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Articles Posted in Tax Implications

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.

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 – Buying Life Insurance to protect your children, but what happens when you name them as the beneficiaries?

During these uncertain times, people are attempting to prepare for the worst. This is especially true for those who have minor children. The fear of getting infected with the virus, developing a serious illness that could potentially lead to death, and leaving their children unprotected is very real. Thus, individuals are opting to buy life insurance to make sure their children are taken care of in the event of their death.

But what happens when you die and your minor children are the beneficiaries under your life insurance policy? Since minors cannot legally manage property, the court will appoint a guardian to handle the money for the benefit of your children until they reach the age of majority—a guardianship proceeding. Alternatively, life insurance companies will sometimes ask you to name a custodian, which will create a custodianship account under the Florida Uniform Transfers to Minors Act (“UTMA”), also until the age of majority.

How to Safely get Documents Notarized During a Pandemic

For the indefinite time being, social distancing and staying home are necessary safety measures. However, that does not mean the world stops. People still have needs and documents that must be notarized. There are ways to do that without leaving the house and risking exposure.

Florida Statute sections 117.201-117.305 went into effect on January 1, 2020 and allows notarization to occur remotely once a notary completes an application and training course. Usually, when getting a document notarized, the notary either confirms that they know you personally or verifies your identity by looking at government-issued identification. Now, according to Florida Statute § 117.265, via audio-video communication, a notary can do the same thing with an additional step. If the notary does not know you personally, you can remotely show your government-issued identification and then answer a few questions to confirm your identity. See Fla. Stat. § 117.265; See also Fla. Stat § 117.295. Once that is complete, the notary can watch you electronically sign the document and notarize it from his/her computer. When looking for a notary to provide this online service, look for someone that is a Remote Online Notary, also known as a “RON.” Not all notaries are qualified to perform this service remotely. The lawyers and staff at Chepenik Trushin LLP can help you through this process, keeping you and your loved one’s safe.

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 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.

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:

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.

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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