Articles Posted in Creditors

How can a single parent avoid homestead to protect a minor child?

            Florida homestead laws are complex, confusing, and enormously important for homeowners with or without an estate plan. Florida homestead law applies to three categories: (1) creditor protection against reaching a primary residence, (2) property tax exemptions and limitations on annual property value increases, and (3) restrictions on how a homeowner may devise property if there is a surviving spouse or a minor child.

Under this third category, Article X, Section 4(c) of the Florida Constitution states that a homestead property cannot be devised if the owner is survived by a spouse or minor child, except to the spouse if there is no minor child. This section only pertains to devises, or post-death transfers of property. A homeowner is free to mortgage, gift, sell, or deed the property freely while the homeowner is still living. If the homestead is jointly owned by both spouses, then the property can be freely transferred as long as both spouses join on the conveyance.

Est. of Pounds v. Miller & Jacobs, P.A., No. 4D21-1362, 2022 WL 39211 (Fla. 4th DCA 2022).

If a will does not specify who should serve as personal representative of an estate, parties can fight over this position through litigation. But what happens if one person obtains a settlement on behalf of an estate, and then another person is appointed as personal representative? The court answered this question in Estate of Pounds v. Miller & Jacobs, P.A., No. 4D21-1362, 2022 WL 39211 (Fla. 4th DCA 2022), giving us insight into why these situations are problematic and why good estate plans need to be carefully drafted.

The decedent died in a motorcycle accident, leaving behind his minor child as the sole heir of the estate. The child’s mother and the decedent’s mother both showed interest in serving as personal representative of the estate, which comes with certain perks, such as earning a personal representative fee, and responsibilities, including distributing estate property. The child’s mother was not married to the decedent.

What to do with 23 and me?

Recent years have seen the rise in ancestry services such as Ancestry.com and 23 and Me. After performing a simple DNA swab, these services provide the subscriber with hereditary and genealogical information that can unlock family history, medical information, and perhaps even long-lost relatives. While these services provide substantial value for our personal lives, they may be problematic in the world of estate planning.

To illustrate, consider the following hypothetical. A man donates to a fertility clinic when he is 20 years old. Many years later, the man is happily married with three adult children. The man then creates a will that reads in part as follows: “I hereby leave my personal savings account, valued at $1,000,000, to my biological children to be divided equally.” This language creates a class gift to a particular class of people, his children, as opposed to naming specific individuals to benefit. While the man’s three children are included in this class gift, as was intended, so too is a fourth biological child resulting from the man’s fertility clinic donation years prior, whom the man never knew existed. Genetic information services can have both intended and unintended consequences, as the three children will find out if the fourth child identifies his father through an ancestry service and later seeks a distribution from the man’s estate under the class gift in the will.

How does Florida’s Elective Share Affect my Estate Plan? Part One.

What is an “Elective Share”?

In situations where the decedent’s will has left their surviving spouse very little, or nothing, Florida law protects surviving spouse’s in two major ways: The Elective Share and Homestead. While both of these laws may affect your estate plan in significant ways, this blog and the next blog will focus on the elective share. A surviving spouse has the right to claim an elective share of the decedent’s estate, often termed “electing against the will.” By opting to claim their elective share, a surviving spouse can essentially supersede the terms of a will and bequests to other people in order to obtain a percentage of the decedent’s estate.

Contracts to Create a Will

A last will and testament must be the consequence of a person’s free will (which is why they are aptly referred to as “wills”). Nevertheless, a person may execute a contract during life to include certain terms and/or beneficiaries in their will in exchange for goods or services.

Enforcing a contract to create a will is more complex than enforcing a normal contract. With these types of agreements, it may be impossible to tell whether the testator lived up to his or her side of the bargain until their estate plan is revealed after their death. Additionally, the terms of a will do not come into effect until death, so there may not technically be a breach of the contract until the decedent’s death. Further, if you were supposed to be a part of the decedent’s estate plan, but were not included, it’s possible you may never even receive notice regarding the administration of the decedent’s estate.

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.

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