Articles Posted in Beneficiaries

IRREVOCABLE SPENDTHRIFT TRUSTS

Trusts are popular estate planning instruments that may bring many benefits both during lifetime and in the case of death. Some common reasons for setting up a trust include the avoidance of costs and time consumption of probate proceedings, property management for those who cannot or do not wish to manage the property themselves, continuance of property management after death or during disability, and saving of taxes and protection of the assets against the claims of creditors. However, there are several types of trusts and not all of them provide these benefits to the same extent.

The revocable trust is the most flexible one as the creator (settlor) can at modify the terms of the trust or completely revoke it at any time. See Fla. Stat. § 736.0602. However, the assets transferred into such trust are still considered personal assets of the settlor and accordingly, can be reached by his or her creditors. See Fla. Stat. § 736.0505(1)(a). Therefore, the revocable trust is not an ideal solution for asset protection purposes. Upon death of the settlor, this trust becomes irrevocable, meaning that the rules for asset distribution can no longer be changed. It is also possible to make a trust irrevocable from the outset and to afford protection against creditors by adding a spendthrift provision. See Fla. Stat. § 736.0502.

HOW THE NEW TAX BILL MAY AFFECT DIVORCES

In one of our previous posts we informed about the new Tax Cuts and Jobs Act (“TCJA”) and the major changes it brings, including the various adjustments in tax deductions. This article focuses on deductions applicable to alimony, as the new system may significantly affect and expedite divorce settlements in the months to come.

Alimony is a form of spousal support awarded by agreement or by court decision to the lower-income spouse after divorce, typically referred to as the “dependent” spouse. The courts have wide discretion in establishing the amount of alimony and the time period during which the higher-income spouse is obligated to pay. The purpose of alimony is to help the dependent spouse overcome the divorce and to at least partially maintain the standard of living the spouses shared during their marriage. To ease the burden of splitting one household into two, the alimonies were tax deductible – at least until now.

IRREVOCABLE SPENDTHRIFT TRUSTS

Trusts are popular estate planning instruments that may bring many benefits both during lifetime and in the case of death. Some common reasons for setting up a trust include the avoidance of costs and time consumption of probate proceedings, property management for those who cannot or do not wish to manage the property themselves, continuance of property management after death or during disability, and saving of taxes and protection of the assets against the claims of creditors. However, there are several types of trusts and not all of them provide these benefits to the same extent.

The revocable trust is the most flexible one as the creator (settlor) can at modify the terms of the trust or completely revoke it at any time. See Fla. Stat. § 736.0602. However, the assets transferred into such trust are still considered personal assets of the settlor and accordingly, can be reached by his or her creditors. See Fla. Stat. § 736.0505(1)(a). Therefore, the revocable trust is not an ideal solution for asset protection purposes. Upon death of the settlor, this trust becomes irrevocable, meaning that the rules for asset distribution can no longer be changed. It is also possible to make a trust irrevocable from the outset and to afford protection against creditors by adding a spendthrift provision. See Fla. Stat. § 736.0502.

How to comply with formal requirements of Will execution

Florida law places great emphasis on compliance with its statutes regarding execution of wills. This is to assure the authenticity of such an important document profoundly affecting many lives, and prevent fraud and imposition in its execution. The statutory provisions, which appear in Florida Statute §735.502, set out four main requirements for executing a will. Failure to comply with the formal requirements can invalidate the will and force the estate to pass through intestate succession. It is therefore important to comply with and understand these formal requirements.

Firstly, the will must be in writing. This means that the document can be handwritten, typed, or printed. Florida does not recognize oral wills (nuncupative wills) or wills without witnesses (holographic wills). Nuncupative wills are allowed in only few jurisdictions and typically require witnesses and some exigent circumstances such as a car accident or a heart attack. Contrarily, many states recognize holographic wills and have different requirements as to their validity.

When devises are actually not part of the estate

Many unexpected things can happen in the period between the execution of a will and the actual death. For example, a decedent may devise the family house in Key West to her granddaughter. Several years after executing the will, the decedent gets into financial troubles and sells the Key West house. With other matters on her mind, the decedent never gets to adjust the will and passes away. Does the granddaughter still have a right to the house? Does she get money instead? Does she get any value at all?

The legal term describing a situation when a particular asset devised in the will is not part of the estate is ademption by extinction. The Florida statutes cover ademption in Section 732.606 for specific devises, and Section 732.605 for securities. Ademption is not uncommon; the decedent may have owned the asset and later sold it, or could have never owned it all. The situation would be different if the grandmother gave the granddaughter the Key West house as a gift before passing away. In that case, the granddaughter’s devise would have been satisfied during the grandmother’s lifetime. Accordingly, this legal concept is called ademption by satisfaction and is not discussed in this blog post.

Where There’s a Will, There May Not Always Be a Way for Attorney-Client Privilege

Attorney-client privilege may not always apply in probate litigation. In fact, the Third District Court of Appeal has held that under the Florida Evidence Code, a lawyer may not invoke attorney-client privilege under certain circumstances.

Attorney-client privilege is a key hallmark of the attorney-client relationship. The privilege prevents disclosure of confidential communications pertaining to legal advice between a client and her attorney. Attorney-client privilege therefore promotes candor and better representation. Rule 4-1.6(a) of the Florida Rules of Professional Conduct states that “[a] lawyer must not reveal information relating to representation of a client . . . unless the client gives informed consent.” https://www.floridabar.org/rules/rrtfb/rule/?num=4-1.6. Further, under the official comments to Rule 4-1.6, a lawyer has an ethical obligation to assert attorney-client privilege on a client’s behalf, including during proceedings involving evidentiary matters.

Expanding Florida’s Homestead Exemption

Florida voters will have an important decision to make for the 2018 election—whether to raise the Florida homestead exemption. At first glance, the legislation offers a substantial property tax break for homeowners; however, if approved, the homestead exemption bill may cost counties and cities enormous revenue.

The Florida legislature created the homestead exemption in 1934 to aid residents affected by the Depression. The homestead exemption—then $5,000.00—allowed residents to keep their homes despite inability to pay property taxes. http://www.tampabay.com/news/politics/legislature/florida-homestead-exemption-increase-closer-to-ballot/2322311. In 1980, under Democratic Governor Bob Graham, Florida voters raised the exemption to $25,000.00, and again in 2008 to $50,000.00 under Republican Governor Charlie Crist. http://www.tampabay.com/news/politics/legislature/florida-homestead-exemption-increase-closer-to-ballot/2322311. Now, the November 2018 ballot will give Florida voters the choice to raise the exemption even higher.

Priority of Medical Decision-Makers when Incapacitated

Throughout life, many unexpected things can happen. Have you ever wondered who will get to make difficult medical decisions for you if you are incapacitated or otherwise unable to? The Florida Legislature has, in § 765.401 Fla. Stat. (1992), made a list in order of priority of such proxies.

The first person on the list is a court-appointed guardian if one has previously been appointed and has been authorized to consent to medical treatment for the patient. Likewise, a guardian advocate previously appointed by the court will be first in line to make decisions for one who has a developmental disability. It is important to note that guardian appointments are not required before a medical decision can be made.

4th DCA Recognizes Homestead Exception for Alimony Creditors

The Florida Constitution provides powerful homestead protection against creditors.  Generally, only three types of super-creditors can breach this protection – (1) government entities with a tax lien or assessment on the property; (2) banks or other lenders with a mortgage originating from the purchase of the property; and (3) creditors with liens originating from work or repair performed on the property.

However, a recent decision by the District Court of Appeal for the 4th District confirmed a “long recognized” fourth category of super-creditors – alimony creditors.  The facts of this case are as follows:  Robert Spector (“Husband”) and Renee Spector (“Former Wife”) divorced in 1996, and agreed in a post-nuptial agreement that Husband would (1) pay Former Wife $5,000 per month in alimony until his or her death, or until she remarried; (2) transfer to Former Wife the title and interest in their marital home; and (3) maintain a $750,000.00 life insurance policy for Former Wife’s benefit.  Subsequently, Husband was held in civil contempt for “willful and deliberate failure to comply with the alimony provisions” of the post-nuptial agreement and was also denied a bankruptcy petition as alimony arrearages were not subject to bankruptcy discharge.

MORE MONEY, MORE PROBLEMS? 6 DO’S AND DONT’S OF ESTATE PLANNING AND INTELLECTUAL PROPERTY

At the end of last year it seemed as if every day there was a new report of a celebrity dying unexpectedly. As fans around the world mourned the death of some of Hollywood’s most iconic figures, reports of their estate planning, or lack thereof, also filled the headlines.

Prince: Intestacy and streaming music rights collide