunity to utilize grantor-retained annuity trusts, also known as GRATs. GRATs are an instrument used to transfer appreciating assets, or assets that become more valuable over time, such as securities, real estate, or private equity investments. Generally, GRATS should be utilized when interest rates are low because they operate by freezing the value of the property transferred to the trust. As a result, future appreciation of the asset will transfer free of estate tax for the named beneficiaries of the grantor. This type of trust allows you to save a lot of money if the trust is set up properly and is set up at the correct time.
As was recently decided by the United States Supreme Court, same-sex couples can legally wed in every state in the country. Not only will same-sex couples be able to marry in any state of their choosing, but they are also now afforded the same rights and benefits that have traditionally accompanied the sanctity of marriage between man and woman. In Obergefell v. Hodges, the Supreme Court in a 5-4 ruling, legalized same-sex marriage. Supreme Court Justice Kennedy, who wrote the majority opinion, stated that same-sex couples may exercise the fundamental right to marry. Justice Kennedy’s majority opinion further holds that same-sex couples will no longer be denied the various benefits that states have linked to marriage.
Justice Kennedy explained that no union is more profound than that of marriage. However, along with this profound union, comes additional and important decisions that must be made by the marrying couple, including decisions related to taxes and estate planning. For tax planning, newly wed same-sex couples should consider the previous year’s federal and state income tax returns in order to discover if there is a positive tax arbitrage worth the time and expense of amending the prior year’s tax returns. In addition, the current year’s federal income tax and state income tax (if applicable) opportunities should be examined.
“For better or for worse.” These are the traditional words that our society associates with wedding vows, indicating that the two individuals marrying each other are making a commitment to each other in good times and in bad times. This commitment is meant to extend to all aspects of the married couple’s lives, and estate administration is no exception. When a married individual dies, the decedent’s spouse is entitled to a portion of the decedent’s estate. This is true in Florida even if the decedent attempted to disinherit his or her spouse. As long as the couple has not divorced, the spouse is entitled to inherit at least something (even if the couple separated).
Earlier this year, Florida became the 36th state to legalize same-sex marriage, which was undoubtedly a monumental event for many South Florida residents. Up until then, gay and lesbian couples who wanted the benefit of marriage, but were legally unable to tie the knot, had very few options when considering things like estate planning, healthcare decisions, and taxes. After legalization, same-sex couples now have the opportunity to achieve greater economic and health benefits under the law.
Notably, as a legally recognized married couple, Floridian same-sex couples can now qualify for both homestead and tenancy by the entirety protection for property. In Florida, homestead refers to the constitutional protection of an individual’s home from creditors. The Florida Supreme Court in Orange Brevard Plumbing & Heating Co. v. La Croix stated that its “design and purpose is to benefit the debtor by securing to him his homestead beyond all liability from forced sale under process of any court. The case law of this state dictates that homestead exemption laws should be liberally applied to the end that the family shall have shelter and shall not be reduced to absolute destitution.” 137 So. 2d 201, 204 (Fla. 1962).
Tenancy by the entirety is a form of ownership only applicable to married couples, where each spouse holds the whole (or the entirety of the) property, and not a share or divisible part. This means that when one spouse dies, the surviving spouse automatically owns the entire asset. In addition to property rights, married same-sex couples can also begin to file joint tax returns and make medical decisions for the other spouse. These are everyday decisions for many of us, and now all married residents of Florida can benefit from these protections.
In the United States, about 40 to 50 percent of marriages end up in divorce. It is, therefore, no secret that many people are entering second marriages. As a result, people need to be aware of the estate planning consequences associated with getting remarried. Not only will you have assets to worry about (e.g., cars, real property, money, etc.), but you may also have to consider the merger of the families and potentially, new children down the road. It can be a complicated proposition to be in, and it is important to have a plan in place if the time comes to walk down that aisle once more.
Florida law on the execution of wills makes it clear that not all wills are created equal. One of the most important things to know when drafting your will is the law governing the validity of that document. In Florida, if a will does not meet certain required formalities, then the will is considered invalid and your estate becomes subject to the laws of intestacy, which will likely result in an outcome that neither you nor your heirs expected.
The number of blended families in America is increasing and with it, so is the need for competent estate planning. As the modern blended family replaces the “traditional” family, tension arises from traditional intestacy laws. Florida residents need to understand the implications these laws have on their family structure and on the obligations that the laws place on individuals wishing to ensure that their intended beneficiaries receive the intended bequests.
When a person dies without a will, the laws of intestacy spring into effect and the property of the deceased person is distributed to family members in accordance with state law. Historically, the law of intestate succession has focused on biological relationships. In Florida, the law of intestacy has yet to be reformed to better address those family structures that include stepchildren.
It is no secret that we are living in a digital world. Our daily lives are spent online paying bills, browsing social media, checking bank accounts, and the list goes on. When you signed up for all of these accounts, you likely did not think to yourself, “I wonder who will manage these accounts if I pass away?” If you did not contemplate this aspect of managing an online account, you would not be alone. Most people do not even read the terms and conditions when creating online accounts. Instead, we take it for granted that digital accounts will make our lives easier, not harder.
A will cannot always handle the wide range of issues that arise when planning your estate. A revocable living trust, commonly called a living trust (or “inter vivos trust”), is created during your lifetime and allows you to create a plan to manage your assets and protect you when you fall ill or even as you age. Because the Living Trust, governed under Chapter 736 of the Florida Statutes (the “Florida Trust Code”) is revocable, you also have the power to revoke or amend it throughout your life.
You take the time to create an estate plan with the hopes that upon passing, your assets are distributed as you had indicated in your estate plan. Unfortunately, not all estate plans are created equal and consequently, a poorly created estate plan could become more contrary to your intended wishes than no plan at all. Drafting an estate plan is a great way to ensure that your assets transition upon death in a manner consistent with your goals and wishes, however, a poorly executed plan can result in unexpected consequences and prove disastrous for your family and your estate.
The following tips can help you avoid common pitfalls in estate planning and may provide you with the peace of mind that undesirable consequences will not result from your good intentions: