CORONAVIRUS UPDATE: What We Are Doing to Protect Our Clients

Articles Posted in Types of Trusts

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.

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).

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.

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.

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.

What happens to Your Pets When you Pass Away?

In addition to the human members of one’s families, many individuals also have animal members of their family. Because pets are so important to many families, it is often appropriate to make provision in one’s will or trust for one’s pets. While pets cannot take under a testamentary will, a pet owner may still be able to set money aside and account for her pet’s care. An owner may create a pet trust under state law or may grant a person with the authority to care for their pet as a guardian.

You may have heard of celebrities in the news giving large devises to their pets, which may have been upsetting to other beneficiaries (or people who thought they should have been beneficiaries). For example, Leona Helmsley left $12 million to her dog, opting to leave her grandchildren out of her will. When a devise to the pet is considerably large, however, a court may step in. Leona Helmsley’s dog wound up only inheriting $2 million after a court determined $12 million was too high.

FLORIDA CHARITABLE TRUSTS: ALTERNATIVE BENEFICIARIES AND CY PRES DOCTRINE

Due to applicable tax exemptions and tax deductions, charitable trusts are a great tool for preserving the value of your property intended for charitable purposes and for reducing taxes payable by your remaining estate (intended for purposes other than charitable ones). Naturally, the main goal when setting up a charitable trust will be the fulfillment of the philanthropic objective of your choice. While the law comes to aid with mechanisms to fill in the blank spaces in the will or trust agreement, well-meant but poorly executed provisions in the documents may defend these mechanisms and obstruct the desired purpose.

Charitable purposes may include relief of poverty; advancement of arts, sciences, education, or religion; promotion of health, governmental, or municipal purposes. Fla. Stat. 736.0405(1).  This list is, of course, non-exhaustive. A specific charitable purpose and beneficiary organization will usually be designated in the document. Even if it is not, the court will select one or more charitable purposes or beneficiaries that will be consistent with the settlor’s original intent, at least to the extent it can be ascertained. Fla. Stat. 736.0405(2). But what if the agreement names a purpose and a beneficiary, but the beneficiary does not exist? Or exists at the time the agreement is made, but ceases to exist before it is supposed to take the bequest? Or what if the stated purpose is impossible to fulfill? In those situations the cy pres doctrine applies to help execute the bequest in accordance with the general spirit of the will or trust agreement.

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