CORONAVIRUS UPDATE: What We Are Doing to Protect Our Clients

Articles Posted in Creditors

Homestead Protection: Can You Lose It in Probate?

A person’s home (homestead) is often the most important asset in their estate plan because of the monetary and sentimental value that is inherent in a person’s main residence. Florida has special rules that govern a person’s primary residence, known as homestead property. Unless a creditor is the IRS, a mortgagee, or a laborer that performed work on the home, a homestead property is safe from creditors’ claims. Essentially, the homestead is exempt from a forced sale of the property unless there is a special creditor.

To qualify for homestead protection, a person must be a permanent resident of Florida, and the homestead must be that person’s primary place of residence, among other rules. This means that second homes and investment properties are ineligible for such protection. However, there is no monetary cap associated with the exemption, so a Florida resident that invests millions of dollars into their primary residence will receive full protection.

Does My Will Control My Joint Property?

There are several different ways to hold real property with another individual in Florida. The three main ones are: 1) tenancy in common, 2) joint tenancy with a right of survivorship, and 3) tenancy by the entirety. The way co-ownership of real property is classified may have significant impacts on the disposition of an estate after one of the owners dies.

In Florida, the default classification of real estate ownership is known as tenancy in common. If a property title lists only the names of owners without specifying another classification, there is a presumption that the property is a tenancy in common (unless the individuals are married). Additionally, unless specifically stated otherwise, tenants in common own equal shares of the property. When a tenant in common dies, the real property passes according to that person’s estate plan. This type of ownership will ensure that the property will flow through the owner’s estate. However, unless this property is held by a mechanism that can avoid probate proceedings (e.g. a Revocable Trust), it must go through the time consuming, expensive and public probate process to transfer title to the heirs.

The Long Arm of the Law – Trust Litigation and Out-of-State Beneficiaries

When dealing with trusts, there is a possibility that the potential litigation or present lawsuit involves people from multiple jurisdictions and multiple states. A trust may be created and administered in Florida, but the beneficiaries may live elsewhere. If this is the case, can the beneficiaries still be sued in Florida?

The Southern District of Florida discussed the issue of personal jurisdiction over a party when dealing with an in-state trust and an out of state beneficiary in Abromats v. Abromats. Gloria Abromats, executed a revocable trust while she was residing in Florida. Further amendments were made to Trust, which one of her sons, Clifford, claimed were procured through undue influence over Gloria by his brother Phillip. Phillip lived in Wyoming and received distributions from the trust. Clifford filed suit against Phillip in Florida, but Phillip argued that the court did not have jurisdiction over him in Florida.

Legitimate Taxation or “Confiscation?”

Taxing Trust Income

Which states can tax a trust’s income? This exact question was taken up by the Supreme Court in their recent opinion North Carolina Department of Revenue v. Kimberly Rice Kaestner 1992 Family Trust. North Carolina was of the opinion that they could tax the trust income of any and all trusts with at least one beneficiary residing in their state. The Supreme Court, however, disagreed.

Is it a Gift or a Loan? Your intention matters for your Estate Planning

Have you ever given your child money to help them with school or a car or rent? How about loaning money to a friend? Is the intention to give a gift or a loan? How these transactions affect your estate planning may not be your first thought, but a good estate planner will take these transactions into account.

A transaction is a gift under section 2512(b) of the Code whenever there is a transfer for less than adequate and full consideration. If you never expect the other person to pay you back, then the transfer was a gift. At this stage it is important to remember that a gift should be properly reported on a gift tax return. Now what if you have made a large gift to one of your children during your lifetime, but you would like to treat your children equally upon your death? You may wish to acknowledge in your will or trust the gift you made to your child during your lifetime as an advancement of that child’s share. This would reduce your child’s share by that amount and give that same amount to your other children.

Avoiding Undue Influence, as an Adult Child, Assisting Parent’s Estate Planning

Writing a will is a process most people view as a terrible chore, but it is one that is necessary. The process may get further complicated when one spouse has already passed away and the adult children of the surviving elderly parent assist in managing and dividing finances. This has become more of a reality as more and more middle-aged children are caring for elderly parents. Perhaps, not surprisingly, this phenomenon is more pronounced in Florida, which according to the U.S. Census Bureau, leads the nation in terms of greatest share of its population aged 65 and older in 2010.

This scenario can lead to issues in estate planning especially if the parent is experiencing diminished mental capacity where too much of an adult child’s influence over estate planning decisions of the parent may bring legal problems such as legal charges of “undue influence.” Every state has its own undue influence laws to address these types of issues not only in the context of children’s undue influence on parents but others outside the family, such as a girlfriend or caretaker. In Florida, in order to raise a presumption of undue influence, a petitioner must show “(1) the existence of a confidential or fiduciary relationship between the decedent and the procurer of a will; (2) the active participation of the procurer in the planning and drafting of the will; and (3) the realization by the procurer of a substantial benefit under the provisions of the will.” These elements in Florida are found in common law as opposed to codified statutes so the court’s decision will be based on how convincing the evidence is in a case.

Seeking Paternity in Probate: Are You Out of Time?

When an estate enters probate and is being distributed, the distribution is usually between family members. Family members can include spouse, children from the marriage, parent, adopted child, aunt, cousin, etc. If there are issues or questions about the status of these individuals, they are usually litigated after the estate holder passes. But what if you are a child born out-of-wedlock? What status do you have and what rights do you have to the estate?

Under Fla. Stat. § 732.103, any children from the marriage are automatically deemed heirs of the estate, and entitled to a share of the intestate estate. But out-of-wedlock children have to establish paternity if they want to share in the distribution of the estate. But do these individuals have the opportunity to litigate the paternity after the father has passed? The opportunity is there, but it is subject to a statute of limitations under Fla. Stat. § 95.11(3)(b). The statute imposes a four year limitation for paternity actions generally, starting from the date the individual turns eighteen.

Probating the Estate of a Missing Person

Even more excruciating than the death of a beloved person is arguably the uncertainty when the beloved person goes missing and his or her body is never recovered. Florida laws contain rules that allow the surviving family members to complete the mourning process, declare the missing person dead, and move on with their lives. One of the issues that the surviving members must deal with is the distribution of the estate of the deceased. Can you probate a missing person’s estate?

The answer is yes. However, as the first step, the missing person must be declared fictitiously dead. Under Florida Statute §731.103(3), a person who is absent from the place of his or her last-known domicile for a continuous period of five years and whose absence is not satisfactorily explained after diligent search and inquiry is presumed to be dead. The thoroughness of the search for the missing person is considered on a case by case basis; therefore, what may be enough in one case might be insufficient in another one. What is clear though is that at least some search must be done every time.

WILLS, TRUSTS, and ARBITRATION AGREEMENTS

In previous blog posts, we have shown how wills and trusts are favored vehicles when protecting someone’s assets. Perhaps one of the purposes of a well-drafted will or trust is to avoid hearing the judge’s gavel when knowing who gets what part of the inheritance. Unfortunately, contentions amongst the parties may well exist. The good news is that since 2007, parties have another alternative to resolve disputes that arise out of a will or a trust. Florida Law provides the option for parties to have a clause in their will or trust requiring arbitration. See Fla. Stat. § 731.401.

Arbitration, is a private (not state-sponsored) method of resolving disputes. Arbitration is not to be confused with mediation: While mediators help the parties in finding a solution, arbitrators decide a dispute.

What is Probate?

Probate is a process, which the court supervises, for settling a deceased person’s estate.  The process involves identifying assets belonging to the estate, paying the decedent’s debt, and distributing the remainder of the assets to the decedent’s beneficiaries.  Costs for the probate proceeding have first priority for payment from the estate’s assets.

If a decedent dies testate (with a valid will) and designates a personal representative, then the will’s provisions govern disposition of the decedent’s probate assets.  If a decedent dies intestate (without a valid will), then Florida law will govern selection of a personal representative and will govern who will receive the decedent’s probate assets.

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