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Articles Posted in International Estate planning

What Happens to My Estate Plan When I Divorce?

People often designate their spouse as a primary beneficiary in their will, trust, or beneficiary designation, but what happens in the case of divorce? Oftentimes, a person may neglect to update their testamentary plan following a divorce and leave their ex-spouse as a beneficiary. Thankfully, in Florida, several laws help automatically update a person’s estate plan upon divorce to avoid unintentionally bequeathing a gift to an ex-spouse.

Florida law provides that any provision of a will in favor of a divorced spouse treats that former spouse as if that spouse had already died. The controlling statute, Fla. Stat. § 732.507(2) states the following:

COVID 19 – Is Your Estate In Order? Non-Probate Transfers and Pitfalls of Beneficiary Designations

In the wake of the recent Corona virus pandemic, many people are understandably concerned about their estate plan. A common misconception is that if you have executed a will or even a trust, then you are all set. In fact, it may not be that simple. In fact, a will is not the only instrument capable of passing down an estate to the decedent’s heirs, and some assets may not be controlled by your will and/or trust at all.

For example, in a joint tenancy with rights of survivorship, the property automatically passes to the surviving owner. So, if A and B own a piece of land in joint tenancy and A dies, B immediately gains full ownership of the land, without a probate administration. A’s right to the land extinguishes and thus, A has nothing to leave to his heirs through a will, or otherwise. Another way to avoid probate is through accounts with Transfer-on-Death (TOD) clauses. An account with a TOD beneficiary will transfer the ownership of the account will be transferred to the beneficiary at the decedent’s death, without a will or trust.

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).

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.

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.

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.

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.

Fiduciary Exception for Attorney-Client Privilege is Extinct in Florida

If you are an attorney hired by a fiduciary, whether it be a trustee, a guardian, or a personal representative, you not only are working for the fiduciary, but you are also working for the best interests of the third party ward or beneficiary. However, can the beneficiary come forward and demand access to privileged communications between the fiduciary and the fiduciary’s attorneys? The “fiduciary exception” to the attorney-client privilege would allow beneficiaries to demand access, as long as the information is related to the normal administration issues of the trust or estate. Because the beneficiary is the intended third party beneficiary of the trust or estate, they are entitled to the information related to the trust or estate.

The original rule created confusion and uncertainty for fiduciaries and their attorneys, so Florida legislatively abolished the “fiduciary-exception” rule by adopting Fla. Stat. § 90.5021. Specifically § 90.5021(2) states that any communication between a lawyer and client acting as a fiduciary is privileged and protected to the same extent as if the client was not a fiduciary. However, there was still much litigation over this issue, and the Supreme Court of Florida on more than one occasion expressed concerns over its constitutionality. However, the Supreme Court of Florida finality resolved the issue in In re Amends. to Fla. Evidence Code, No. SC17-1005 (Fla .Jan. 25, 2018), in which it upheld the constitutionality of the statute.

Foreign Property, Divorce, and Florida Probate Proceedings: Do not Assume Anything

          In Florida, if for some reason your marriage ends, there are some instances where your ex-spouse’s rights to inheritance under your estate plan are automatically severed. In Florida, the ex-spouse is automatically cut out of any estate planning documents, reducing the need to amend a will in the event of a divorce. Also, if a couple owns a house in Florida as tenants by the entireties, that joint interest is severed upon divorce and they become tenants in common. The divorce changes the property interest, and allows that each ex-spouse inherits their half, but the other half does not automatically transfer to the surviving ex-spouse. However, all of these automatic changes happen when the property is located in Florida. What changes if the property is located in a foreign country? A case out of the Second District Court of Appeals addressed the issue in Ebanks v. Ebanks.

Arthur and Diane Ebanks were divorced in Florida in 2008. Arthur executed his will on the day he filed for divorce in 2006. The Ebanks jointly owned three water front properties in the Cayman Islands. In his will, Arthur provided that upon his death, the property jointly held will pass to the survivor. The property in the Cayman Islands was owned under “joint proprietorship,” which is a form of holding title in the Cayman Islands which is similar to joint tenancy with right of survivor ship. Under “joint proprietorship” the interest of the deceased proprietor would transfer to the surviving proprietor. There is no law in the Cayman Islands dissolving a joint proprietorship in the event of divorce.

Great news for Creditors! Up to 20 years to enforce a domesticated foreign judgment

Over 30 years ago, Florida enacted the Florida Enforcement of Foreign Judgments Act (FEFJA) providing a simplified procedure for domesticating foreign judgments.  In other words, FEFJA allows a judgment from any other US state or the US federal government to be recognized and enforced as if it were a Florida judgment.  Until recently, Florida creditors remained uncertain as to one crucial aspect of this important mechanism – what is the “expiration date” of a domesticated foreign judgment?

To understand the implications of this issue, we must look to the applicable statute of limitations.  Under Florida law, the expiration date for a judgment or decree issued by a Florida court is 20 years.  Fla. Stat. 95.11(1).  Contrarily, a judgment or decree of any court of the United States, any other state or territory in the United States, or a foreign country, expires after only five years.  Fla. Stat. 95.11(2).  Therefore, the question as to which of these time limitations apply to a domesticated foreign judgment clearly bears far-reaching consequences.

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