Estate Planning and Documents

Part 2: The Secure Act – Look at your trust, your beneficiaries, and get it reviewed

March 20, 2020 | by Chepenik Trushin LLP

Do I Need to Amend My Trust Because of the Secure Act?

Last month, in our last blog, we addressed the basics of the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act’) and how retirement plan beneficiary designations will be impacted for individuals who die in or after 2020. But what if you already set up an estate plan with a trust as beneficiary of your retirement account? Do you need to amend your trust or your beneficiary designation form as a result of the passage of the SECURE Act?

The answer is that it depends on whether the trust is an “accumulation” trust or a “conduit” trust and how you want such retirement accounts to be treated. Generally, in an accumulation trust, assets payable to the trust are to be distributed in the trustee’s discretion. A conduit trust, on the other hand, generally requires that assets must be distributed to the beneficiary – in other words, the trust simply acts as a conduit to deliver the assets to the beneficiary, and the assets cannot stay (that is, cannot accumulate) in the trust. It is possible to draft the trust as an accumulation trust with respect to all assets except retirement accounts, just as it is possible to draft a conduit trust that requires only outright distributions of retirement accounts (leaving the remainder of the funds at the trustee’s discretion).

Part 1 – The Secure Act (the rules changed very recently for beneficiaries)

February 21, 2020 | by Chepenik Trushin LLP

The Secure Act: Retirement Accounts and Your Estate Plan

Beginning on December 20, 2019, the Secure Act substantially changed the rules for designated beneficiaries of retirement plans, with wide raging implications for estate planning.

The old rule used to be that upon the death of a retirement account owner, the beneficiary of the plan would be able to take required minimum distributions based on that beneficiary’s life expectancy. This was beneficial especially for younger beneficiaries with long life expectancies who could “stretch” the payments over many years, allowing the assets to stay invested in the plan longer. It was also possible for beneficiaries to receive these stretch payments if a trust for their benefit was named as the beneficiary, as long as the trust qualified as a “see-through” trust. If no beneficiary was named, or if a non-see-through trust was named as beneficiary, the entire plan had to be distributed within 5 years of the date of death of the participant. Because many clients wish to leave their assets in trust for their children, much of the focus of estate planners up until this point had been drafting trusts so that they qualified as see-through trusts in order to avoid the 5-year rule.

What happens when your chosen beneficiary, heir or personal representative (PR) dies before you do?

January 17, 2020 | by Chepenik Trushin LLP

What if Your Beneficiaries Predecease You?

When preparing a will, people assume that the beneficiaries that they name will outlive them. Unfortunately, testator’s live beyond the life of their beneficiaries all the time. What happens to the gift left for someone who is now deceased?

The original common law understanding was that if a beneficiary predeceases the testator, the specific gift to that beneficiary would “lapse,” and therefore fall back into the residuary estate of the testator. However, in some instances, Florida “Anti-Lapse statutes” may change this result. In Florida, barring any contrary intent appearing in the will, if the devise is to the testator’s grandparent or any descendant of a grandparent, and the devisee predeceases the testator, the devise passes onto the devisee’s surviving descendants. Thus, a lapse is avoided when the specific gift is to the testator’s grandparents or descendant of grandparents. However, a devise to anyone who is not a grandparent or descendant of a grandparent would still lapse if that devisee predeceased the testator, unless a contrary intent appeared in the will.

Lack of Testamentary capacity and undue influence – what are the legal standards?

December 23, 2019 | by Chepenik Trushin LLP

How Can you Prove Undue Influence?

For a Will to be valid, certain conditions must be met. The testator must have legal capacity, at least eighteen years old, must have testamentary intent, and the will must not be a product of undue influence or duress. The first two requirements are usually relatively easy issues to resolve, but undue influence and duress is not always clear. As the Supreme Court of Florida explained, “[u]ndue influence is not usually exercised openly in the presence of others, so that it may be directly proved, hence it may be proved by indirect evidence of facts and circumstances from which it may be inferred.”

In In re Estate of Carpenter, the Supreme Court of Florida listed a set of seven, non-exhaustive factors to consider when deciding cases of Undue Influence:

Four important reasons to update your estate plan and/or your trust documents

December 2, 2019 | by Chepenik Trushin LLP

I Already Have a Will; When Should I Update My Estate Planning Documents?

When someone executes a valid will, some people assume that if their wishes do not change, they should never have to revisit their estate plan. However, there are certain common events in life that should cause you to review or update your estate planning documents.

Marriage/Divorce: A surviving spouse is entitled to a percentage of a decedent’s estate, regardless of whether the decedent included the spouse in the decedent’s will. Interestingly, the amount that a surviving spouse is entitled to may vary depending on whether the will was executed before or after the marriage. If you execute a will and subsequently marry, the spouse will receive a share equal to what he or she would have had, had the testator died intestate. This typically amounts to either one-half of the estate (if there are children of the decedent who are not children of the surviving spouse), or the entire estate (if there are no surviving children, or if the surviving spouse and the decedent are the parents of the only surviving children). Fla. Stat, Sec. 732.301 and Sec. 732.102. In either case, this is more than the amount that a surviving spouse is entitled to under the “elective share” which is thirty percent (30%) of the decedent’s estate.

In today’s electronic age, can you trust your Personal Representative (PR) to have control of your digital passwords?

October 23, 2019 | by Chepenik Trushin LLP

Estate Planning with Digital Assets: Should I Give My Passwords to My Personal Representative (PR)?

Much of our access to information is protected by passwords. In the context of estate planning and probate, passwords can lead to expensive complications and third-party subpoenas. For this reason, an important aspect of modern estate planning is planning in such a way that fiduciaries will be able to access the financial and other electronic documents belonging to a decedent.

Florida law gives personal representatives and trustees certain powers with regard to accessing certain digital assets, but such powers are useless unless the fiduciary knows the passwords to access these accounts. Your passwords should not be in your will, as a will may become may be a public document, but you may want to consider maintaining a list, including log-in and password information, for all of your digital assets (including, for example: email accounts; electronic documents; software; internet sites; online user accounts; social media accounts; and electronic content, such as music or photography collections). A viable alternative may be programs or applications that safely store passwords. Some internet browsers have built-in password storage. If you use such programs, you must ensure that your fiduciaries know the master password that will allow them to see the other passwords.

If you are a Personal Representative in an estate, understand the Relation Back Doctrine statute

September 13, 2019 | by Chepenik Trushin LLP

Are Actions Taken Before Appointment as Personal Representative Valid? Yes, if the Actions Were Beneficial to the Estate

Florida law states that the duties and powers of a personal representative commence upon appointment. You may be named as personal representative in a decedent’s will, you are not legally considered a personal representative until the court appoints you. But what happens if you need to take action regarding an estate before a court officially appoints you as the personal representative of the estate, such as paying bills or filing a lawsuit? As it turns out, under the relation back doctrine, any act that you do on behalf of the estate becomes valid after you are appointed the personal representative, if such actions are beneficial to the estate. Florida courts have also clarified that performing the duties of a personal representative is considered beneficial to the estate.

Florida’s Relation Back Doctrine is found in Fla. Stat. § 733.601, which states, “The powers of a personal representative relate back in time to give acts by the person appointed, occurring before appointment and beneficial to the estate, the same effect as those occurring after appointment. A personal representative may ratify and accept acts on behalf of the estate done by others when the acts would have been proper for a personal representative.”

Giving money to a child, a loved one, a relative or a friend – your intentions do matter

July 1, 2019 | by Chepenik Trushin LLP

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.

Help mom and dad with estate planning, but know your boundaries under the law

June 10, 2019 | by Chepenik Trushin LLP

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.

Paternity in Probate bench court – timing is everything, be aware

May 28, 2019 | by Chepenik Trushin LLP

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.