Jacksonville Estate Planning Attorneys Answer FAQs
What does it mean to ‘fund’ my revocable living trust, and why is that important?
- Introduction to the concept of funding a living trust
What does it mean to “fund” a trust? These days many people choose a revocable living trust instead of relying on a last will and testament or joint ownership in their estate plan. They like the cost and time savings, plus the added control over assets that a revocable living trust can provide. For example, when properly prepared, a revocable living trust can avoid the public, costly and time-consuming court processes at death (probate) and incapacity (conservatorship or guardianship). It can let you provide for your spouse without disinheriting your children, which can be important in second marriages. It can save estate taxes. And it can protect inheritances for children and grandchildren from the courts, creditors, spouses, divorce proceedings and irresponsible spending. If you need the assistance of an experienced Jacksonville trust lawyers or Florida estate planning attorneys to help you with the proper funding of your revocable living trust, please call us at (904) 688-3324, or toll-free at (866) 510-9099, or email us at [email protected]. Still, many people make a big mistake that sends their assets right into the probate court system: They don’t “fund” their trusts.
- What is ‘funding’ my revocable living trust?
Funding your revocable living trust is the process of transferring title or ownership of your assets from you to your revocable trust. To do this, you physically change the titles of your assets from your individual name (or joint names, if married) to the name of your revocable living trust. You will also change most beneficiary designations to your revocable living trust. Many estate planning attorneys do not provide assistance with the transfer of the ownership of your assets to your trust. At The Coleman Law Firm, PLLC Attorneys and Counselors at Law, we provide you with detailed instructions for the funding of your living trust, as well as in-depth support from our funding coordinator who will actually prepare documents for you to accomplish the transfer. We understand that one of the major purposes for establishing a revocable trust is to avoid probate. Probate avoidance can only happen for those assets that are actually titled to your revocable trust.
- Who controls the assets in my revocable living trust?
Will I still have control over my assets if I have a revocable living trust? The trustee you name will control the assets in your revocable trust. Most likely, you have named yourself as trustee, so you will still have complete control. One of the key benefits of a revocable living trust is that you can continue to buy and sell assets just as you do now. You can also remove assets from your living trust should you ever decide to do so. Our estate planning attorneys in Jacksonville can help you ensure that your assets are properly titled so that you can confidently retain control over your assets while achieving all the objectives for which you chose a revocable trust.
- Why is funding my revocable living trust so important?
If you have signed your revocable living trust document but haven’t changed titles and beneficiary designations, you will not avoid probate. Your living trust can only control the assets you put into it. You may have a great revocable trust, but until you fund it (transfer your assets to it by changing titles), it doesn’t control anything; your living trust can only control the assets you put into it. If your goal in having a living trust is to avoid probate at death and court intervention at incapacity, then you must fund it now, while you are able to do so. If you need the assistance of an experienced estate planning attorney or trusts lawyers to help you fund your living trust in Florida, please call us at (904) 688-3324, or toll-free at (866) 510-9099, or email us at [email protected].
- What happens if I forget to transfer an asset?
Along with your revocable living trust, your Florida estate planning attorneys should prepare a “pour over will” that acts like a safety net. When you die, the will “catches” any forgotten asset and sends it to your revocable trust. The asset will probably go through probate first, but then it can be distributed according to the instructions in your revocable living trust. To avoid probate, you must transfer your assets to your revocable trust during your lifetime.
- Who is responsible for funding my revocable living trust?
You are ultimately responsible for making sure all your appropriate assets are transferred to your living trust. Many estate planning attorneys do not include funding with the preparation and implementation of a living trust. At The Coleman Law Firm, PLLC Attorneys and Counselors at Law, we will always assist you in funding your trust. You should inquire to determine whether a particular Florida estate planning attorney does or does not include funding as a part of the services to be rendered for you in the preparation of your revocable living trust. Any Jacksonville estate planning attorney who does not include funding your trust as a part of his or her services is not providing you with a valuable service. If you would appreciate the assistance of your estate planning attorneys participation in your funding process, you should contact The Coleman Law Firm, PLLC Attorneys and Counselors at Law, at (904) 688-3324, or toll-free at (866) 510-9099, or by email to [email protected]. We will help you ensure that your trust is properly funded so that you can avoid a Florida probate of your estate.
- Won’t my attorney fund my revocable living trust?
Typically, you will transfer some assets and your estate planning attorney will handle some. Most trust attorneys will transfer your real estate, and then they will provide you with instructions and sample letters for your other assets. Ideally, your estate attorney should review each asset with you, explain the procedure and help you decide who will be responsible for transferring each asset. Once you understand the process, you may decide to transfer many of your assets yourself and save on legal fees. The funding coordinator at The Coleman Law Firm, PLLC Attorneys and Counselors at Law, provides assistance for the clients of our Jacksonville estate planning attorneys with the funding process to help ensure that you achieve your estate planning objectives.
- How difficult is the funding process?
It’s not difficult, but it will take some time. Because living trusts are now so widely used, you should meet with little or no resistance when transferring your assets. For some assets, a short assignment document will be used. Others will require written instructions from you. Most can be handled by mail, telephone or online. Some institutions will want to see proof that your living trust exists and that you have the authority to represent the revocable trust. To satisfy them, your Jacksonville estate planning attorneys will prepare what is often called a certification of trust. This is a shortened version of your revocable trust that verifies your trust’s existence, explains the powers given to the trustee and identifies the trustees, but it does not reveal any information about your assets, your beneficiaries and their inheritances. The certification of trust is now specifically authorized by Florida Statutes, Section 736.1017. While the process isn’t difficult, it’s easy to get sidetracked or procrastinate. Just make funding your living trust a priority and keep going until you’re finished. Make a list of your assets, their values and locations, then start with the most valuable ones and work your way down. Remember why you are doing this, and look forward to the peace of mind you’ll have when the funding of your revocable trust is complete.
- Which assets should I put in my revocable living trust?
The general idea is that all of your assets should be in your living trust. However, as we’ll explain, there are a few assets you may not want in, or that cannot be put into, your revocable trust. Also, your Florida trust attorney may have a valid reason (like avoiding exposure to a potential lawsuit) for leaving a certain asset out of your living trust. Generally, assets you want in your revocable trust include real estate, bank/saving accounts, investments, business interests and notes payable to you. You will also want to change most beneficiary designations to your living trust so those assets will flow into your living trust and be part of your overall plan. IRAs, retirement plans and other exceptions are addressed later. If you have questions about whether a particular asset should be transferred to your revocable trust, you should ask your Jacksonville estate planning attorneys to evaluate the advantages and disadvantages for each such asset.
- Will putting real estate in my trust cause any inconveniences?
In most cases, you will notice little difference. You may even find it easy to transfer real estate you own to your living trust and to purchase new real estate in the name of your living trust. Refinancing may not be as easy. Some lending institutions require you to conduct the business in your personal name and then transfer the property to your revocable trust. While this can be annoying, it is a minor inconvenience that is easily satisfied. Because your living trust is revocable, transferring real estate to your trust should not disturb your current mortgage in any way. Even if the mortgage contains a “due on sale or transfer” clause, retitling the property in the name of your revocable trust should not activate the clause. There should be no effect on your property taxes because the transfer does not cause your property to be reappraised. Also, having your home in your living trust will have no effect on your being able to use the capital gains tax exemption when you sell it. Your Jacksonville estate planning attorneys will help you with real property transactions involving your revocable trust. Also, having your revocable living trust as the owner on your homeowner, liability and title insurance may make it easier for a successor trustee to conduct business for you. Check with your agent.
- What about out-of-state property? Should it go in my revocable living trust?
If you own property in another state, transferring it to your living trust will prevent a conservatorship and/or probate in that state. Your Jacksonville estate planning attorneys can contact a title company or an estate planning attorney in that state to handle the transfer for you.
- What about contaminated property?
Property that has been contaminated (for example, from a gas station with underground tanks or by a printing facility that used chemicals) can be placed in your living trust, but the trustee can be held personally responsible for any cleanup. If you are your own trustee, this is a moot point because, as the owner, you are already responsible. But if cleanup is not complete by the time your successor trustee steps in, your successor and, ultimately, your beneficiaries can also be liable. If you suspect this may apply to you, tell your Florida trust attorney before you transfer the property to your living trust.
- How does community property status affect the funding of my living trust?
Community property status can be continued inside your living trust. Also, if you live in a community property state, your Florida estates and trusts attorney may suggest that jointly owned assets, especially real estate, be retitled as community property before they are put in your living trust. This can reduce capital gains tax if the asset is sold after one spouse dies.
- Should I put my life insurance policies in my revocable living trust?
That depends on the size of your estate. Federal estate taxes must be paid if the net value of your estate when you die is more than the amount exempt at that time ($5.45 million for each individual in 2016). Some states have their own estate/inheritance tax, and it is possible your estate could be exempt from federal tax and still have to pay state tax. In Florida, there is no estate tax. Your taxable estate includes benefits from life insurance policies you can borrow against, assign or cancel, or for which you can revoke an assignment, or name or change a beneficiary. If your estate will not have to pay estate taxes, naming your living trust as owner and beneficiary of the policies will give your trustee maximum control over them and the proceeds. If your estate will be subject to estate taxes, it would be better to set up an irrevocable life insurance trust and have it own your policies for you. This will remove the value of the insurance from your estate, reduce estate taxes and let you leave more to your loved ones. What is an irrevocable life insurance trust? There are some restrictions on transferring existing policies to an irrevocable life insurance trust. If you die within three years of the transfer date, the IRS will consider the transfer invalid and the insurance will be back in your estate. There may also be a gift tax. These restrictions, however, do not apply to new policies purchased by the trustee of this irrevocable life insurance trust. If you have a sizeable estate, your Florida estate planning attorney will be able to advise you on this and other ways to reduce estate taxes.
- Should my revocable living trust own my car?
Unless the car is valuable and substantially increases your estate, you will probably not want it in your living trust. The reason is if you are at fault in an auto accident and the injured party sees that your car is owned by a revocable trust, he or she may think “deep pockets” and be more likely to sue you. Liability insurance companies may also impose additional burdens on the insured when an automobile is owned by a trust. All states allow a small amount of assets to transfer outside of probate; the value of your car may be within this limit. Some states let you name a beneficiary; in some, like Florida, cars are not required to go through probate. Your estate planning attorneys will know the laws and procedures in your state and will be able to advise you.
- Do my IRA and other tax-deferred plans go into my revocable living trust?
Do not change the ownership of these to your living trust. You can name your revocable trust as the beneficiary but be sure to consider all your options, which could include your spouse; children, grandchildren or other individuals; a revocable or an irrevocable trust; a charity; or a combination of these. Whom you name as beneficiary will determine the amount of tax-deferred growth that can continue on this money after you die. Most married couples name their spouse as beneficiary because 1) the money will be available to provide for the surviving spouse and 2) the spousal rollover option can provide for many more years of tax-deferred growth. (After you die, your spouse can “roll over” your tax-deferred account into his/her own IRA and name a new beneficiary, preferably someone much younger like your children and/or grandchildren.) A nonspouse beneficiary can also inherit a tax-deferred plan and roll it into an IRA to continue the tax-deferred growth, but only a spouse can name additional beneficiaries. You should consult with your Jacksonville estate planning attorneys to evaluate whether your revocable trust is the most efficient or the most effective beneficiary of such tax-deferred assets. Of course, any time you name an individual as beneficiary, you lose control. After you die, the beneficiary can do whatever he or she wants with this money, including cashing out the account and destroying your carefully made plans for long-term, tax-deferred growth. The money could also be available to creditors, spouses and ex-spouses, and there is the risk of court interference at incapacity. Naming a revocable or irrevocable trust as beneficiary will give you maximum control because the distributions will be paid not to an individual but into a trust that contains your written instructions stating who will receive this money and when. After you die, distributions will be based on the life expectancy of the oldest beneficiary of the trust. You can also set up separate trusts for each beneficiary so that each one’s life expectancy can be used. The rules for these plans have recently been made simpler, but it is still easy to make a costly mistake. Because there is often a lot of money at risk, be sure to get expert advice from your estate planning attorney.
- Are there any assets I should not put in my revocable living trust?
If you live in a noncommunity property state and have owned an asset jointly with your spouse since before 1976, transferring the asset to your living trust could cause your surviving spouse to pay more in capital gains tax if he or she decides to sell the asset after you die. If the asset is your personal residence, this would not be a problem unless the gain is more than $500,000. But it could be a problem for other assets like farmland, commercial real estate or stocks. If you think this might apply to your situation, be sure to check with your tax adviser or estate planning attorney before you change the title to your living trust. Other assets that should probably not be transferred to your revocable trust are incentive stock options, Section 1244 stock and professional corporations. If you are unsure whether to transfer an asset to your revocable living trust, check with your Florida trust attorney.
- What about property that doesn’t have a title? How does that get into my revocable living trust?
Personal property (artwork, clothing, jewelry, cameras, sporting equipment, books and other household goods) typically does not have a formal title. Your Florida trust attorney will prepare an assignment to transfer these items to your revocable living trust.
- What if I buy new assets after I fund my revocable living trust?
Find out if you can take the title initially as trustee of your revocable living trust. If not, transfer the title right away. If you’re not sure how to transfer it, contact your trust attorney for instructions.
- Funding Your Revocable Living Trust
Assets you probably want in your living trust:
- Real property (home, land, other real estate)*
- Bank/credit union accounts, safe deposit boxes
- Investments (CDs, stocks, mutual funds, etc.)
- Notes payable (money owed to you)
- Life insurance (or use irrevocable trust)
- Business interests, intellectual property
- Oil and gas interests, foreign assets
- Personal untitled property
Assets you may not want in your living trust:
- IRA and other tax-deferred retirement accounts
- Incentive stock options and Section 1244 stock
- Interests in professional corporations
* Funding real estate into a living trust is state-specific and may not apply in all states.
What are the duties and responsibilities of the trustee of my revocable living trust?
- Overview of the Duties and Responsibilities of a Trustee of a Revocable Living Trust
If you have been named as a trustee or successor trustee for someone’s revocable living trust, you may want to know what you are supposed to do. Successor trustees can relax a bit, because you have no duties and responsibilities until the incapacity or death of the grantor or settlor (trustmaker) of the trust. You will only begin to act when the trustmaker becomes unable to manage his or her own financial affairs due to incapacity, or when he or she dies. If you have been named as a current trustee or co-trustee, you may already be acting in that capacity and need to be aware of your duties and responsibilities as trustee. In either case, it is important that you understand your duties and responsibilities. These FAQs will help. We will start with some explanations and definitions. If you are a trustee, or a beneficiary, of a trust and you need the assistance of an experienced trust lawyer or estate planning attorney in northeast Florida, please call us toll-free at (866) 510-9099.
- What is a trust?
A trust is a legal entity and is treated under the law as a “person” who can “own” assets. The trust document looks much like a last will and testament. Like a will, a revocable living trust includes instructions to the person or persons you have named as your successor trustees – those persons whom you want to handle your final affairs and whom you want to receive your assets after you die. There are different kinds of legal trusts for which you may have been named a successor trustee: a testamentary trust (created in a will after someone dies); an irrevocable trust established either during the lifetime of the trust maker or through a will (usually cannot be changed); and revocable living trusts. A revocable living trust is established during the trustmaker’s lifetime, and usually becomes irrevocable upon the death or incapacity of the trustmaker. Today, many people use a revocable living trust instead of a last will and testament in their estate plan because the revocable living trust, if properly funded (assets are retitled to the trust) avoids court interference at death (probate) and at incapacity (court supervised guardianship). It is also flexible. As long as you are alive and competent, you can change the revocable living trust document, control all investments and other assets, add or remove assets, decide when and how much to distribute out of the trust, even cancel or revoke it.
- How does a revocable living trust work?
For a revocable living trust to work properly, you must transfer your assets into it. Titles must be changed from your “individual” name to the name of your revocable living trust. Because your name is no longer on the titles, there is no reason for the Florida probate court to be involved if you become incapacitated or when you die. This makes it very easy for the person or persons (a trustee or successor trustee) that you have chosen to step in and manage your financial affairs during your incapacity and at your death. Your successor trustee, in the event of your incapacity, does not have the potential limitations experienced by someone you have named as your power of attorney, i.e., a third party’s refusal to honor the durable power of attorney. The third party has no choice but to work with your successor trustee(s) because that person is the “legal owner” of the assets titled to the trust, even though you remain the “beneficial owner” of those assets. If you would like to explore how a revocable trust can help you control your estate planning, and avoid probate, please call us toll-free at (866) 510-9099.
- Who are the people involved with a revocable living trust?
The grantor (also called settlor, trustor, creator or trustmaker) is the person who established the revocable living trust. Married couples who set up one revocable living trust together are co-grantors of their joint revocable living trust. Only the grantor(s) can make changes to his or her revocable trust. The trustee manages the assets that are in the revocable living trust. Many people choose to be their own trustee and continue to manage their affairs for as long as they are able. Married couples are often co-trustees, so that when one dies or becomes incapacitated, the surviving spouse can continue to handle their finances with no other actions or steps required, including Florida probate court interference. A successor trustee is named to step in and manage the revocable trust when the trustee is no longer able to continue (usually due to incapacity or death). Typically, several successor trustees are named in succession in case one or more cannot act. Sometimes two or more adult children are named to act together. Sometimes a corporate trustee (bank or trust company) is named. Sometimes it is a combination of the two. The beneficiaries are the persons or organizations who will receive the benefit of the trust assets after the grantor dies.
- As a Successor Trustee, what do I need to know now?
The grantor should make you familiar with the revocable living trust and its provisions. You need to know where the original trust document, trust assets, insurance policies (medical, life, disability, long-term care) and other important papers are located. However, don’t be offended if the grantor does not want to show you values of the trust assets; some people are very private about their finances. This would be a good time to make sure appropriate titles and beneficiary designations have been changed to the revocable living trust. (Some assets, like annuities and IRAs, will list the revocable trust as a primary or contingent beneficiary.) You also need to know who the trustees are currently, who are the successor trustees, the order in which you are slated to act as a trustee, and if you will be acting alone as the sole trustee or with someone else as co-trustees.
- What responsibilities will I have as a trustee?
The most important thing to remember when you step in as trustee is that the trust’s assets are not your assets. You are safeguarding them for others: for the grantor (if living), the grantor’s spouse, and for the beneficiaries, who will receive them after the grantor dies. As a trustee, you have certain duties and responsibilities. For example:
- You must follow the instructions in the revocable trust document.
- You cannot mix, or commingle, trust assets with your own. You must keep separate checking accounts and investments and be able to account for them.
- You cannot use trust assets for your own benefit (unless the trust authorizes it).
- You must treat trust beneficiaries the same; you cannot favor one over another (unless the trust says you can).
- Trust assets must be invested in a prudent (conservative) manner (the “prudent investor rule”), in a way that will result in reasonable growth with minimum risk.
- You are responsible for keeping accurate trust accounting records, filing tax returns and reporting to the beneficiaries as the trust requires, or as the Florida Trust Code requires.
- Do I have to do all this myself?
No, you can have professionals help you, especially with the trust accounting and investing to satisfy the prudent investor rule. You will also probably need to consult with an experienced estates and trusts attorney from time to time. However, as trustee, you are ultimately responsible to the beneficiaries for prudent management of the trust assets. If you would like additional information, or a consultation to determine how to handle your trustee responsibilities, please call The Coleman Law Firm, PLLC Attorneys and Counselors at Law, at (904) 688-3324 or toll-free at (866) 510-9099, or email us at [email protected].
- How will I know if the grantor is incapacitated?
Usually the living trust document contains instructions for determining the grantor’s incapacity. The revocable living trust may require one or more doctors to certify the grantor is not physically or mentally able to handle his or her financial affairs.
- What do I do if the grantor is incapacitated? Initial considerations.
If all assets have been transferred to the living trust, you will be able to step in as successor trustee and manage the grantor’s financial affairs quickly and easily, with no Florida probate court interference through a court-supervised guardianship. If there are assets that were intended to be transferred to the revocable living trust, but have not, anyone who has the grantor’s durable power of attorney has the legal authority to transfer those assets to the revocable living trust. First, make sure the grantor is receiving quality care in a supportive environment. Give copies of health care documents (designation of health care surrogate, medical power of attorney, living will, etc.) to the attending physician. If someone has been appointed to make health care decisions other than you, make sure he or she has been notified. You may need to notify the grantor’s employer, friends and relatives. Next, find and review the trust document. (Hopefully, you already know where it is.) Notify any co-trustees as soon as possible. Also, notify the estates and trusts attorney who prepared the revocable trust document; he or she can be very helpful if you have questions. You may want to meet with the estate planning attorney to review the revocable trust and your responsibilities. The estate planning attorney can also prepare a certificate of trust, a shortened version of the trust that proves you have legal authority to act as the successor trustee. You will want to become familiar with the grantor’s insurance (medical and long-term care, if any) and understand the benefits and limitations. Assuming the insurance will cover a certain procedure or facility could be a costly mistake. Have the doctor(s) document the incapacity as required in the trust document. Banks and others may ask to see this and a certificate of trust (sometimes referred to as an “affidavit of successor trustee”) before they let you transact business on behalf of the living trust.
- What do I do if the grantor is incapacitated? Additional considerations.
If there are minors, other dependents, or pets, you will need to provide for their care. The living trust may have specific instructions. If the grantor’s incapacity is expected to be lengthy, a guardian (of the person, not a guardian of the property) may need to be appointed by the Florida probate court. The Florida estates and trusts attorney can help you with this procedure if it is necessary. Become familiar with the trustmaker’s finances. You need to know what assets are owned by the trust, where the assets are located and the current values of the assets. You will also need to know the grantor’s sources and amounts of income, when it is paid, and the grantor’s regular ongoing expenses. You will want to develop a budget so that you can take appropriate actions to assure that financial resources are available when needed. If you cannot readily find this information, others (family members, banker, employer, accountant) may be able to help you. Last year’s tax returns will be helpful. If you discover other assets that were left out of the revocable living trust, the estates and trusts attorney can help you determine if they need to be put into the trust and can then assist you in the funding process. Apply for disability benefits through the grantor’s employer, social security, private insurance and veteran’s services. Notify the bank and other professionals that you are now the trustee for this person. Put together a team of professionals (attorney, accountant, banker, insurance and financial advisers) to help you. Be sure to consult with them before you sell any assets. Now you can start to transact the business activities necessary to manage the trust assets, and provide for the financial support of the trustmaker, or others who are beneficiaries of the trust. You can receive and deposit funds, pay bills and, in general, use the person’s assets to take care of him or her and any dependents until recovery or death. You’ll need to keep careful records of medical expenses and file claims promptly. Keep a ledger of income received and bills paid. An accountant can show you how to set up these records properly. The revocable trust document may require you to send trust accountings to the trust beneficiaries. Also, don’t forget income taxes (due April 15) and property taxes.
- What happens if the grantor recovers capacity?
You go back to being a co-trustee or successor trustee and the grantor resumes taking care of his or her own financial affairs. It’s very easy, and there is no Florida probate court involvement.
- What do I do when the grantor dies? Initial considerations.
You will have essentially the same duties as an executor named in a will would have. But if all titles and beneficiary designations have been changed to the grantor’s revocable trust, the Florida probate court will not be involved. That means you will be able to act on your schedule instead of the probate court’s. The trustee is responsible for seeing that everything is done properly and in a timely manner. You may be able to do much of this yourself, but an estates and trusts attorney, corporate trustee and/or accountant can give you valuable guidance and assistance. Here’s an overview of what needs to be done. Inform the family of your position and offer to assist with the funeral. Read the living trust document and look for specific instructions. Notify a co-trustee as soon as possible. Make an appointment with an experienced estates and trusts attorney to go over the revocable trust document, trust assets and your responsibilities as soon as possible. Do not sell or distribute any trust assets before you meet with the estates and trusts attorney. If you need the assistance of an experienced trusts and estates attorney in the Jacksonville, Florida, area, please call us toll-free at (866) 510-9099. Before the meeting, make a preliminary list of the trust assets and their estimated values. You’ll need exact values later, but this will help the estates and trusts attorney know if a federal estate tax return will need to be filed (due no later than nine months after the grantor’s death). If there is a surviving spouse or if the trust has a tax planning provision, the estates and trusts attorney may need to do some tax planning right away. The living trust, which is now irrevocable, may also need its own tax identification number from the Internal Revenue Service. Collect all death benefits (social security, life insurance, retirement plans, associations) and put them in an interest-bearing account until assets are distributed. If the surviving spouse or any other trust beneficiary needs money to live on, you can probably make some partial distributions. But do not make any distributions until after you have determined there is enough money to pay all expenses, including federal estate and income taxes.
- What do I do when the grantor dies? Additional considerations.
Notify the bank, brokerage firm and others of the grantor’s death and that you are now trustee. They will probably want to see a certified death certificate (order at least 12), a certificate of trust and your personal identification. To finalize the list of trusts assets, you will need exact values as of the date of the grantor’s death. Some trust assets will need to be appraised. A trust estate sale may need to be held to dispose of household goods and personal effects. Keep careful records of final medical and funeral expenses, and file medical claims promptly. Keep a ledger of bills and income received. Contact an accountant and an estates and trusts attorney to prepare final income and federal estate tax returns, if required. Verify and pay all bills and taxes. Make a final accounting of trust assets and bills paid, and give it to the trust beneficiaries. If the trust assets are to be fully distributed, you will divide the cash and transfer titles according to the instructions in the trust document. That’s it…you’re finished and the trust is dissolved. If the trust assets are to stay in a trust (for minors, for a surviving spouse, for tax purposes or if the trust beneficiaries will receive their inheritances in installments), each testamentary trust will need a new tax identification number, and proper bookkeeping and reporting procedures will need to be established. The estates and trust attorney, and an experienced accountant should be consulted to ensure these matters are properly handled.
- Should I be paid for all this work?
Yes, trustees are entitled to reasonable compensation for their services. The trust document should give guidelines, or you can consult the Florida Trust Code to determine reasonable compensation.
- What if the responsibilities are too much for me?
Consider hiring an experienced estates and trusts attorney, bookkeeper, accountant or corporate trustee to help you. A corporate trustee can manage the investments and do the record keeping. If you feel you cannot handle any of the responsibilities due to work, family demands or any other reason, you can resign and let the next successor trustee step in. If no other successor trustee has been named, or none is willing or able to serve, a corporate trustee can usually be named.
- What does the trustee do at incapacity?
- Oversees care of ill person
- Understands insurance benefits and limitations
- Looks after care of any minors and dependents
- Applies for disability benefits
- Puts together team of advisers
- Notifies bank and others
- Transacts necessary business
- Keeps accurate records and accounting
- What does the trustee do at death?
- Contacts estates and trusts attorney to review trust and process
- Keeps beneficiaries informed
- Puts together team of advisers
- Inventories assets, determines current values
- Makes partial distributions if needed
- Collects benefits, keeps records, files tax returns
- Pays bills, does final accounting
- Distributes assets to beneficiaries as trust directs
If you need the assistance of an experienced estates and trusts lawyer in Jacksonville, Florida, please call us toll-free at (866) 510-9099.
Who should be the trustee of my revocable living trust?
- What is a corporate trustee?
With people living longer and health care costs continuing to rise, our savings must grow larger and last longer. Deciding where to put your money in an uncertain market with so many investment options from which to choose can be very confusing, and making a wrong decision can be very costly. One option you should not overlook is the bedrock of asset management and personal service – the corporate trustee. A corporate trustee is a bank trust department or trust company. Its employees can help you build, manage and protect your wealth when you put your assets in a revocable living trust. A revocable living trust is simply a legal document that lets you reduce unnecessary legal fees, save taxes and keep control over your assets while you are living, if you become physically or mentally incapacitated, and after you die. When you set up a revocable living trust, you need to name someone (a trustee) to manage the assets your trust controls. While you can choose just about any adult, there are very good reasons why you should consider a corporate trustee or institutional trustee.
Seven Reasons To Use A Corporate Or Institutional Trustee
- You’ll gain the advantage of years of experience. Because they manage trusts on a daily basis, they are familiar with all kinds of trusts, tax and estate planning strategies, and the legal responsibilities of a trustee. They can manage the assets in your revocable living trust now and/or after you die as your trust directs – buying and selling assets, paying bills, filing tax returns, maintaining accurate records, and distributing income and assets. Most have experience with all kinds of assets, including stocks and bonds, real estate, farms, closely held businesses, mineral properties, international investments and collectibles.
- You’ll enjoy the potential of even greater investment returns. Corporate trustees give their full attention to managing trust assets – that’s their job. And because their staff collectively has more experience and resources than an individual, they often achieve better results. After discussing your financial goals, risk tolerance and long-term objectives with you, they will recommend the best investment strategy for you. Then, depending on how involved you want them to be, they can provide ongoing advice, or even make decisions for you, to make sure your investments stay on track to reach your goals.
- You’ll protect your wealth because corporate trustees are regulated by both state and federal agencies. Also, most courts consider them “experts” and expect them to meet higher standards than a nonprofessional.
- You’ll receive reliable, professional service. A corporate trustee won’t become ill or die, divorce, go on vacation, move away or become distracted by personal concerns or emotions as an individual might.
- You’ll value their objectivity. They will follow your trust instructions objectively and faithfully, something family members are often unable to do.
- You’ll tap their rich sources of advice and referrals. They routinely provide advice on investment, tax, retirement and estate planning issues, and they can refer you to estate planning attorneys and other qualified professionals as needed.
- You’ll enjoy peace of mind. Knowing you have selected someone with experience and integrity to manage your financial affairs now and/or when you are no longer able to do so yourself can be very reassuring.
- When would I use a corporate trustee?
If you set up an irrevocable trust (like a charitable or life insurance trust) or you plan to make gifts in trust – strategies often used to save federal estate taxes by removing assets now from your taxable estate – you will probably need to name someone other than yourself as trustee for tax reasons. A corporate trustee is a natural choice to make sure your irrevocable trust is administered properly. If you set up a revocable living trust – to avoid probate when you die and prevent court control of your assets at incapacity – you can be your own trustee. Even so, there are many benefits to having a corporate trustee involved. They can assist you in several ways.
- As Trustee
As trustee, a corporate trustee has full responsibility for managing your trust assets according to your instructions. This would be an excellent choice if you are elderly and have no one you can trust to take care of your financial affairs. You may be widowed, have no children or other trusted relatives living nearby (or don’t want to burden them), or you and your spouse may be in declining health. Even if you are capable of managing your own living trust, a corporate trustee can be a wise choice. You may not have the time, desire or investment experience to manage your living trust yourself. Or perhaps you just feel that someone with more time and experience could do a better job than you.
- As Co-Trustee
If you want to take advantage of a corporate trustee’s investment experience but still be involved, you could have one work with you as co-trustee. Developing a working relationship with a corporate trustee now lets them become familiar with your objectives, your trust and your beneficiaries’ needs and personalities while you are around and able to provide guidance and input. It would also let you see how they would perform in your absence, let you evaluate their investment performance and service, and let you see how comfortable you feel with them overall – a kind of “trustee test drive.”
- As Investment Agent
You could also name a corporate trustee as agent. While a co-trustee has equal responsibility with you (usually both signatures are required to transact business), an agent can have as much responsibility as you wish. You can have an agent manage only a portion of your trust’s assets (your stocks and bonds, for example) or just provide you with investment advice, with you making all final investment decisions.
- As Successor Trustee
If you decide to be your own trustee (for example, of your revocable living trust), consider naming a corporate trustee as your successor trustee. In this capacity, they will step in and manage your revocable living trust for you when you can no longer act due to incapacity or death. Many people like the idea of having a professional take care of the paperwork, tax filings and other final details.
- Couldn’t I name a relative or friend instead?
You could, but keep in mind that family and friends are not always a good choice to be involved with your trust. They may be too busy with their own affairs, may reside in a distant area, may not get along with other family members, or may not be responsible or experienced enough to manage the trust assets. An innocent error by a well-meaning but inexperienced relative or friend could negate your careful planning and cost your beneficiaries thousands of dollars. One option is having a relative (perhaps one or more of your adult children) and a corporate trustee work together as co-trustees. This would give you the professional experience and objectivity of a corporate trustee and the personal involvement of someone who knows you.
- Do I lose control if I use a corporate trustee?
Not if the revocable living trust is prepared correctly. With most trusts, you can change your trustee at any time if you aren’t satisfied. Even with an irrevocable trust, you or your trust beneficiaries can have the right to change the corporate trustee. Also, the trustee you select must follow the instructions you put in your living trust document – while you are living, if you become incapacitated, and after you die. That’s because a revocable living trust is a binding legal contract, and your trustee can be held liable if he or she doesn’t follow your instructions.
- How safe are trust assets?
Even if a bank or trust company fails, trust assets are safe. By law, trust assets must be kept separate from all other assets. They cannot be loaned out, mixed with the corporate trustee’s own assets or used to satisfy its creditors. Because of these safeguards, trust assets are not insured by the FDIC. You are also protected against fraud, against theft (for example, if an employee takes trust assets and disappears), or if they make an error administering your trust. But, of course, there is no insurance or bond that will protect you if your trust assets lose value simply due to a decline in market values.
- Should everyone use a corporate trustee?
No, of course not. But many more people should consider one. Most people are just not aware of the many benefits a corporate trustee can offer them and their families. You need to look objectively at your situation and the type of trust you set up. If you have a modest estate and your trust is fairly simple, you may be fine being your own trustee and having a capable family member step in for you when you can no longer manage your trust yourself. But if your estate is larger, has a variety of assets, includes tax planning, or if you doubt your relatives’ capabilities or intentions, definitely consider a corporate trustee.
- Are there any disadvantages to using a corporate trustee?
Because they must objectively follow the instructions for the trusts they manage, some trust beneficiaries (especially those who want the money now instead of when the revocable living trust document provides) have found them to be uncooperative. But that may be exactly what you want. One reason why many trusts are set up, and a corporate trustee chosen, is to keep a beneficiary from getting the money until Mom and Dad (or whoever set up the trust) intended. However, if you are concerned about a corporate trustee being too impersonal, you can always name a family member or close friend to act with them as co-trustee.
- Is a corporate trustee expensive?
Most are very reasonable, especially when you compare their fee to the costs of paying others for estate and tax planning advice, for investment management, for preparing tax returns and for investment trading commissions. A corporate trustee typically provides all these services and more for only a small percentage of the value of the assets they manage for you. (Fees are published, so you can find out what they are.) And because their compensation is based on how much those assets are worth (instead of on how many trades they make for you), a corporate trustee is motivated to help your assets grow.
- How can I evaluate a corporate trustee?
Talk to several. Visit them if you can. Ask how long the trust department has been in business, how many trusts they manage, minimum and average size of trusts they manage (most require a certain amount of assets) and how much experience their people have in the trust business. Compare investment returns, fees (including when and how much the last increase was), and services. Ask to see samples of statements or reports you would receive and see how easy they are to understand. Facts and numbers are important, but so are the people. Do they seem to genuinely care about you and your family? Do they listen and seem to understand your concerns? Can you understand them? How confident are you that they will be there for you and your family when they are needed?
- Could a corporate trustee help you? Look at these 18 real-life situations.
Building Wealth With Professional Asset Management
- My spouse took care of all our investments. Since he (she) died, I don’t know what to do or whom to trust.
- I don’t know where I should invest my money. I’m so confused by everything I read.
- I just received a large inheritance. I’ve never had to invest this much money before.
- I travel a lot now (business or pleasure), and I don’t have time to manage my investments like I used to.
- I recently sold my business (or other assets). Now I just need to figure out how to invest my money.
- I just received a large settlement from a lawsuit, divorce, etc.
Wealth Protection With Retirement/Estate Planning
- I’m retiring soon. I’m not sure how I should take distributions from my IRA and other plans.
- I’m a business owner/professional, and I’m wondering what my options are for retirement plans.
- I’m changing jobs. Should I take a lump sum distribution from my current retirement plan?
- I want to avoid probate and save estate taxes.
Smooth Settling Of An Estate
- I’m executor/personal representative of my father’s estate (trustee of my father’s trust). I don’t know what I’m supposed to do or how to do it.
Peace Of Mind At Incapacity
- I worry about what will happen to me and my money if I become mentally or physically incapacitated.
- I’m concerned about my mother (father). I don’t have the time to help her with her finances, and I’m worried she might be taken in by some scam.
Caring For Loved Ones/Gifts
- One of my children is not responsible with his own money. I shudder to think what will happen to his inheritance – my money – after I die.
- I want my children to be responsible and productive – not spoiled or lazy from a large inheritance.
- I’d like to make gifts to my children and grandchildren to save estate taxes.
- I have a child with special needs. I worry about what will happen to him when something happens to me.
- I’d like to make a large gift to a charity.
Who should be the beneficiary of my individual retirement accounts (IRAs)?
How would you like to turn your modest tax-deferred individual account into millions of dollars for your family? Depending on whom you name as beneficiary of your IRA, you can keep this money growing in tax-deferred retirement plan for not only your and your spouse’s lifetimes but also for your children’s or grandchildren’s lifetimes. That can turn even a modest inheritance into millions through a stretch IRA.
- Don’t I have to use this money for my retirement?
When you reach a certain age, usually April 1 after you are 70 1/2, Uncle Sam says you must start taking some money distributions out of your IRA. (This is called your required beginning date.) But if you do not use all this money before you die, naming the right beneficiary for your individual retirement account can keep it growing tax-deferred for decades in a stretch IRA.
- How much will I have to take out?
Calculating the amount that must be distributed each year (your required minimum distribution) from your IRA is much easier now than it used to be. Each year, you divide the year-end value of your individual retirement account by a life expectancy divisor from the Uniform Lifetime Table (provided by the IRS). The result is the minimum distribution from your IRA you must withdraw for that year. You can always take out more from your individual retirement account, but you are penalized if you take out less from your IRA. For example, the divisor at age 70 is 27.4. If your year-end account balance is $100,000, you divide $100,000 by 27.4, making your first required minimum distribution $3,650 from your IRA. Each year the divisor is smaller, but it never goes to zero. Even at age 115 and older, the divisor is 1.9. “To recalculate or not recalculate” is no longer an issue. Everyone now gets the benefit of recalculating his/her life expectancy for purposes of determining the amount to be distributed from your IRA.
- Doesn’t my beneficiary affect my distribution?
Not any longer. Now, almost everyone uses the same chart to calculate distributions from your individual retirement accounts, even if you have no beneficiary designation. After you die, distributions from your IRA are based on your beneficiary’s life expectancy (or the rest of your life expectancy if you die without one.) Naming the right beneficiary for your IRA is still critical to getting the most tax-deferred growth from a stretch IRA. That’s much easier to do now, because you are no longer locked into the beneficiary designation you name when you take your first distribution from your individual retirement account.
- Whom can I name as beneficiary, and what happens if I do not name a beneficiary?
You have five basic options for naming a beneficiary of your IRA: your spouse, if married; your children, grandchildren or other individuals; a trust; a charity; or some combination of the above. If you do not name a beneficiary of your IRA, then you will lose control of the distribution of the IRA at your death. The contract between you and the custodian of the IRA funds will determine where your IRA goes, and your IRA will pay the highest income taxes of all the options you have for naming a beneficiary. The contract between you and your IRA custodian provides where your IRA funds will be paid upon your death if you do not name a beneficiary. Your IRA funds may go to your estate – which is especially a bad choice. Your IRA funds may go to your heirs at law – which also may not be the result you would prefer. If your IRA funds are paid to your estate, three things happen, two of which are bad news. The first problem is that your IRA will be subject to taxation on the entire amount in the year of your death. The second problem is that, in most states, you will have taken an asset that is not subject to your creditors’ claims at your death and placed those funds into your probate estate and subjected the funds to the claims of your creditors. That could cause the entire IRA proceeds, other than what is paid to the IRS for income taxes, to go to your creditors instead of your family. Finally, if you do not have a will or trust that provides for the distribution of your estate, the funds will be paid to your heirs at law, as if you had died intestate. In Florida, that typically would require that one-half the net proceeds (after income taxes) be paid to your surviving spouse, and one-half the net proceeds would be paid to your natural and adopted children, in equal shares. For many blended families that would not be the distribution you would choose.
- Option 1: Spouse
Most married people name their spouse as beneficiary of their individual retirement account. That’s because 1) the money will be available to provide for the surviving spouse and 2) the spousal rollover option can provide many more years of tax-deferred growth through a stretch IRA. Also, if your spouse is more than 10 years younger than you are, you can use a different life expectancy chart that makes your required distributions from your individual retirement account even less. (This lets the tax-deferred growth continue longer on more money for your beneficiaries.)
- How does the spousal rollover option work?
If you die first, your surviving spouse can “roll over” your tax-deferred account into his/her own stretch IRA, further delaying income taxes until he/she must start taking required minimum distributions from the individual retirement account on April 1 after age 70 1/2. When your spouse does the rollover, he/she must name a new beneficiary for the IRA, preferably someone much younger like your children and/or grandchildren. After your spouse dies, the beneficiary’s actual life expectancy can be used for the remaining required minimum distributions from the inherited individual retirement account. The results, shown in the chart below, can be phenomenal. For example, let’s say your grandson is 20 when he inherits a $100,000 IRA from your spouse. Over the next 63 years (the life expectancy of a 20-year-old), the $100,000 IRA can provide him with over $1.7 million in income! Under current IRS policy, your spouse can do this rollover and stretch out the IRA even if you had started taking required minimum distributions from the IRA before you died.
***** TOTAL INCOME FROM IRA OVER BENEFICIARY’S LIFETIME*.
Age 20, Life Expectancy 63.0 Years Value of $50,000 IRA When Inherited by Beneficiary = $882,865 Value of $100,000 IRA When Inherited by Beneficiary = $1,765,731 Value of $500,000 IRA When Inherited by Beneficiary = $8,828,658 Age 30, Life Expectancy 53.3 Years Value of $50,000 IRA When Inherited by Beneficiary = $526,612 Value of $100,000 IRA When Inherited by Beneficiary = $1,053,225 Value of $500,000 IRA When Inherited by Beneficiary = $5,266,128 Age 40, Life Expectancy 43.6 Years Value of $50,000 IRA When Inherited by Beneficiary = $321,210 Value of $100,000 IRA When Inherited by Beneficiary = $642,421 Value of $500,000 IRA When Inherited by Beneficiary = $3,212,106 Age 50, Life Expectancy 34.2 Years Value of $50,000 IRA When Inherited by Beneficiary = $201,067 Value of $100,000 IRA When Inherited by Beneficiary = $402,134 Value of $500,000 IRA When Inherited by Beneficiary = $2,010,671 * Assumptions: 7% annual return; only required minimum distributions withdrawn. Income subject to income taxes.
- What happens if my spouse dies first?
If you don’t remarry, you lose the rollover option. This used to be a problem, because distributions from your IRA after your death would still be based on your and your deceased spouse’s life expectancies. But now you can name a new beneficiary for the individual retirement account, and after you die, the distributions from the IRA will be based on the new beneficiary’s life expectancy.
- Are there any disadvantages of naming my spouse?
Your spouse will have full control of this money in your IRA after you die and is under no obligation to follow your wishes. This may not be what you want, especially if you have children from a previous marriage or feel that your spouse may be too easily influenced by others after you’re gone. Also, if your spouse becomes incapacitated, the probate court could take control of this money in the IRA. It could be lost to your spouse’s creditors. And, finally, naming your spouse as beneficiary can cause your family to pay too much in estate taxes on the individual retirement account. (More about estate taxes later.) If any of this concerns you, keep reading. Another disadvantage of naming your spouse or anyone else other than a trust is that your IRA will lose its protection from creditors after your death, unless you name a trust as the beneficiary. Many states have statutes that exempt retirement plans, including IRAs, from the claims of your creditors. After your death, if the IRA is rolled over by your spouse or any other individual beneficiary, it will lose that creditor protection. To “re-create” the creditor protection, you can designate a trust as the beneficiary of the IRA and provide for “spendthrift” protection for the beneficiaries of the trust – who can be your spouse, children or other beneficiaries – and the IRA will not be subject to the claims of the individual beneficiaries’ creditors.
- Option 2: Children, Grandchildren, Others
If your spouse will have plenty of assets after you die, if you have reason to believe your spouse will die before you, or if you are not married, you could name your children, grandchildren or other individuals as beneficiary(ies) of your IRA. Because the distributions from the IRA can be paid over your beneficiary’s life expectancy after you die, the tax-deferred growth in the stretch IRA can continue even without the spousal rollover.
- Are there any disadvantages?
Anytime you name an individual as beneficiary of your IRA, you lose control. After you die, your beneficiary can do whatever he/she wants with this money in the IRA, including cashing out the entire IRA account and destroying your carefully made plans for long-term, tax-deferred growth of the IRA for the benefit of your named beneficiaries of the IRA. The money in the IRA could also be available to the beneficiary’s creditors, spouses and ex-spouse(s). And there is the risk of probate court interference at incapacity. If any of this concerns you, consider using a retirement plan trust as the beneficiary of your IRA.
- Option 3: Trusts
Naming a retirement plan trust as beneficiary of your individual retirement account will give you maximum control over your tax-deferred money in the IRA after you die. That’s because the distributions will be paid not to an individual but into a retirement plan or IRA trust that contains your written instructions stating who will receive the money from your IRA and when. For example, your retirement plan or IRA trust could provide income to your surviving spouse for as long as he or she lives. Then, after your spouse dies, the income from the IRA could go to someone else. The retirement plan or IRA trust could even provide periodic income to your children or grandchildren, keeping the rest of the funds in the stretch IRA safe from irresponsible spending and/or creditors of your IRA beneficiaries. While you are living, the required minimum distributions from the IRA will still be paid to you over your life expectancy. After you die, the required distributions can be paid from the IRA or retirement plan to the trust over the life expectancy of the oldest beneficiary of the IRA or retirement plan trust. The trustee can withdraw more money from the IRA if needed to follow your instructions, but the rest can stay in the individual retirement account and continue to grow tax-deferred as a stretch IRA. You can name anyone as trustee of the IRA or retirement plan trust, but many people name a bank or trust company, especially if the retirement plan or IRA trust will exist for a long period of time.
- Are there any disadvantages?
You will not be able to provide for your spouse and stretch out the tax-deferred IRA growth beyond your spouse’s actual life expectancy. That’s because you must use the life expectancy of the oldest beneficiary of the retirement plan or IRA trust, which, in this case, would probably be your spouse. Also, many IRA and retirement plan trusts pay income taxes at a higher rate than most individuals, but this only applies to income that stays in the retirement plan or IRA trust. Distributions from your tax-deferred IRA account that are paid to the retirement plan or IRA trust are subject to income taxes, and if the money stays in the IRA or retirement plan trust, the higher tax rates would apply. But usually this is not a problem because the trustee has authority to distribute the money from the IRA to the beneficiaries of the retirement plan or IRA trust, who pay the income taxes at their own income tax rates. Finally, the IRA or retirement plan trust must meet certain IRS requirements, including that it is a valid trust under state law. It is advantageous to create an irrevocable Retirement Benefit Trust, also called a Stand-alone Retirement Trust, and to name this trust as the beneficiary of your IRA on your individual retirement account’s beneficiary designation form.
- Option 4: Charity
If you are planning to leave an asset to charity after you die, a tax-deferred IRA account can be an excellent one to use. That’s because the charity will pay no income taxes when it receives the money from the IRA, and the individual retirement account will not be included in your taxable estate when you die, reducing the amount your family may have to pay in estate taxes. (More on estate taxes later.)
- Option 5. Some or all of the above
You don’t have to choose just one of these options. You can divide a large IRA into several smaller ones and name a different beneficiary for each IRA. (If your money is in an employer’s plan, you can roll it into an IRA and then split it.) If you name several beneficiaries for one IRA, the oldest one’s life expectancy will determine the payout after you die. But with separate IRAs (one for each beneficiary), each life expectancy will be used, providing the maximum stretch IRA. This is especially important if a charity is named as an IRA beneficiary. A charity has a life expectancy of zero, so the IRS would consider it the oldest beneficiary of the IRA. Depending on when you die, this could cause the entire IRA to be paid out in just five years rather than allowing the stretch IRA to be distributed over the life expectancy of your children or grandchildren as beneficiaries of the IRA. If you divide your IRA now, you will need to calculate a distribution for each IRA, but it can be worth the trouble. Under the new rules, your IRA can be divided even after you die. Splitting a large IRA can also save estate taxes.
- What are estate taxes, and why should I care?
Estate taxes are different from, and in addition to, income taxes. When you die, your estate must pay estate taxes if its net value (including your tax-deferred IRA accounts and other retirement plan accounts) is more than the amount exempt at that time. Currently in 2010, there is no federal estate tax, but the estate tax is scheduled to return in 2011 with a $1 million exemption and a 55% tax rate. Some states also have their own death or inheritance tax. Estate taxes must be paid in cash, usually within nine months of your death. If money must be withdrawn from a tax-deferred individual retirement account to pay the estate taxes, the result can be disastrous because income taxes must be paid on the money that is withdrawn from the IRA to pay the estate taxes.
- What can I do about estate taxes?
You can reduce your taxable estate through effective estate tax planning. Estate planning options include giving some assets to your loved ones now, often at discounted values. You can buy life insurance to pay estate taxes at a reduced cost. And, if you are married, make sure both you and your spouse utilize your estate tax exemptions. You see, everyone is entitled to an estate tax exemption. But many married couples who fail to do proper estate planning waste one of the spouse’s exemptions when they leave all their assets outright to the other spouse. The marital deduction lets you leave your spouse an unlimited amount of assets when you die and pay no estate taxes at that time. But when your spouse dies later, he or she will only be entitled to one exemption. That can cause your family to pay hundreds of thousands too much in estate taxes when proper estate planning could easily have avoided that result.
- How can splitting my IRA help?
Any assets you own, including a tax-deferred individual retirement accounts, that you leave to anyone other than your spouse (your children, grandchildren or a trust) can use your exemption. Splitting a large IRA into smaller IRAs will make this easier to do.
- What if I’m not married?
If you are single, naming your IRA beneficiary(ies) will be less complicated because you have just one estate tax exemption and there will be no spousal rollover option to consider.
- When can I change my beneficiary?
You can change your beneficiary of your IRA at any time while you are living, and the distributions after you die will be paid over that beneficiary’s life expectancy (unless they cash out) as a beneficiary’s stretch IRA. It is very important to name both primary and contingent beneficiaries of the IRA while you are living to allow for greater flexibility and “clean up” after your death. For example, your spouse could disclaim some benefits from the IRA so a grandchild could inherit the IRA instead and get a longer stretch IRA. No new beneficiaries of an IRA can be added after you die (unless your spouse names new ones with a rollover IRA), so make sure you include all appropriate beneficiaries of the IRA when you complete the beneficiary designation forms. Some employer-sponsored retirement plans (401(k), pension and profit-sharing retirement plans, etc.) have restrictions on beneficiary distribution options. But under a new rule, any beneficiary may now inherit employer plan assets and roll them into a beneficiary stretch IRA in the name of the decedent, continuing the tax-deferred growth over the beneficiary’s own life expectancy. (Some restrictions apply.) If your retirement plan will not let you do what you want, rolling your retirement plan account into an IRA will usually give you more options. If your money is already in an IRA and the institution will not agree to your wishes, move your IRA to one that will.
- What about a Roth IRA?
If you qualify, you may want to convert some or all your tax-deferred money into a Roth IRA. You’ll have to pay income taxes on the amount of the traditional IRA that you convert, but special rules in 2010 can make the conversion more attractive. Also, if you qualify, you can make after-tax contributions to a Roth IRA. Unlike a traditional IRA that requires you to start taking money out on April 1 after age 70 1/2, there are no minimum distributions required during your lifetime with a Roth IRA. And, generally, after five years or age 59 1/2 (whichever is later), all withdrawals are income tax-free. So you can leave your money in the Roth IRA, growing tax-free, for as long as you wish. You can stretch out a Roth IRA just like a regular IRA. After you die, distributions from the Roth IRA can be paid over the actual life expectancy of your beneficiary. Your spouse can even do a rollover and name a new beneficiary. And, remember, all distributions from the Roth IRA to your beneficiaries will be income tax-free.
- Do I need professional assistance?
Yes. Even though the rules are now simpler, they are still loaded with tax traps and penalties. Make sure you get expert advice, from an experienced and knowledgeable estate planning attorney or tax planning lawyer, especially if you have a sizable amount in tax-deferred IRA or other retirement plans and your estate is large enough to pay estate taxes. If you would like a no-cost, no-obligation consultation with an estate planning attorney at The Coleman Law Firm, PLLC Attorneys and Counselors at Law, please contact us at (904) 688-3324 or toll-free at 1-888-492-2468, or email us at [email protected].
Irrevocable Life Insurance Trusts Jacksonville Attorneys And Lawyers In Florida
If you need the assistance of a Jacksonville estate planning, or Florida wills and trusts lawyer to learn more about irrevocable life insurance trusts, or to establish or administer an irrevocable life insurance trust, please contact your Jacksonville trusts lawyer for irrevocable life insurance trusts at (904) 688-3324, toll-free at (866) 510-9099, or email us at [email protected].
- What does an irrevocable life insurance trust do?
An irrevocable life insurance trust (“ILIT”) lets you reduce or even eliminate estate taxes (also known as the “death tax”) so more of your estate can go to your loved ones. It also gives you more control over your life insurance policy’s death benefits proceeds and the money that is paid from them. The ILIT also provides a mechanism for an individual to create substantial wealth for generations of descendants, especially for 2011 and 2012 with the $5 million exemption from estate and gift tax that can be used to fund such a trust.
- What are estate taxes?
Estate taxes are different from, and in addition to, probate expenses and final income taxes which are due on the income you receive in the year you die. Federal estate taxes are expensive (historically 35-55%) and they must be paid in cash, usually within nine months after the date of your death. Since few estates have this kind of cash, estate assets often have to be liquidated. But if you plan ahead, estate taxes can be substantially reduced or even eliminated.
- Who has to pay estate taxes?
Your estate will have to pay federal estate taxes (the “death tax”) if its net value at your death is more than the “exempt” amount set by Congress at that time. For the year 2010, there was no federal estate tax, but it is scheduled to return in 2011 with a $5 million exemption amount and a 35% estate tax rate. Compare this to 2009, when the exemption amount from the federal estate tax was $3.5 million and the estate tax rate was 45%.
- What makes up my net estate?
To determine your current net estate, add the fair market value of all the assets that you own or control, then subtract your debts. Life insurance policies in which you have any “incidents of ownership” are included in your taxable estate for estate tax purposes, even if the proceeds go directly to the beneficiary. This includes life insurance policies you can borrow against, assign or cancel, or for which you can revoke an assignment, or can name or change the life insurance beneficiary. You can see how life insurance death benefit proceeds can increase the size of your taxable estate and the amount of estate taxes that must be paid.
- How does an irrevocable life insurance trust reduce estate taxes?
The irrevocable life insurance trust (ILIT) owns your life insurance policies for you and is the life insurance beneficiary for the death benefit proceeds. Since you don’t personally own the life insurance policy or have any “incidents of ownership,” the life insurance death benefit proceeds will not be included in your estate — so your estate taxes are reduced. (There is a three-year rule for existing life insurance policies, which is explained later.) Let’s say you are married, with a combined net estate of $11 million, $1 million of which is life insurance, and both you and your spouse die when the estate tax exemption is $1 million. An estate tax planning provision in a revocable living trust or a last will and testament would protect up to $10 million from federal estate taxes. But your estates would have to pay $450,000 in federal estate taxes (based on 2013 rates) on the additional $1 million. With an irrevocable life insurance trust (ILIT), the $1 million of life insurance death benefit proceeds would not be included in your estate for federal estate tax purposes. That would save your family $450,000 in federal estate taxes. Previously, if your adjusted gross income was $100,000 or more, you did not qualify to convert your tax-deferred savings to a Roth IRA. But beginning in 2010, the income restriction has been eliminated, so everyone is now eligible to convert to a Roth IRA. You can roll over amounts from your traditional IRA and from eligible retirement plans, which include qualified pension, profit sharing or stock bonus plans such as 401(k)s; annuity plans, tax-sheltered annuity plans; and deferred compensation plans of a state or local government. You do not have to roll these into a traditional IRA first. Of course, you will have to pay income taxes on the amount you convert. If you do a conversion the total amount of the conversion will all be included in that year’s income.
Benefits Of A Roth IRA
- Unlike a traditional IRA that requires you to start taking your money out at age 70 ½, with a Roth IRA there are no required minimum distributions during your lifetime.
- Unlike a traditional IRA, you can continue to make contributions to a Roth IRA after you have reached age 70 ½. (See restrictions below.)
- As a general rule, after five years or age 59 ½, whichever is later, all distributions to you and your beneficiaries will be income tax-free. So your money doesn’t grow tax-deferred…it grows tax-free.
- Withdrawals before age 59 ½ are considered contributions first, then earnings. So there is no income tax or penalty until all contributions have been withdrawn from the account.
- Money can be withdrawn at any time without penalty for college expenses, and up to $10,000 can be withdrawn tax-free at any time to buy or rebuild a home.
- You can stretch out a Roth IRA just like a traditional IRA. After you die, distributions will be paid over the actual life expectance of your beneficiary. Also, your spouse can do a rollover and name a new, younger beneficiary with a longer life expectancy and get the maximum stretch out.
This is an excellent opportunity, but make sure you evaluate your situation and run the numbers before you make a decision. Consider how much you would pay in income taxes. Are you currently in a low tax bracket? Will your retirement tax bracket be the same or higher than it is now? Can you pay the tax without dipping into your tax-deferred savings? Did you make any nondeductible contributions that won’t be taxed when you convert? Do you want to eliminate your required annual distribution? Should you convert some or all of your tax-deferred savings?
Can You Make Contribution To A Roth IRA?
There are still restrictions on who can contribute to a Roth IRA. Maximum Contribution Limits: If you are under age 50 and meet the income limits below, you can contribute up to $5,000 per year. If you are age 50 and older, the maximum you can contribute is $6,000 per year. Income Limits in 2010: If you are a single or head of household taxpayer with up to $105,000 adjusted gross income, you can contribute the maximum amount. (Smaller contributions are allowed if your AGI is $105,000 to $120,000). If you are married, filing jointly or a qualifying widow(er) with up to $167,000 AGI, you can contribute the maximum amount. (Smaller contributions are allowed if your AGI is $167,000 to $177,000.)
Seek Expert Advice
This is an appropriate time to get advice from a qualified professional who has experience in this area. There may be a substantial amount of money involved, and while you certainly want to take advantage of this opportunity if it applies to you, you also want to make sure you act wisely.
- What if my estate is larger than this?
If your estate will still have to pay federal estate taxes after you transfer your life insurance policy to an irrevocable life insurance trust, you can reduce your federal estate tax costs — by having the irrevocable life insurance trust buy additional life insurance death benefits. Here are three very good reasons to do this: 1. If the life insurance trust buys the life insurance policy, and is the life insurance beneficiary, the death benefit proceeds will not be included in your taxable estate after your death. So the life insurance death benefit proceeds, which are not subject to probate or income taxes, will also be free from federal estate taxes. 2. Life insurance proceeds are available right after your death. So your estate assets will not have to be liquidated to pay federal estate taxes. 3. Life insurance can be an inexpensive way to pay federal estate taxes and other probate expenses. So you can leave more estate assets to your loved ones.
- How does an irrevocable life insurance trust work?
An irrevocable life insurance trust (ILIT) has three parties involved. The “grantor” is the person creating the trust — that’s you. The ILIT “trustee” you select manages the life insurance trust. And the life insurance trust “beneficiaries” you name in the insurance trust will receive the trust assets after your death. The trust trustee purchases a life insurance policy, with you as the insured, and the irrevocable life insurance trust as owner and (usually) beneficiary. When the life insurance death benefit is paid after your death, the trustee of the ILIT will collect the life insurance death benefit funds, make them available to pay federal estate taxes and/or other expenses (including debts, legal fees, probate costs, and income taxes that may be due on IRAs and other retirement benefits), and then distribute the remaining death benefit proceeds to the life insurance trust beneficiaries as you have instructed in the irrevocable life insurance trust document.
- Can I be my own trustee of my irrevocable life insurance trust?
Not if you want the estate tax advantages, we’ve discussed above. Some people name their spouse and/or adult children as trustee(s) of the irrevocable life insurance trust, but often they don’t have enough time or experience. Many people choose a corporate trustee (bank or trust company) because they are experienced with administering irrevocable life insurance trusts. A corporate trustee will make sure the irrevocable life insurance trust is properly administered and the life insurance premiums promptly paid to the life insurance company.
- Why not just name someone else as owner of my life insurance policy?
If someone else, like your spouse or adult child, owns a life insurance policy on your life and dies first, the cash/termination value of the life insurance policy will be included in his/her taxable estate and potentially be subjected to estate taxes. That scenario creates the possibility of no tax savings. But, more importantly, if someone else owns the life insurance policy, you lose control. This person could change the life insurance beneficiary, take the cash value of the life insurance policy, or even cancel the life insurance policy, leaving you with no life insurance death benefit proceeds. You may trust this person now, but you could have problems later on because of the individual’s changed circumstances. The life insurance policy could even be garnished by creditors to help satisfy the other person’s debts to creditors, even in Florida. The complete loss of the life insurance policy’s death benefits is a possible result. An irrevocable life insurance trust is safer; it lets you reduce federal estate taxes and keep control of the life insurance death benefits.
- How does an irrevocable life insurance trust give me control?
With an irrevocable life insurance trust, your life insurance trust owns the life insurance policy. The trustee you select must follow the instructions you put in your irrevocable life insurance trust document. And with your irrevocable life insurance trust as beneficiary of the life insurance policies, you will even have more control over the life insurance death benefit proceeds. For example, your irrevocable life insurance trust agreement could allow the trustee to use the life insurance death benefit proceeds to make a loan to or purchase assets from your estate or revocable living trust, providing cash to pay estate taxes and expenses. You could provide your spouse with lifetime income and keep the life insurance proceeds out of both of your taxable estates. You could keep the life insurance proceeds money in the irrevocable life insurance trust in a testamentary trust for years and have the trustee make distributions as needed to trust beneficiaries, which can include your children and grandchildren. Life insurance proceeds that stay in the irrevocable life insurance trust can be protected from courts, creditors (even divorcing spouses) and irresponsible spending. By contrast, if your spouse or children are life insurance beneficiaries of the life insurance policy, you will have no control over how the life insurance death benefit money is spent. If your spouse is the life insurance beneficiary and you die first, all the life insurance proceeds will be in your spouse’s taxable estate; that could create a death tax problem. Also, your spouse (not you) will decide who will inherit any remaining life insurance money after he or she dies.
- Are there other benefits to naming the irrevocable life insurance trust as beneficiary of a life insurance policy?
Yes. If you name an individual as a life insurance beneficiary of a life insurance policy and that person is incapacitated when you die, the probate court will probably take control of the life insurance death benefit money through a guardianship of the person or the property, or both. Most life insurance companies will not knowingly pay life insurance death benefits to an incompetent person and will usually insist on probate court supervision through the guardianship. But if your irrevocable life insurance trust (ILIT) is the life insurance beneficiary of the life insurance policy, the trustee can use the death benefit proceeds to provide for your loved one without probate court interference.
- Who can be beneficiaries of the irrevocable life insurance trust?
You can name any person or organization you wish as the beneficiary of your life insurance trust. Most people name their spouse, children and/or grandchildren as trust beneficiaries.
- Where does the trustee of the irrevocable life insurance trust get the money to purchase a new life insurance policy?
From you, but in a special way. If you transfer money directly to the trustee of the irrevocable life insurance policy, there could be a gift tax. But you can make annual tax-free gifts of up to $14,000 ($28,000 if your spouse joins you) to each trust beneficiary of your irrevocable life insurance trust. (Amounts may increase periodically for inflation.) If you give more than this, the excess is applied against your federal gift/estate tax lifetime exemption. Instead of making a gift directly to a life insurance trust beneficiary, you give it to the trustee of the irrevocable life insurance trust, for the benefit of each beneficiary. The trustee notifies each trust beneficiary that a gift has been received on his/her behalf and, unless the trust beneficiary elects to receive the gift now, the trustee will invest the funds — by paying the premium on the life insurance policy owned by the ILIT. Each trust beneficiary must understand the consequences of taking the gift now; for example, it may reduce the trustee’s ability to pay life insurance premiums for the life insurance policy owned by the irrevocable life insurance trust.
- Are there any restrictions on transferring my existing life insurance policies to an irrevocable life insurance trust?
Yes. If you die within three years of the date of the transfer of an existing life insurance policy to the irrevocable life insurance trust, the life insurance policy death benefit proceeds from the life insurance will be included in your taxable estate. There may also be a gift tax. If you have questions about whether life insurance will be included in your taxable estate, please call your Jacksonville lawyer for estate tax planning for a no-cost, no-obligation consultation to discuss this matter at (904) 688-3324, toll-free at (866) 510-9099, or email your Jacksonville, Florida, estate planning or trust attorney at [email protected].
- Can I make any changes to the irrevocable life insurance trust?
An insurance trust is irrevocable, which generally means you cannot make changes to it. However, under the Uniform Trust Code (UTC) and decanting provisions in some states, including Florida, you maybe able to make some changes to your irrevocable life insurance trust. Still, you should read the irrevocable life insurance trust document carefully before you sign it because making changes is not automatic or simple.
- When should I set up an irrevocable life insurance trust?
You can set up one at any time, but because the life insurance trust is irrevocable many people wait until they are in their 50s or 60s. By then, family relationships have usually settled. Just don’t wait too long; you could become uninsurable. And remember, if you transfer existing life insurance policies to the irrevocable life insurance trust, you must live three years after the transfer for the life insurance proceeds to be excluded from your taxable estate.
- Should I seek professional assistance to establish an irrevocable life insurance trust?
Yes. If you think an irrevocable life insurance trust would be of value to you and your family, talk with an life insurance professional, Florida estate planning or trust attorney, corporate trustee or CPA who has experience with irrevocable life insurance trusts. If we can be of assistance to you with the establishment of an irrevocable life insurance trust, please call your Jacksonville lawyer for estate tax planning at (904) 688-3324, toll-free at (866) 510-9099, or email us at [email protected].
- Benefits of an Irrevocable Life Insurance Trust
- Provides immediate cash to pay federal estate taxes and other expenses after death
- Reduces federal estate taxes by removing life insurance death benefit proceeds from your taxable estate
- Inexpensive way to pay federal or Florida estate taxes
- Life insurance death benefit proceeds avoid probate and are free from income and federal estate taxes
- Gives you maximum control over life insurance policy death benefit proceeds and how the life insurance proceeds are used
- Can provide income to spouse without life insurance proceeds being included in spouse’s taxable estate
- Prevents the Florida probate court from controlling life insurance death benefit proceeds if the trust beneficiary is incapacitated
Do I have to be concerned with estate taxes?
- Who has to pay federal estate taxes, or ‘death taxes’?
Depending on the value of the assets you own or control when you die, your estate may have to pay federal estate taxes (Florida does not have a separate estate tax) before your assets can be fully distributed to your loved ones, beneficiaries and heirs. Federal estate taxes are different from, and in addition to, Florida probate expenses (some of which can be avoided with a properly funded revocable living trust) and final income taxes (on income you receive in the year you die). Federal estate taxes are expensive (historically, 35-55%), and they must be paid in cash, usually within nine months after you die. Since few estates have this kind of cash, estate assets often have to be liquidated. But if you plan ahead, you can reduce and even eliminate estate taxes. Ultimately, the federal estate tax is a “voluntary tax” that can be legally avoided with proper estate planning. If you would like to meet with an experienced estate tax planning attorney to learn how you can reduce or eliminate federal estate taxes, please contact us at or call us at (904) 688-3324 or toll-free at (866) 510-9099. In 2008, the last year that figures are available from the IRS, approximately $25 billion of estate tax was collected by the IRS. (Look here to see a spreadsheet from the IRS with the 2008 estate tax return analysis.) The State of Florida does not impose an estate tax or an inheritance tax. Your estate will have to pay federal estate taxes if its net value when you die is more than the “exempt” amount set by Congress at that time. For 2014, there is a $5.34 million exemption per person ($10.68 million for a married couple) from estate taxes at death with a 45% rate on amounts in excess of those exemptions; in 2015, the exemption increases to $5.43 million per individual and $10.86 million for a married couple, while the rate remains at 45%. In addition to the Federal estate tax, some states have their own death or inheritance tax, so your estate could be exempt from federal estate taxes and still have to pay a state estate, death or inheritance tax.
- How is the net value of my estate determined?
To determine the current net value of your estate, add all your assets, add any assets over which you exert control, then subtract your debts. Include your home, business interests, bank accounts, investments, personal property (including jewelry), IRAs, retirement plans and death benefits from your life insurance.
- How can I reduce or eliminate my estate taxes?
In the simplest terms, there are four ways to reduce or eliminate federal estate taxes: If you are married, use both federal estate tax exemptions through proper estate planning. Remove assets from your taxable estate before you die. Buy life insurance, properly structured, to replace assets given to charity and/or pay any remaining federal estate taxes. Take advantage of valuation discounts afforded through the use of limited partnerships, limited liability companies and other legal entities. If you would like a consultation with an experienced estate tax planning attorney at The Coleman Law Firm, PLLC Attorneys and Counselors at Law, to determine how federal estate taxes impact your estate, or how to reduce or eliminate federal estate taxes, please call us at (904) 688-3324 or toll-free at (866) 510-9099 or email us at [email protected].
- Use both estate tax exemptions
If your spouse is a U.S. citizen, you can leave him or her an unlimited amount when you die with no estate tax liability at your death.
- Remove assets from your taxable estate
A great way to reduce estate taxes is to reduce the size of your taxable estate before you die. The most obvious way to accomplish this estate planning objective is to spend some and enjoy it! Also, you probably know to whom you want to leave your assets after you die. If you can afford it, why not give them some assets now and save estate taxes? It can be very satisfying to see the results of your gifts — something you can’t do if you keep everything until you die. Assets that are likely to appreciate before your death are usually best to give, because the asset and the future appreciation will be removed from your estate. Assets you give away keep your cost basis for income tax purposes (what you paid for them), so the recipients may have to pay capital gains tax when they sell the assets you’ve given them. But the top capital gains rate is only 15% on assets held at least 12 months (which will increase to 20% in 2011, much less than estate taxes (historically 45%-55%) that would be assessed against those assets if you have a taxable estate, and if you keep the assets until you die. Some of the most commonly used estate planning strategies to remove assets from taxable estates are explained below. Note that these are all irrevocable, so typically you can’t change your mind later. One of the IRS requirements for removing the value of an asset from your estate for federal estate tax purposes, is that you give up ownership and control over the asset.
- Tax-free gifts
This is easy, and it doesn’t cost anything (other than the value of the assets gifted). Under federal estate and gift tax law, you can give up to $14,000 ($28,000 if married) annually to each of as many people as you want. So if you give $14,000 to each of your two children and five grandchildren, you will reduce your estate by $98,000 (7 x $14,000) a year — $196,000 if your spouse joins you. The amount of this “annual exclusion” is tied to inflation and may increase every few years. (The various states may have gift tax laws that may differ.) If you give more than the annual exclusion amount (currently $14,000 annually), the excess will be considered a taxable gift and will be applied to your lifetime $1 million gift tax exemption that each individual receives under the Internal Revenue Code. Charitable gifts of an unlimited amount can be made at any time without incurring a gift tax liability. Gifts for tuition and medical expenses for the benefit of your children or grandchildren (or others if you want) are unlimited, without gift tax consequences, if you give directly to the institution rather than making the gift to the ultimate recipient of the gift value. If you need an experienced estate tax lawyer in Jacksonville, Florida, to discuss how you can use gifts to reduce or eliminate estate and gift taxes, please call us toll-free at (866) 510-9099.
- Irrevocable life insurance trust (ILIT)
An easy way to remove life insurance from your estate is to establish an irrevocable life insurance trust (“ILIT”) the owner of the policies. As long as you live three years after the transfer of an existing policy, the death benefits will not be included in your estate. Usually the ILIT is also beneficiary of the policy, giving you the option of keeping the proceeds in the trust for years, with periodic distributions to your spouse, children and grandchildren. Proceeds kept in the trust are protected from irresponsible spending, creditors, and even divorcing spouses.
- Qualified personal residence trust (QPRT)
A QPRT lets you save estate taxes by removing your home (a substantial asset) from your estate now; yet you can continue to live there. Here’s how it works. You transfer your home to a trust for a period of time, usually 10 to 15 years. During this time, you continue to live in your home. When the time is up, it transfers to the trust beneficiaries, usually your children. If you wish to stay there longer, you may make arrangements to pay rent. If you die before the trust ends, your home will be included in your estate, just as it would without a QPRT. There’s more. A QPRT “leverages” your estate tax exemption. Since your children will not receive the house until the trust ends, its value as a gift is reduced. For example, if the current value of your home is $250,000 and you put it in a QPRT for 15 years, its value for tax purposes could be as little as $75,000. That leaves much more of your exemption for other assets. If you would like a complimentary no-cost, no-obligation consultation with your Jacksonville lawyer for estate tax planning to determine how a Qualified Personal Residence Trust can help you reduce federal estate taxes on your estate, please call us at (904) 688-3324 or toll-free at (866) 510-9099 or email us.
- Grantor retained annuity trust (GRAT) and Grantor-retained unitrust (GRUT)
These are much like a qualified personal residence trust (“QPRT”). The main difference is that a grantor retained annuity trust (“GRAT”) or grantor retained unitrust (“GRUT”) lets you transfer an income-producing asset (stock, real estate, business) to a trust for a set number of years, removing it from your estate, and still receive the income. (If the income is a set amount, the trust is called a GRAT. If the income fluctuates, it’s called a GRUT.) When the grantor trust ends, the asset will go to the beneficiaries of the trust. Since they will not receive it until then, the value of the gift is reduced. If you die before the trust ends, some or all the trust’s assets maybe included in your estate.
- Limited liability company (LLC) and family limited partnership (FLP)
FLPs and LLCs let you reduce estate taxes by transferring assets like a family business, farm, real estate or stocks to your children now, and still keep some control. They can also protect the assets from future lawsuits and creditors. Here’s how they work. You and your spouse can set up an LLC or FLP and transfer assets to it. In exchange, you receive ownership interests. Though you have a fiduciary obligation to other owners, you control the LLC (as manager) or FLP (as general partner). You can give ownership interests to your children, which removes value from your taxable estate. These interests cannot be sold or transferred without your approval, and because there is no market for these interests, their value is often discounted. This lets you transfer the underlying assets to your children at a reduced value and less transfer tax (estate tax or gift tax) cost, without losing control.
- Charitable Remainder Trust (CRT)
A charitable remainder trust (“CRT”) lets you convert a highly appreciated asset (like stocks or investment real estate) into a lifetime income without paying capital gains tax when the asset is sold. It also reduces your income and estate taxes, and lets you benefit a charity that has special meaning to you. With a CRT, you transfer the asset to an irrevocable trust. This removes it from your estate. You also get an immediate charitable income tax deduction. The charitable remainder trust then sells the asset at market value, paying no capital gains tax, and reinvests in income-producing assets. For the rest of your life, the charitable remainder trust pays you an income. Since the principal has not been reduced by capital gains tax, you can receive more income over your lifetime than if you had sold the asset yourself. After you die, the trust assets go to the charity you have chosen.
- Charitable Lead Trust (CLT)
A charitable lead trust (“CLT”) is just about the opposite of a CRT. You transfer an asset to the charitable lead trust, which reduces the size of your taxable estate and saves estate taxes. But instead of paying the income from the CLT to you, the trust pays the income to a charity for a set number of years or until your death. After the charitable lead trust ends, the trust assets will go to your spouse, children or other beneficiaries that you have named when you established the charitable lead trust. If you would like to consult with a Jacksonville estate planning attorney with The Coleman Law Firm, PLLC Attorneys and Counselors at Law, about charitable trusts, please call us at (904) 688-3324, or toll-free at (866) 510-9099, or email us at [email protected].
- Buy life insurance
Depending on your age and health, buying life insurance can be an inexpensive way to replace an asset given to charity and/or to pay any remaining estate taxes. The three-year rule mentioned earlier does not apply to new policies. But you should not be the owner of the life insurance policy — that would increase your taxable estate and estate taxes. To keep the death benefits out of your estate, set up an irrevocable life insurance trust (“ILIT”) and have the trustee purchase the life insurance policy for you.
- How to reduce estate taxes – summary
1.) If married, use both spouse’s estate tax, doubling the amount protected from estate taxes and saving a substantial amount for your loved ones.
2.) Remove assets from the estate to make annual tax-free gifts. This is a simple, no-cost way to sae estate taxes by reducing the size of our estate. Individuals can give gifts of $14,000 ($28,000 for married couples) per recipient. Gifts to charities are unlimited.
- If married, use both exemptions living trust with tax planning • Uses both spouses’ estate tax exemptions, doubling the amount protected from estate taxes and saving a substantial amount for your loved ones
- Remove assets from estate make annual tax-free gifts • Simple, no-cost way to save estate taxes by reducing size of estate • $14,000 ($28,000 if married) each year per recipient (amount tied to inflation) • Unlimited gifts to charity and for medical/educational expenses paid to provider
Utilize valuation discounts like those provided by limited liability companies and limited partnerships to obtain valuation discounts for lack of marketability, lack of control, and minority discounts. When used in conjunction with annual gifting through the annual exclusion the value of the annual exclusion is leveraged into higher benefits.
- Transfer Life Insurance Policies to Irrevocable Life Insurance Trust
- Removes death benefits of existing life insurance policies from estate
- Included in estate if you die within three years of transfer Qualified Personal Residence Trust
- Removes home from estate at discounted value
- You can continue to live there Grantor Retained Annuity Trust/Grantor Retained Unitrust
- Removes income-producing assets from estate at discounted value
- You can continue to receive income Limited Liability Company/Family Limited Partnership
- Lets you start transferring assets to children now to reduce your taxable estate
- Often discounts value of business, farm, real estate or stock
- Can protect the assets from future lawsuits, creditors, spouses
- You keep control Charitable Remainder Trust
- Converts appreciated asset into lifetime income with no capital gains tax
- Saves estate taxes (asset out of estate) and income taxes (charitable deduction) • Charity receives trust assets after you die Charitable Lead Trust
- Removes asset from your estate, saving estate taxes
- Income goes to charity for set time period, then trust assets go to loved ones 3. Buy life insurance through irrevocable life insurance trust
- Can be inexpensive way to pay estate taxes and/or replace charitable gifts
- Death benefits not included in your estate
What is a Charitable Remainder Trust and how can I benefit from one?
- What does a charitable remainder trust (CRT) do?
Since 1969, countless families have used charitable remainder trusts (CRTs) to increase their incomes, save taxes and benefit charities. A charitable remainder trust (CRT) lets you convert a highly appreciated asset (like stock or real estate that have increased in value since your purchase of the asset) into a lifetime income stream, for you and your spouse, or other family members or loved ones. It reduces your income taxes now and reduces your estate taxes when you die. You pay no capital gains tax when the CRT owned asset is sold, and it lets you make charitable contribution deductions to reduce your income taxes and help one or more charities that have special meaning to you. If you would like to explore how a charitable remainder trust can help you achieve your estate planning, tax planning or charitable planning goals, please call us toll-free at (866) 510-9099.
- How does a CRT work?
A charitable remainder trust (CRT) starts when you transfer an appreciated asset into an irrevocable charitable remainder trust. This removes the asset from your taxable estate, so no estate taxes will be due on your estate at your death. You also receive an immediate charitable income tax deduction for your income tax return for the year of the transfer, to reduce your current income taxes. The trustee of the charitable remainder trust (CRT) then sells the charitable trust asset at full market value, paying no capital gains tax, and re-invests the proceeds from the sale of the trust asset into income-producing assets. For the rest of your life, or your life and others, the trust pays you an income. When you die, the remaining trust assets go to the charity(ies) you have chosen. That’s why it’s called a charitable remainder trust.
- Why not sell the asset myself and re-invest, rather than transfer it to the charitable remainder trust?
You could, but you would pay more capital gains income taxes and there would be less assets remaining to provide income for you. Here’s an example. Years ago, John and Jane Smith (aged 65 and 63) purchased some stock for $100,000. It is now worth $500,000. They would like to sell it and generate some retirement income. If they sell the stock themselves, they will have a gain of $400,000 (current value less cost) and would have to pay $60,000 in federal capital gains tax (15% of $400,000) (based on current capital gains rates – which could be rising). That would leave them with $440,000 after paying the capital gains tax. If they re-invest and earn a 5% return, that would provide them with $22,000 in annual income. Multiplied by their life expectancy of 26 years, this would give them a total lifetime income (before taxes) of $572,000 from the direct sale of the asset and reinvestment of the sales proceeds. Because they still own the reinvested assets, there is no asset protection from creditors and no charitable income tax deduction is available to reduce income taxes. If you would like to discuss how you can avoid capital gains taxes through the use of a charitable remainder trust, please call us toll-free at (866) 510-9099.
- What happens with the use of a Charitable Remainder Trust?
If they transfer the stock to a CRT instead, the Smiths can take an immediate charitable contribution income tax deduction of $90,357. Because they are in a 35% tax bracket, this will reduce their current federal income taxes by $31,625. The CRT trustee will sell the stock for the same amount, but because the charitable remainder trust is exempt from capital gains tax, the full $500,000 is available to re-invest for retirement income. The same 5% return will produce $25,000 in annual income which, before taxes, will total $650,000 over their lifetimes. That’s $78,000 more in income than if the Smiths had sold the stock themselves. The assets are in an irrevocable charitable remainder trust, so those assets are protected from creditors’ claims (except the IRS). For more information on Asset Protection Planning read The Florida Asset Protection and Estate Planning Blog.
- What are my income options from a charitable remainder trust?
You can receive a fixed percentage of the charitable remainder trust assets (like the Smiths in the illustration above), in which case your charitable remainder trust would be called a charitable remainder unitrust (“CRUT”). With this income option, the amount of your annual charitable remainder trust income will fluctuate, depending on investment performance and the fair market value of the assets owned by the trust valued annually either at the beginning of the year or at the end of the year. The charitable remainder trust will be re-valued at the beginning of each year to determine the dollar amount of income the charitable remainder trust income beneficiaries will receive. If the charitable remainder trust is well managed, it can grow quickly because the charitable remainder trust assets grow tax-free. The amount of the CRT beneficiaries’ income will increase as the value of the charitable remainder trust assets grows. Sometimes the assets contributed to the trust (like real estate or stock in a closely held corporation) are not readily marketable, so income is difficult to pay. In that case, the charitable remainder trust can be designed to pay the lesser of the fixed percentage of the charitable trust’s assets or the actual income earned by the charitable remainder trust. A provision is usually included so that, if the charitable remainder trust has an off year, it can “make up” any loss of income in a better year. The “net income” and the “net income with make-up provisions” may result in a smaller charitable contribution deduction from your income taxes. If you would like to discuss how a charitable remainder trust can ensure a lifetime of income for you, please call us toll-free at (866) 510-9099 to schedule your consultation.
- Can I receive a fixed income from my charitable remainder trust instead?
Yes. You can elect instead to receive a fixed income from the charitable remainder trust, in which case the charitable remainder trust would be called a charitable remainder annuity trust (“CRAT”). This means that, regardless of the charitable remainder trust’s performance, the trust income beneficiary’s income will not change. This option is usually a good choice at older ages. It doesn’t provide protection against inflation like the charitable remainder unitrust does, but some people like the security of being able to count on a definite amount of charitable remainder trust income each year. It’s best to use cash or readily marketable assets to fund a charitable remainder annuity trust. In either (charitable remainder unitrust or charitable remainder annuity trust), the IRS requires that the payout rate stated in the charitable remainder trust document cannot be less than 5% or more than 50% of the initial fair market value of the trust’s assets, and there must be at least a 10% likelihood the charitable remainder will in fact receive the amount of the charitable remainder interest deduction that is initially calculated.
- Who can receive trust income from the charitable remainder trust?
Trust income, which is generally subject to income tax in the year it is received, can be paid to the charitable remainder trust income beneficiary for life. If the charitable remainder trust income beneficiaries are married, the income can be paid for as long as either of the named trust income beneficiaries lives. The trust income can also be paid to the children of the trust income beneficiaries, for their lifetimes or to any other person or entity the grantor of the charitable remainder trust may desire, providing the charitable remainder trust meets certain requirements. In addition, there are gift and estate tax considerations if someone other than grantor of the charitable remainder trust receives it. Rather than provide that the trust payout income for the lifetime of the life income beneficiary, the trust can also exist for a specified number of years (up to 20).
- Do I have to take the charitable remainder trust income now?
No. You can set up the charitable remainder trust and take the income tax deduction now, but postpone taking the trust income until later. By then, with good management, the charitable remainder trust assets will have appreciated considerably in value, resulting in more trust income for you.
- How is the charitable remainder trust income tax deduction determined?
The charitable deduction is based on the amount of trust income received by the charitable remainder trust income beneficiaries, the type and value of the trust asset, the ages of the trust income beneficiaries, and the Internal Revenue Code Section 7250 rate, which fluctuates from month to month. (Our example is based on a 3.0% Section 7250 rate.) Generally, the higher the charitable remainder trust income payout rate, the lower the charitable contribution deduction. The charitable contribution deduction is usually limited to 30% of adjusted gross income, but can vary from 20% to 50%, depending on how the IRS defines the charity and the type of trust assets. If you can’t use the full charitable contribution deduction the first year, you can carry it forward for up to five additional years. Depending on your tax bracket, type of asset and type of charity, the charitable contribution deduction can reduce your income taxes by 10%, 20%, 30% or even more. If you would like to discuss how you can obtain a significant income tax deduction through the use of a charitable remainder trust, please call us toll-free at (866) 510-9099.
- What kinds of assets are suitable to be transferred to the charitable remainder trust?
The best assets for a charitable remainder trust are those that have greatly appreciated in value since purchased, specifically publicly traded securities, real estate and stock in some closely held corporations. (S corp stock does not qualify. Mortgaged real estate usually won’t qualify, either, but you might consider paying off the loan before contributing the real estate to the charitable remainder trust). Cash can also be used.
- Who should be the trustee of the charitable remainder trust?
You can be the trustee of your own charitable remainder trust. But you must be sure the charitable remainder trust is administered properly – otherwise, you could lose the charitable contribution tax advantages and/or be penalized. Most people who name themselves as trustee of a charitable remainder trust have the paperwork handled by a qualified third-party administrator who is familiar with the administration of a charitable remainder trust. However, because of the experience required with investments, accounting and government reporting, some people select a corporate trustee (a bank or trust company that specializes in managing charitable remainder trust assets) as trustee. Some charities are also willing to be trustees of a charitable remainder trust that names the charity as the ultimate charitable trust beneficiary. Before naming a trustee, it’s a good idea to interview several and consider their investment performance, services and experience with charitable remainder trusts. Remember, you are depending on the trustee to manage your charitable remainder trust properly and to provide you with trust income.
- Do I still have some control?
Yes. For as long as you live, the trustee you select – not the charity – controls the assets. Your trustee must follow the instructions you put in your trust. You can retain the right to change the trustee if you become dissatisfied. You can also change the charity (to another qualified charity) without losing the tax advantages.
- Can I make other changes to the charitable remainder trust?
Generally, once an irrevocable trust is signed, technically you cannot make other changes. Be sure you understand the entire charitable remainder trust document and that it is exactly what you want before you sign. Under the Uniform Trust Code, that the state of Florida has substantially adopted, there are certain changes that can be made to an irrevocable trust, with the consent of all the parties to the trust, including all the trust beneficiaries, the trustee, and the trust grantor or settlor, if he or she is alive. In the absence of consent by all parties to the irrevocable trust, the irrevocable trust can only be changed by a court order. With a charitable remainder trust, in the state of Florida, the Florida attorney general may need to be made a party to any legal action involving changes to a charitable remainder trust, so that the attorney general can represent the otherwise unrepresented charitable beneficiaries of the charitable trust.
- Sounds great for me. But if I give away my assets to the charitable remainder trust, what about my children?
If you have a sizeable estate, the asset you place in a CRT may only be a small percentage of your assets, so your children may be well taken care of. However, if you are concerned about replacing the value of this asset contributed to the charitable remainder trust for your children, there is an easy way to do so. You can take the income tax savings, and part of the income you receive from the charitable remainder trust, and fund an irrevocable life insurance trust. The trustee of the insurance trust can then purchase enough life insurance to replace the full value of the asset contributed to the charitable remainder trust for your children or other beneficiaries.
- What benefit does a life insurance trust provide in conjunction with a charitable remainder trust?
With an irrevocable life insurance trust, the life insurance policy proceeds will not be included in your taxable estate, so you avoid estate taxes on the face value of the life insurance proceeds (yes, life insurance proceeds are otherwise subject to estate taxes in the estate of the insured, if the insured had any incidents of ownership). You can keep the proceeds of the life insurance policy in the life insurance trust for years, making periodic distributions of trust income and trust principal from the life insurance trust to your children and grandchildren. Any life insurance proceeds that remain in the life insurance trust are assets protected from the beneficiary’s irresponsible spending and the beneficiaries’ creditors (even divorcing spouses). Life insurance can be an inexpensive way to replace the assets contributed to the charitable remainder trust for your children. (Every dollar you spend on life insurance premium buys several dollars of life insurance through the leverage that life insurance provides). Life insurance proceeds are available immediately, even if you and your spouse both die tomorrow. In addition to avoiding estate taxes if owned by an irrevocable life insurance trust, the life insurance proceeds will be free from probate and income taxes.
- A charitable remainder trust (CRT) and irrevocable life insurance trust (ILIT) almost sounds too good to be true – does it really work?
Combining a charitable remainder trust with an irrevocable life insurance trust is a winning formula for everyone – you, your children and the charity. You convert an appreciated asset contributed to the charitable remainder trust into a lifetime income from the CRT, and because you pay no capital gains tax when the charitable trust asset is sold, you receive more income from the charitable remainder trust than if you had sold the asset yourself and invested the sales proceeds. You receive an immediate charitable income tax deduction, reducing your current income taxes. By removing the asset from your estate, you reduce estate taxes that may be due when you die. With the irrevocable life insurance trust replacing the full value of the asset(s) contributed to the charitable remainder trust, your children receive much more than if you had sold the asset yourself, and paid capital gains and estate taxes. Plus, the life insurance proceeds are free of income and estate taxes, and probate. Finally, you will make a substantial gift to your favorite charity or charities. The charity knows it will receive the distribution from the charitable remainder trust at some point in the future, so it can plan projects and programs now – benefiting even before receiving the charitable gift from your charitable remainder trust.
- Benefits of a charitable remainder trust
Convert an appreciated, often illiquid, asset into lifetime income. Reduce your current income taxes with charitable income tax deduction. Pay no capital gains tax when the asset is sold. Reduce or eliminate your estate taxes. Gain protection from creditors for gifted asset. Benefit one or more charities. Receive more income over your lifetime than if you had sold the asset yourself. Leave more to your children or others by using a life insurance trust to replace the gifted asset.
- Should I seek professional assistance to set up a charitable remainder trust and irrevocable life insurance trust?
You think a charitable remainder trust, with or without an irrevocable life insurance trust, would be of value to you and your family, speak with a tax-planning attorney, insurance professional, corporate trustee, investment adviser, CPA and/or favorite charity. Be sure an attorney experienced in Charitable Remainder Trusts prepares the documents. If you would like a consultation with an experienced estate planning attorney about how a charitable remainder trust can help you achieve your estate planning, tax planning or charitable planning goals, please call the The Coleman Law Firm, at (904) 688-3324 or toll-free at (866) 510-9099, or email us at [email protected].
What is Probate in Florida?
Florida Probate Attorneys And Lawyers For Estate Settlement And Administration In Jacksonville
The Jacksonville, Florida, probate lawyers and attorneys associated with The Coleman Law Firm, PLLC, assist those who need legal representation for estate settlement or probate of a will in Florida, probate court administration, real estate probate of real property in Florida, summary probate administration of Florida probate cases, ancillary probate for non-Florida residents who die owning real estate or other probate assets in Florida, Florida probate litigation, Florida will contests and will disputes, in the courts of probate throughout the state of Florida. Our 30-plus years of experience allows us to help you avoid unnecessary delays and costs, and helps you resolve your probate needs quickly and efficiently. If you need a probate lawyer in Florida, please call your Jacksonville probate lawyer at (904) 688-3324, toll-free at (866) 510-9099 or email us at [email protected].
Do I need an attorney to handle a probate estate?
As experienced Florida probate attorneys and lawyers for estate settlement, having represented clients in the Florida probate courts for over 30 years, we are familiar with the Florida rules of probate, and know how important it is for the probate estate administration process to be completed as soon as reasonably possible, and as efficiently as possible, regardless of whether the Florida probate estate is simply to probate a Florida real estate deed, or a complex probate estate that is subject to the federal estate taxes, or the “death tax.” Our Florida probate attorneys and lawyers provide our clients with complete and timely probate information and legal advice regarding Florida law and probate, and the status and activities of each Florida probate case. We are familiar with the Florida probate law, Florida probate rules and the Florida probate codes that are followed by the Florida probate courts, the Florida probate process, and the Florida probate forms necessary to successfully complete a probate case with efficiency and at the least cost to you. Our lawyers and attorneys counsel you on each phase of the probate process and the estate administration process, whether it’s a will or trust, and provide direction for each step that must be taken. Our staff promptly responds to all questions that are asked, and patiently provides you with a complete explanation of what needs to be done to comply with probate law, and why. We can help you understand the probate process and how to probate a will in Florida.
If you need the assistance of an experienced probate lawyer in Florida, please call us toll-free at (866) 510-9099.
As experienced Jacksonville estate settlement and probate lawyers and attorneys we understand the emotional issues that become involved with probate cases, and when there is probate litigation in particular, whether the issues involve will contests, will disputes, inheritance disputes, litigation for removal of a personal representative or executor from a Florida probate estate, for removal of a personal representative for breach of fiduciary duty by the personal representative, or a will challenge based on irregularities in the formal requirements for the execution of a last will and testament, forgeries, the exercise of undue influence in the procuring of a last will and testament, the will maker’s lack of testamentary capacity or inability to understand the contents of a last will and testament, the improper administration of a probate estate by the personal representative, or disputes that arise between the surviving spouse and the children of previous marriages, especially where the Florida spousal elective share or an inheritance through Florida intestacy law may be involved for an intestate estate. With our 30-plus years of experience, we can help you avoid unnecessary delays and costs and help you resolve your probate needs quickly and efficiently.
If you need a probate attorney in Florida, please call us toll-free at (866) 510-9099. Our Jacksonville estate settlement and probate lawyers and attorneys are also experienced in pursuing actions for abuse of a power of attorney, financial abuse of the elderly, and related actions in the Florida probate courts. If you find your loved one’s estate in probate, we can help you.
Who pays for the estate attorney?
Our probate fees for representing you in the estate settlement and administration of a Florida probate estate or trust administration will depend on the facts and circumstances of your particular case. Often our Florida probate lawyers will work on a flat-fee or fixed-fee basis. Other times, a Florida probate lawyer’s or attorney’s hourly rates are appropriate. In appropriate Florida probate or will contests litigation, we will consider working on a contingent-fee basis, which means there is no fee if there is no recovery. In particular, if your Florida probate administration is for the sole purpose of a Florida real estate probate, i.e., transferring title to Florida real property, our Florida probate lawyers usually will work on a fixed-fee basis, so that you will know from the beginning exactly what your total cost will be for the Florida probate of the will. Our probate office will provide you with all the probate court documents and probate forms that are needed for your case. We hope the following series of questions and answers will help you gain an understanding of some of the issues and needs involved in Florida’s courts of probate proceedings, whether a formal administration, a summary administration, or the probate of Florida real estate, and will assist you in determining the needs or proper course of action for your Florida probate matter.
If you find that you need help with estate settlement or probate administration, we encourage you to seek the assistance of a Jacksonville, Florida, probate lawyer or attorney, and we sincerely hope you will contact your Jacksonville, Florida, lawyer for probate matters at (904) 688-3324 (toll-free at (866) 510-9099) or email The Coleman Law Firm to discuss your needs with us so that we can help guide you through the Florida probate of a will process.
- What is probate and Florida probate court?
In a typical probate administration, what documents are initially filed with the probate court?
An estate settlement or probate in Florida is a court-supervised process for identifying and gathering the decedent’s Florida probate assets, paying taxes, claims and expenses and distributing assets to the beneficiaries of the probate estate. The probate laws of Florida require that all wills must go through probate. The Florida Probate Code is found in Chapters 731 through 735 of the Florida Statutes. Florida probate law establishes two main types of Florida probate administration: a) Formal Probate Administration, with which most of this information about probate is concerned, and includes probate estates that are in excess of $75,000 of value, or in which there are multiple creditors involved, and b) Summary Probate Administration, which involves an estate that is less than $75,000 in value, other than exempt assets (including the Florida homestead), and for which there are no outstanding unpaid creditor claims. The Florida law of probate also establishes a nonadministration proceeding called “Disposition of Personal Property Without Administration.” If you need an experienced Florida probate lawyer to represent you regarding a Florida probate estate, please call us toll-free at (866) 510-9099.
- What are Florida probate assets?
Generally, Florida probate law provides that probate assets are those assets titled in the decedent’s sole name at death or otherwise owned solely by the decedent and which contain no provision for automatic succession of ownership at death are subject to probate. For example:
- A Florida bank account in the sole name of a decedent is a Florida probate asset that is subject to probate, but a bank account held in-trust-for (ITF) another, or held jointly with rights of survivorship (JTWROS) with another, is not a Florida probate asset and is not subject to probate in Florida
- A life insurance policy, annuity or individual retirement account that is payable to a specific beneficiary is not a Florida probate asset and not subject to probate, but a policy payable to the decedent’s estate is a Florida probate asset and is subject to probate
- Florida law provides that real estate titled in the sole name of the decedent or as a tenant in common with another person, is a Florida probate asset (unless it is exempt Florida homestead) but real estate in Florida held as joint tenants with rights of survivorship or as tenants by the entirety is not a Florida probate asset and is not subject to probate
- Property owned by husband and wife as tenants by the entirety is not a Florida probate asset on the death of the first spouse to die, but goes automatically to the surviving spouse
This list is not exclusive. If you have a will in probate in Florida, it may be necessary to obtain legal advice and help with probate from a Florida probate lawyer or attorney to determine what constitutes Florida probate assets.
- Why is Florida probate necessary?
You must probate wills in a court of probate in Florida. Florida probate is necessary to wind up the affairs the decedent leaves behind. It ensures that all the decedent’s creditors are properly paid. Florida probate also serves to transfer assets from the decedent’s individual name to the proper beneficiary. Florida has had probate laws in force since becoming a state in 1845. The Florida law of probate and estate settlement requires that all last wills and testaments must be probated, and provides for all aspects of the probate process, but allows the decedent to make certain decisions by leaving a valid last will and testament.
- What is a last will and testament?
Do I need the original will? A last will and testament is a written legal document, signed by the decedent and witnesses, that meets the formal requirements set forth by the Florida law of probate. A last will and testament usually designates a personal representative (sometimes called an Executor) to administer the Florida probate estate and names beneficiaries to receive Florida probate assets. A last will can also do other things, including establishing a testamentary trust and designating a trustee. To the extent a last will and testament properly devises Florida probate assets and designates a personal representative, the last will and testament controls over the automatic provisions set forth under Florida probate law. In the absence of a valid last will, or if the probate estate is without a will because the last will fails in either respect, Florida probate law designates the beneficiaries and designates the way to select the personal representative for the Florida probate estate settlement.
If you need Florida legal advice regarding a last will and testament or a will in probate in Florida, please contact your Jacksonville lawyer for probate and our probate law firm at (904) 688-3324, or toll-free at (866) 510-9099, or email us at [email protected].
- What happens to Florida probate assets if there is no last will and testament?
What if there is no last will?
Contrary to the belief of some, the decedent’s assets are not turned over to the state of Florida unless no intestate heirs can be found, pursuant to the Florida law of intestacy. If there is no last will and testament, or if the probate estate is without a will, the assets of the decedent will be distributed to the intestate heirs as follows:
- If there is a Surviving Spouse and No Lineal Descendants: If there is a surviving spouse and no lineal descendants, the surviving spouse takes all the Florida probate estate. ·
- If there is a Surviving spouse and lineal descendants:
- a) If there is a surviving spouse and one or more lineal descendants (with the lineal descendants all being the lineal descendants of the surviving spouse as well as the decedent), the surviving spouse receives the first $60,000 of the Florida probate estate plus one-half of the rest of the Florida probate estate, and the lineal descendants share the remaining half.
- b) If there is a surviving spouse and one or more lineal descendants (one or more of which lineal descendants are not also lineal descendants of the surviving spouse), the surviving spouse receives one-half of the Florida probate assets and the lineal descendants share the remaining half.
- If there is No Surviving Spouse, But Lineal Descendants: If there is no surviving spouse, but there are lineal descendants, the lineal descendants share the probate estate, which is initially broken into shares at the children’s level, with a deceased child’s share going to the descendants of that deceased child.
- If there is No Surviving Spouse, No Lineal Descendants: If the decedent left no surviving spouse or lineal descendants, the Florida probate property goes to the decedent’s surviving parents, and if none, then to the decedent’s brothers and sisters and descendants of any deceased brothers or sisters. The Florida probate law provides for further disposition if the decedent is survived by none of these.
Exceptions to Above
The above provisions are subject to certain exceptions for Florida exempt homestead property, exempt personal property, and a statutory allowance to the surviving spouse and any lineal descendants or ascendants the decedent supported. Regarding Florida exempt homestead, if titled in the decedent’s name alone, the surviving spouse receives a life estate in the Florida homestead, with the lineal descendants of the deceased spouse receiving the remainder in there in the Florida exempt homestead property upon the death of the surviving spouse. If there are no lineal descendants, the surviving spouse receives full ownership of the Florida homestead outright. One of the principal reasons for preparing a last will and testament is to properly provide for the distribution of assets to a descendant who is a minor. As you can see, if one does not have a last will and testament, the Florida intestacy statute provides for the distribution of Florida probate assets to your lineal descendants. An example of the complications that can arise when there is no last will, you may want to visit our blog article entitled “The Problem With Life Estate Deeds.” Life estate deeds are often used to avoid probate, but are not recommended for that purpose of experienced Florida probate lawyers.
If you need an experienced Florida probate lawyer to represent you as a beneficiary of a Florida probate estate, please contact us toll-free at (866) 510-9099.
If those descendants are minors (under 18 years of age), before any probate assets can be distributed from the Florida probate estate to the minor descendants, it is necessary for a Florida probate court supervised guardianship to be established on the assets that are being distributed to the minor beneficiary. The Florida probate court will appoint someone to serve as the guardian of the property of the minor descendant(s). The guardian’s responsibility will be to manage the assets for the benefit of the minor descendant and see that the assets are used properly. However, it is necessary to get Florida probate court approval for all expenditures on behalf of the minor descendant, until the child reaches 18 years of age (unless the court appointed guardian posts a surety bond with the probate court). On the child’s 18th birthday, the probate court is required by Florida probate law to distribute all the assets, lump sum, outright to the 18 year old child. For more information about Florida guardianship law, please go to our page discussing Florida guardianship law. Through a last will and testament, your Florida attorney can provide for a testamentary trust that is designed to hold any portion or all of the assets for any descendant who is less than 18 years of age, and who is to receive assets from your probate estate. The trustee of that trust is given instructions by you, in the legal document, regarding the uses of the funds, and the amount of access the beneficiary is allowed to have to the income or the principal from the trust assets that you have allocated for the minor child.
For more information, please visit our page discussing Wills in Florida, or our page discussing Revocable Living Trusts. You can provide for the management of the trust assets for the benefit of your descendants for up to 360 years in Florida. You determine when the descendant(s) have access to the assets owned by the trust, and the purposes for which funds can be withdrawn from the testamentary trust. You determine the timing and amounts of the distributions of the trust assets to each descendant. You can spread the distributions out in multiple distributions with several years in between each distribution. Or, you can provide for lifetime trusts that will provide substantial asset protection from the beneficiary’s creditors, including divorcing spouses, general creditors and even the IRS. Through the use of such a testamentary trust, you can avoid the Florida law that requires all the assets left to a minor descendant be distributed in a lump sum at age 18.
- Who is involved in the Florida probate process?
While there maybe others, the following is a list of persons or entities often involved in the Florida probate process:
- Clerk of the Probate Court, in Duval County, Florida, for probate matters in Duval County, Florida. The probate clerk’s office is located at 330 E. Bay Street, Jacksonville, Florida.
- For St. Johns County, the Clerk of the Probate Court is located at 4010 Lewis Speedway, St. Augustine, Florida 32084 (See Question 7).
- For Clay County, the Clerk of the Probate Court is located at 825 N. Orange Avenue, Green Cove Springs, Florida, 32043.
- The Nassau County, Clerk of the Probate Court is located at 76347 Veterans Way, Yulee, Florida, 32097.
- Circuit Court (acting through a Circuit Court Probate Judge, See Question 8).
- Personal Representative or Executor (See Questions 9 through 11).
- Florida Probate Lawyer or Attorney for the Personal Representative (See Question 12).
- Creditors or other Claimants (See Question 13).
- Internal Revenue Service (IRS) (See Question 14).
- Florida Department of Revenue (See Question 15).
- Surviving Spouse and Children (See Question 16).
- Other Beneficiaries of the Florida probate estate (See Question 17).
- Trustee of Revocable Living Trust (See Question 21).
- Where are Florida probate papers filed?
Probate court forms and papers are filed with the Clerk of the Circuit Court (which is the probate office for the Florida court of probate), usually for the county where the decedent lived. In Jacksonville, Duval County, Florida, the probate clerk of the court of probate is located at the county courthouse at 330 East Bay Street, Jacksonville, Florida, 32202. A probate filing fee must be paid to the probate clerk to commence the Florida probate administration. The clerk assigns a file number and maintains a docket sheet which lists all probate forms, legal documents and papers filed with the clerk for that Florida probate administration. The assistance of a Florida probate lawyer or attorney is required by Florida law for filing a formal probate administration or a summary probate administration.
- Who supervises the Florida probate administration?
A Circuit Court Judge presides over Florida court of probate proceedings. The Florida probate judge appoints the personal representative and issues “letters of administration,” also referred to as “letters testamentary” or simply as “letters.” This probate form shows to the world the authority of the personal representative to act on behalf of the Florida probate estate. The probate Judge also holds hearings when necessary and resolves all questions of Florida law raised during the administration of the probate estate by entering written directions called “orders.” The probate timeline is established by the Florida probate rules.
- What is a personal representative and what does the personal representative do?
What is a personal representative (executor)?
The personal representative is the person or persons, bank or trust company appointed by the Florida probate court to be in charge of the estate settlement and administration of the Florida probate estate. The generic term “personal representative” has replaced such terms in probate as “executor, executrix, administrator and administratrix.” Upon a probate filing the personal representative in the probate of wills is directed by the Florida probate court to administer the probate estate pursuant to Florida probate code and the Florida probate rules. The personal representative is obligated to follow certain probate steps:
- Identify, gather, value and safeguard probate assets in probate.
- Publish a “notice to creditors” in a local newspaper, giving notice to file claims and other papers relating to the Florida probate estate.
- Serve a “notice of administration” on specific persons, giving information about the will in probate and the probate timeline for estate administration and giving notice of requirements to file probate forms with the Florida probate court for any objections relating to the Florida probate estate.
- Conduct a diligent search to locate “known or reasonably ascertainable” creditors, and notify them of the probate timeline by which their claims must be filed with the Florida probate court against the Florida probate estate.
- Object to improper claims in probate and defend lawsuits brought against the Florida probate estate on such claims.
- Pay valid claims of the Florida probate estate.
- File tax returns for the Florida probate estate.
- Pay taxes of the Florida probate estate.
- Employ necessary probate professionals to assist in probate, including a Florida probate lawyer or attorney in a counsel of record capacity.
- Pay administrative expenses of the probate estate.
- Distribute statutory amounts or probate assets to the surviving spouse or family.
- Distribute assets to beneficiaries of the Florida probate estate.
- Close Florida probate administration.
If you need an experienced Florida probate lawyer to represent you as personal representative of a Florida probate estate, please call us toll-free at (866) 510-9099.
- Who can be a personal representative of the Florida probate estate?
Who can be appointed personal representative (executor)?
- The personal representative could be an individual, multiple individuals, bank or trust company, subject to certain restrictions as set forth in the Florida probate codes that your Florida probate lawyer can explain for you.
- An individual who is either a resident of Florida, or is a spouse, sibling, parent, child or certain other close relatives, can serve as personal representative of the Florida probate estate.
- A trust company incorporated under the laws of Florida, or a bank or savings and loan authorized and qualified to exercise fiduciary powers in Florida, can serve as personal representative of a Florida probate estate.
- Who has preference to be personal representative?
- If the decedent left a valid last will and testament, the designated personal representative nominated in the last will and testament has preference to serve.
- If the decedent did not leave a valid last will and testament, the surviving spouse has preference, with second preference to the person selected by a majority in interest of the heirs of the intestate probate estate. If there is no will, your Florida probate attorney can help you determine if you are entitled to preference in the appointment of the personal representative.
- Why does the personal representative need a Florida probate attorney?
Do I need a Florida probate attorney to handle an estate?
In almost all instances the personal representative must be represented in the Florida courts of probate by a Florida probate lawyer or attorney. Many legal issues arise concerning the Florida probate law, even in the simplest Florida probate estate administration. The Florida probate attorney for the personal representative advises the personal representative on rights and duties under the Florida law of probate and represents the personal representative in Florida probate court estate proceedings. The Florida probate lawyer or attorney for the personal representative cannot serve as the Florida probate lawyer or attorney for the beneficiaries. A provision in a last will and testament mandating that a particular Florida probate lawyer, attorney or law firm be employed as the Florida probate attorney for the personal representative is not binding on the personal representative. The personal representative has the right to choose his or her own Florida probate lawyer.
- How are estate creditors handled?
Prior to commencement of Florida probate proceedings, a creditor can file a caveat with the Florida probate court. Upon publication of notice to creditors a creditor or any other claimant may file a probate form document called a “statement of claim” against the probate estate with the Clerk of the Circuit Court where the Florida probate estate is being administered. This probate form is generally required to be filed within the first three months of publication of a prescribed notice in a countywide newspaper. This three-month period is often referred to as the “nonclaim period.” The Florida personal representative or any other interested person may file with the Florida court of probate an objection to the statement of claim, after which the claimant must file a separate independent lawsuit against the probate estate to pursue the claim. A creditor or interested person will find the help with probate from a Florida probate lawyer or attorney is beneficial when filing caveats with the Florida probate court, or statements of claim, objections to claims and separate independent lawsuits. The personal representative is required to use diligent efforts to give actual notice of the Florida probate and administration proceeding to “known or reasonably ascertainable” creditors of the probate estate, to afford them an opportunity to file claims against the Florida probate estate. A valid claimant is not viewed as an adversary of the personal representative but rather must be treated fairly as a person interested in the probate estate until the claim has been satisfied or otherwise disposed of.
If you need an experienced probate attorney in Florida to represent you as a creditor of a probate estate in Florida, please call us toll-free at (866) 510-9099.
For federal income tax purposes, death triggers two things. It ends the decedent’s last income tax year for purposes of filing a federal income tax return, and it establishes a new tax entity, the “estate.” The personal representative maybe required to file the following returns, depending on income of the decedent, income of the probate estate and size of the estate:
- Final Form 1040 income tax return, reporting income for the decedent’s final tax year.
- One or more Form 1041 income tax returns for the probate estate, reporting income for the probate estate.
- Form 709 gift tax return(s), reporting certain gifts made by the decedent prior to death.
- Form 706 estate tax return, reporting the gross estate and deductions, depending upon the value of the gross estate, to determine whether an estate tax (commonly referred to as the “death tax.”) will be due for the probate estate to pay.
The personal representative maybe required to file other returns on behalf of the Florida probate estate. Additionally, the personal representative has the responsibility to deal with issues arising from tax years prior to the decedent’s death (including tax returns that were filed by the decedent or that should have been filed). The personal representative has the responsibility to pay amounts due to the IRS from the decedent and the Florida probate estate and maybe personally liable for those taxes if not properly paid from the probate estate. If a federal estate tax return is required to be filed, an estate tax closing letter is necessary to clear title to Florida real property, and in some instances in order to close the probate administration with the Florida probate court.
- How is the Florida department of revenue involved?
The personal representative is required to send a copy of the Florida probate inventory to the Florida Department of Revenue. If a federal estate tax return is not required to be filed with the IRS, then the personal representative is required to record in the public records (and file in a formal estate administration) an Affidavit of No Florida Estate Tax Due. If a federal estate tax return is required to be filed with the IRS, then the personal representative is required to file a Florida estate tax return, Form F-706, with the Florida Department of Revenue. Your Florida probate attorney can assist you with the preparation of the federal estate tax return, or with identifying an experienced certified public accountant who can prepare the estate tax return. Regarding Florida’s intangible tax, the Florida Department of Revenue may review the Florida probate inventory to determine whether the Florida probate estate, or the decedent while alive, failed to file a required intangible tax return or to pay intangible tax. For Florida probate estates required to file a Florida estate tax return, a nontaxable certificate or a tax receipt from the Florida Department of Revenue is required in order to clear title to Florida real property and in order to close a formal Florida probate administration.
- What rights do the surviving family have in the Florida probate estate?
Florida public policy protects the surviving spouse and certain surviving children from total disinheritance. Absent a premarital or post-marital agreement to the contrary (commonly called a premarital or prenuptial agreement), a surviving spouse may have Florida exempt homestead rights, elective share rights, family allowance rights and exempt property rights. In addition, certain surviving children of the decedent may also have exempt Florida homestead rights, pretermitted child rights, family allowance rights and exempt property rights. The existence and enforcement of these rights is often best handled by an experienced Florida probate lawyer or attorney.
- What rights do other potential beneficiaries (other than the surviving spouse and children under certain circumstances) have in the probate estate?
Under Florida probate law, as with most other states, a decedent may entirely disinherit other potential beneficiaries.
- How long does Florida probate take?
For Florida probate estates not required to file a federal estate tax return, the final accounting and papers to close the Florida probate estate administration are due within 12 months of issuance of letters of administration. This probate calendar period can be extended by the Florida court of probate, after notice to interested persons. The federal estate tax return is initially due nine months after death and may be extended for another six months, for a total of 15 months. If a federal estate tax return is required, the final accounting and papers to close the Florida probate estate administration are due within 12 months from the date the tax return is due. This probate calendar date is usually extended by the Florida probate court because often the IRS’ review and acceptance of the estate tax return are not completed within that period. Florida probate estates that are not required to file a federal estate tax return and that do not involve probate litigation may often close in five or six months and the property in probate can be distributed.
- How are probate fees determined in Florida probate?
The personal representative, the Florida probate lawyer or attorney and other professionals whose services may be required in estate settlement and administering the Florida probate estate in the court of probate (such as appraisers and accountants) are entitled by Florida probate law to reasonable compensation for probate fees. The probate fee for the personal representative is usually determined in one of five ways: a) As set forth in the last will and testament b) As set forth in a contract between the personal representative of the Florida probate estate and the decedent c) As agreed among the personal representative of the Florida probate estate and the persons who bear the impact of the probate fees d) As the amount presumed to be reasonable as calculated under Florida probate law if the amount is not objected to; or e) As determined by the Florida probate judge, applying Florida probate law. Likewise, the probate fees for the Florida probate lawyer or attorney for the personal representative is usually determined (1) As agreed among the Florida probate lawyer or attorney, the personal representative of the Florida probate estate and the persons who bear the impact of the fee, (2) As the amount presumed to be reasonable calculated under Florida probate law, if the amount is not objected to, or (3) As determined by the Florida probate judge, applying Florida law.
- What alternatives are available to formal probate administration?
Florida probate law provides for several alternate, abbreviated procedures other than Formal Probate Administration for the settlement of an estate. Summary Probate Administration is generally available under the Florida probate codes, if the value of the property in the probate estate subject to probate in Florida (less property which is exempt from the claims of creditors) is not more than $75,000 or the decedent has been dead for more than two years.
If you need an experienced Florida probate attorney for a summary probate administration in Florida, please call us toll-free at (866) 510-9099.
Under Summary Probate Administration, the persons who receive the probate estate assets remain liable for claims against the decedent for two years after the date of death. This period may be reduced in Summary Probate Administration by publication of notice in a local newspaper. Another alternative to Formal Probate Administration is “Disposition Without Administration.” This is available if the Florida probate estate assets consist solely of exempt property (as defined by law and the Florida Constitution) and nonexempt personal probate property, the value of which does not exceed the combined total of up to $6,000 in funeral expenses, plus the amount of all reasonable and necessary medical and hospital expenses incurred in the last 60 days of the last illness. If the decedent was not a Florida resident at the time of death, an alternate procedure maybe used to admit the last will and testament to record in Florida. This procedure is used to establish title to Florida real property. When admitted to record in any Florida county where the real estate is located, the “foreign will” serves to pass title to the Florida real estate as if the last will and testament had been admitted to Florida probate. This procedure is available only if either two years have passed from the decedent’s death or the domiciliary personal representative has been discharged, and there has been no probate estate administration in Florida.
- What if there is a revocable living trust?
What is a revocable living trust? If the decedent created a revocable living trust, in certain circumstances, the trustee maybe required to pay expenses of administration of the decedent’s Florida probate estate and enforceable claims of the decedent’s creditors. In any event, the trustee is required to file a “notice of trust” with the Florida probate court where the decedent lived, giving information concerning the settlor and trustee. The counsel of a Florida probate lawyer may help with probate and legal advice about the probate code and probate rules for the personal representative in this situation. (Back to Top of Page) However, a revocable living trust, if properly funded, provides the opportunity to avoid probate. Properly funded means that all probate assets are re-titled to the revocable living trust. At the death of the grantor (settlor), the successor trustee has immediate access to the trust assets so that probate can be avoided, for all its costs, delays and the public nature of a probate proceeding or court-supervised guardianship.
The Florida estate settlement and probate lawyers and attorneys at The Coleman Law Firm have more than 30 years’ experience providing legal advice and working with personal representatives, beneficiaries, surviving spouses and the heirs to probate estates both with wills and no wills. We also have significant experience working with creditors’ claims in probate administration in the Florida probate courts. We recognize the need for efficient probate administration, and the importance of keeping our clients fully informed of each step in the Florida probate process and probate timelines. We explain the Florida probate process to our clients and help them understand each step in the Florida probate process and why that step is necessary.
What is a revocable living trust, and why should I consider using a revocable living trust for my estate planning?
The following frequently asked questions regarding revocable living trusts should provide the answers to most of your questions. If you have additional questions please call your Jacksonville lawyer for estate planning, wills and trusts, at (904) 688-3324, toll-free , or email us at [email protected] to schedule your no-charge, no-obligation estate planning consultation.
- I have a will. Why would I want a revocable living trust?
Contrary to what you’ve probably heard, a last will and testament may not be the best plan for you and your family. That’s primarily because a last will and testament does not avoid probate when you die. A will must be validated by the probate court before it can be enforced. Why should I consider a revocable living trust? Also, because a last will and testament can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So, the probate court could easily take control of your assets before you die through a probate court-supervised guardianship — a concern of millions of older Americans and their families. Fortunately, there is a proven alternative to a will — the revocable living trust. It avoids probate, and lets you keep control of your assets while you are living — even if you become incapacitated — and provides for the management and distribution of your assets after you die.
- What is probate?
What is probate and estate administration? Probate is the legal process through which the court ensures that, upon your death, your legally enforceable debts are paid, and your assets are distributed according to your wishes, if you have a valid last will and testament. If you don’t have a valid will, your assets are distributed according to the intestacy statute in the state of your residence at the time of your death. Intestacy often does not provide the same plan for the distribution of your assets that you would have provided with your own last will and testament.
- Why should I try to avoid probate?
It can be expensive. Legal fees, executor or personal representative fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in more than one state, your family could face multiple probates, each one according to the laws in each state in which you own real property. These costs can vary widely; it might surprise you if you check to see what those expenses are at this time. It takes time, usually nine months to two years, but often longer. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor/personal representative’s approval. If your family needs money to live on, they must request a living allowance from the probate court, which may be denied, even if the funds are available. Your family has no privacy. Probate is a public process, so any “interested party” can see at least some of what you owned, to whom you owed, who will receive your assets and when they will receive them. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors and consequent dissipation of assets. Your family has no control. The probate process determines how much it will cost, how long it will take and what information is made public. The probate judge, probate law, as expressed in the probate code, and the probate rules of court determine all the actions that take place in the probate process.
- Doesn’t joint ownership avoid probate?
Not really. Using joint ownership usually just postpones probate, at best. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs. Watch out for other problems. When you add a co-owner, you lose control. Your chances of being named in a lawsuit and of losing the asset to a creditor are increased. There could be gift and/or income tax problems. Since a will does not control most jointly owned assets, you could disinherit your family. There may be adverse estate tax consequences of owning property jointly with right of survivorship, that could cost your family the loss of your estate tax exemption, which might cause additional estate taxes of several hundreds of thousands of dollars. With some assets, especially real estate, all owners must sign to sell or refinance. So, if a co-owner becomes incapacitated, you could find yourself with a new “co-owner” — appointed by the court even if the incapacitated owner is your spouse.
- What happens if I become incapacitated? Will the court take over?
If you can’t conduct business due to mental or physical incapacity (dementia, stroke, heart attack, etc.), only a probate court appointee can sign for you — even if you have a will. (Remember, a will only goes into effect after you die.) Once the probate court gets involved, it usually stays involved until you recover or die and it, not your family, will control how your assets are used to care for you. This public, probate process, called a “guardianship of the person and property” in Florida, can be expensive, embarrassing, time-consuming and difficult to end. It does not replace probate at death, so your family may have to go through probate court twice!
- Does a durable power of attorney prevent this?
A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so. However, many financial institutions will not honor one unless it is on their form. If accepted, it may work too well, giving someone a “blank check” to do whatever he/she wants with your assets. It can be very effective when used with a living trust, but risky when used alone.
- What is a revocable living trust?
A revocable living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a revocable living trust can avoid probate at death, control all your assets and prevent the court from controlling your assets if you become incapacitated.
- How does a revocable living trust avoid probate and prevent court control of assets at incapacity?
When you set up a revocable living trust, you transfer assets from your name to the name of your trust, which you control — such as from “John and Jane Doe, husband and wife” to “John and Jane Doe, trustees under trust dated (month/day/year).” Legally, you no longer own anything; everything now belongs to your revocable living trust. So there is nothing for the probate courts to control when you die or become incapacitated. The concept is simple, but this is what can keep you and your family out of the probate courts.
- Do I lose control of the assets in my revocable living trust?
Absolutely not. You keep full control. As trustee of your revocable trust, you can do anything you could do before — buy and sell assets, change or even cancel your revocable living trust. That’s why it’s called a revocable living trust. You even file the same tax returns. Nothing changes but the names on the titles.
- Is it hard to transfer assets into my revocable living trust?
No, and your estate planning attorney, trust officer, financial adviser and insurance agent can help. Typically, you will change titles on real estate, stocks, CDs, bank accounts, investments, insurance and other assets with titles through a process called “funding your revocable living trust.” Most revocable living trusts also include jewelry, clothes, art, furniture and other assets that do not have titles. Some beneficiary designations (for example, insurance policies) should also be changed to your revocable living trust so the probate court can’t control them if a beneficiary is incapacitated or no longer living when you die. (IRA, 401(k), etc. can be exceptions.)
- Doesn’t this take a lot of time to fund a revocable living trust?
It will take some time — but you can do it now, or you can pay the probate courts and probate attorneys to do it for you later. One of the benefits of a revocable living trust is that all your assets are brought together under one plan. Don’t delay “funding” your revocable living trust; it can only protect assets that have been transferred or retitled into it.
- Should I consider a corporate trustee for my revocable living trust?
You may decide to be the trustee of your revocable living trust. However, some people select a corporate trustee (bank or trust company) to act as trustee or co-trustee now, especially if they don’t have the time, ability or desire to manage their revocable living trusts, or if one or both spouses are ill. Corporate trustees are experienced investment managers, they are objective and reliable, and their fees are usually very reasonable.
- If something happens to me, who has control of my revocable living trust?
If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your revocable living trust for you.
- What does a successor trustee of a revocable living trust do?
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your revocable living trust assets to pay your expenses. If you recover, you resume control. When you die, your successor trustee pays your debts, files your tax returns and distributes your revocable living trust assets. All can be done quickly and privately, according to instructions in your revocable living trust, without court interference.
- Who can be successor trustees for my revocable living trust?
Successor trustees can be individuals (adult children, other relatives or trusted friends) and/or a corporate trustee. If you choose an individual, you should also name some additional successors in case your first choice is unable to act.
- Does my revocable living trust end when I die?
Unlike a will, a revocable living trust doesn’t have to die with you. Assets can stay in your revocable living trust, managed by the trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your revocable living trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses and future death taxes.
- How can a revocable living trust save on estate taxes (death taxes)?
Your estate will have to pay federal estate taxes if its net value when you die is more than the “exemption” amount at that time. Currently in 2011 and 2012 the federal estate tax is imposed only on estates greater than $5 million for each spouse (a total of $10 million), but it is scheduled to return in 2013 with a $1 million exemption and a 55% tax rate. If you are married, your revocable living trust can include a provision that will let you and your spouse use both of your estate tax exemptions and leave up to $10 million estate tax-free to your loved ones, and $2 million starting in 2013, saving up to $435,000 in federal estate taxes based on current law. (Some states also have their own death or inheritance tax.)
- Doesn’t a testamentary trust in a will do the same thing as a revocable living trust?
Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it’s part of your will, this trust cannot go into effect until after you die, and the will is probated. So it does not avoid probate and provides no protection at incapacity.
- Is a revocable living trust expensive?
Not when compared to all the costs of court interference at incapacity and death. How much you pay will depend primarily on your goals and what you want to accomplish with your revocable living trust.
- How long does it take to get a revocable living trust?
It should only take a few weeks to prepare the legal revocable living trust documents after you make the basic decisions.
- Should I have an attorney do my revocable living trust?
Yes, but you need the right attorney. A local attorney who has considerable experience in revocable living trusts and estate planning will be able to give you valuable guidance and peace of mind that your revocable trust is prepared and funded properly.
If you would like a free estate planning consultation to determine how a revocable living trust can help you achieve your estate planning goals and objectives, please contact The Coleman Law Firm toll-free at , or by email at [email protected], to schedule your appointment.
- If I have a revocable living trust, do I still need a will?
Yes, you need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your revocable living trust. When you die, the will “catches” the forgotten asset and sends it into your revocable living trust. The asset may have to go through probate first, but it can then be distributed as part of your overall revocable living trust plan. Also, if you have minor children, a guardian will need to be named in the will.
- Is a ‘living will’ the same as a living trust?
No. A revocable living trust is for financial affairs. A living will is for medical affairs; it lets others know how you feel about life support in terminal situations.
- Are revocable living trusts new?
No, they’ve been used successfully for more than 600 years.
- Who should have a revocable living trust?
Age, marital status and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid probate court interference at your death or incapacity, you should probably have a revocable living trust. You may also want to encourage other family members to have one so you won’t have to deal with the probate courts at their incapacity or death.
- Summary of Revocable Living Trust Benefits
- Avoids probate at death, including multiple probates if you own property in other states
- Prevents court control of assets at incapacity
- Brings all your assets together under one plan
- Provides maximum privacy
- Quicker distribution of assets to beneficiaries
- Assets can remain in trust until you want beneficiaries to inherit
- Can reduce or eliminate estate taxes
- Inexpensive, easy to set up and maintain
- Can be changed or cancelled at any time
- Difficult to contest
- Prevents court control of minors’ inheritances
- Can protect dependents with special needs
- Prevents unintentional disinheriting and other problems of joint ownership
- Professional management with corporate trustee
- Peace of mind
What is a guardianship under Florida Law?
The following information explains Florida guardianship law, who is subject to a guardianship, who can be appointed as a guardian, and how the guardianship works after it is established. In addition to incapacitated adults, Florida guardianship law requires that any minor child who is entitled to receive or receives property valued at more than $15,000 shall be subject to a guardianship of the property of a minor child. The experienced guardianship lawyers and attorneys at The Coleman Law Firm in Jacksonville, Florida, have extensive experience representing guardians for both incapacitated adults and for the property of a minor child.
- What is a guardianship?
A guardianship is a legal proceeding in the circuit courts of Florida in which a guardian is appointed to exercise the legal rights of an incapacitated person. The Florida guardianship may be limited in its scope (a limited guardianship), or the guardianship may be for the purpose of totally taking care of the person and property of the incapacitated person (a plenary guardianship). Under Florida guardianship laws, the guardian may be appointed only to take control of the property of the incapacitated person (a guardian of the property), or only to take control of the person of the incapacitated person (a guardian of the person). After the appropriate Florida guardianship forms are filed with the guardianship court, the assigned judge holds a hearing to determine whether the person is actually incapacitated. If you need the assistance of an experienced Florida guardianship attorney in the Jacksonville and Duval County, Florida, area to help you with your family member or loved one who has become incapacitated, please call us toll-free at (866) 510-9099.
- What is a guardian?
A guardian is an individual or institution such as a bank trust department appointed by the court to care for an incapacitated person – called a “ward” – or for the ward’s assets.
- How is a person determined to be incapacitated?
Any adult, with the assistance of a Florida guardianship lawyer or attorney may file with the Florida guardianship court the FL guardianship forms, including a petition to determine another person’s incapacity setting forth the factual information upon which they base their belief that the person is incapacitated. The Florida court of guardianship then appoints a committee of two professionals, usually physicians, and a lay person to examine the person and report its findings to the guardianship court. The court also appoints a Florida guardianship attorney to represent the person alleged to be incapacitated (called the “attorney ad litem”). If the examining committee concludes that the alleged incapacitated person is not incapacitated in any way, the court will dismiss the petition. If the examining committee finds the person to be incapable of exercising certain rights, however, the court schedules a hearing to determine whether the person is totally or partially incapacitated. A plenary guardian of the person and property is usually appointed at the end of the incapacity hearing. If you need the assistance of a Florida guardianship lawyer to establish the incapacity of your family member or loved one, please call us at (904) 688-3324, toll-free at (866) 510-9099, or email us at [email protected].
- Who may serve as guardian?
According to Florida guardianship laws, any adult resident of Florida can serve as a guardian. A close relative of the ward who does not live in Florida may also serve as a guardian. Persons who have been convicted of a felony or who are incapable of carrying out the duties of a guardian cannot be appointed. Institutions such as a bank trust department, a nonprofit religious or charitable corporation, or a public guardian, can be appointed guardian, but a bank trust department may only act as guardian of the property. The Florida court of guardianship gives consideration to the wishes expressed by the incapacitated person in a written declaration of preneed guardian or at the hearing.
- What does a guardian do?
Pursuant to the Florida law of guardianship, a guardian who is given authority over any property of the ward shall inventory the property, invest it prudently, use it for the ward’s support, and account for it by filing detailed annual reports and other required Florida guardianship forms with the Florida guardianship court. In addition, the guardian must obtain court approval for certain financial transactions. The guardian of the ward’s person may exercise those rights that have been removed from the ward and delegated to the guardian, such as providing medical, mental and personal care services and determining the place and kind of residential setting best suited for the ward. The guardian of the person, through his or her Florida guardianship lawyer, must also present to the court every year a detailed plan for the ward’s care.
- Is a guardian accountable?
Yes. Guardians must be represented by a Florida guardianship attorney who will serve as “attorney of record.” Guardians are usually required to furnish a bond and maybe required to complete a court-approved training program. The Clerk of the Court reviews all annual reports of guardians of the person and property and presents them to the court for approval. A guardian who does not properly carry out his or her responsibilities may be removed.
- Is guardianship permanent?
Not necessarily. If a person recovers in whole or part from the condition that caused him or her to be incapacitated, the guardianship court will have the ward reexamined and can restore some or all of the person’s rights.
- Is guardianship the only means of helping an incapacitated person?
No. Florida law requires the use of less restrictive alternatives to protect persons incapable of caring for themselves and managing their financial affairs whenever possible. If a person creates an advance health care directive and a durable power of attorney or revocable living trust while competent, he or she may not require a guardian in the event of incapacity. An experienced Florida guardianship lawyer or attorney can help you decide whether a guardianship is the most appropriate action for you and your loved ones.
- What about guardians for minors?
A child’s parents are the child’s natural guardians and in general may act for the child. In circumstances where the parents die or become incapacitated or if a child receives an inheritance or proceeds of a lawsuit or insurance policy exceeding $15,000, the court must appoint a guardian of the property of the minor child to protect the child’s property. Both parents or a surviving parent may make and file with the Clerk of the court a written declaration naming a guardian of the child’s person or property to serve if both parents die or become incapacitated. A guardian may also be designated in a will in which the child is a beneficiary. When the minor child for whom the guardianship of the property has been established reaches 18 years of age, the court is required by Florida law to turn over to the 18-year-old all the assets in the guardianship.
How do I apply for Medicaid Benefits to pay for Nursing Home Care?
On July 23, 2014, the U.S. Government Accountability Office released its report to the public entitled: “Medicaid: Financial Characteristics Of Approved Applications And Methods Used To Reduce Assets To Qualify For Nursing Home Coverage.” The report found that “Medicaid paid for nearly one third of the nation’s $158 billion in nursing home expenditures in 2012. To be financially eligible for Medicaid, individuals cannot have assets above certain limits. Not all assets are countable in determining Medicaid eligibility; federal law discourages individuals from reducing their countable assets, for example by transferring them to family members to qualify for Medicaid. Although Congress has acted multiple times to address financial eligibility requirements for Medicaid coverage of nursing home care, methods exist through which individuals, sometimes with the help of attorneys, can reduce their assets and qualify for Medicaid.” Elder law includes Medicaid planning.
If you would like to have the help of a Florida elder law attorney to reduce your family member’s assets and qualify for Medicaid benefits to pay for nursing home costs, or to apply for Medicaid benefits, please call The Coleman Law Firm, PLLC, toll -free at (866) 510-9099.
Paying For Long-Term Care In A Skilled Nursing Home Facility Long-term care, also called custodial care, is the living arrangement that includes nursing home care, assisted living facility care and some at-home care circumstances. Medicare does not pay for nursing home care except up to 100 days that is available from Medicare for rehabilitative skilled care that may be provided in the same type nursing home facility. In Florida, the cost of nursing home care typically is between $6,000 and $8,000 per month, or more than $80,000 per year. (For detailed statistics on the cost of long-term care, see the 2011 MetLife Survey of Long-Term Care Costs). The question many families with elderly members face is how to pay for nursing home costs when it is needed. Proper Medicaid planning may include qualified income trusts (sometimes referred to as a Miller Trust), Medicaid asset protection trusts, personal care contracts and many other techniques designed to protect a family’s assets without impairing eligibility for Medicaid nursing home benefits.
Will Medicare Pay For My Nursing Home Costs? However, the cost of, and paying for long-term care are but one of the issues involved in the selection of a skilled nursing facility in Florida for your loved one. If you would like a copy of our FREE Northeast Florida Nursing Home Guide, please complete a Request for Free Northeast Florida Nursing Home Guide. Long-term care in Florida nursing home is paid for in one, or a combination, of three ways: 1. Long-Term Care Insurance 2. Private Funds 3. Medicaid – through the Florida Institutional Care Program (ICP).
Long-Term Care Insurance If you have assets worth protecting, are young and healthy enough to qualify and can afford the premiums, long-term care insurance maybe your best option. If your long-term care insurance policy qualifies for the Florida Long-Term Care Partnership, then you have the legal right to protect from nursing home costs some of your assets with a total value equal to the long-term care insurance benefits. For instance, if your long-term care policy qualifies for participation in the Florida Long-Term Care Partnership and provides $100 per day for five years, you can set aside approximately $180,000 of assets for your family that you otherwise would be required to spend on nursing home care. The Florida Long-Term Care Partnership is one of the most effective asset protection devices available to the person who can qualify for long-term care insurance.
How can I avoid being impoverished by the high cost of nursing home care?
Using your own private funds. Without long-term care insurance, it will be necessary for you to use your own resources to pay for nursing home costs or apply and qualify for Florida Medicaid benefits to pay for nursing home care. A Jacksonville, Florida, Medicaid planning attorney can help you develop a properly designed Medicaid spend down plan that may allow you to protect some of the elder person’s assets for family members, and still allow the elder person to qualify for Medicaid benefits to pay the costs of the nursing home.
Medicaid Benefits To Pay For Nursing Home Costs: Medicaid is a federally funded health care program designed for those who are unable to afford medical care and nursing home costs. One of the components of Medicaid benefits is the Institutional Care Program (ICP). There are other less well-known programs, but the Institutional Care Program is the one that pays for skilled nursing home care for those who meet the Florida Medicaid requirements. The Florida Medicaid application process is administered through the Florida Department of Children & Families. You apply for Medicaid in Florida through an online application administered by DCAF. Without long-term care insurance, it will be necessary for you to use your own resources to pay for nursing home costs or apply and qualify for Florida Medicaid benefits to pay for nursing home care. An experienced Florida elder law attorney can help you develop a properly designed Medicaid spend down plan that may allow you to protect some of the elder person’s assets for family members, and still allow the elder person to qualify for Medicaid benefits to pay the costs of the nursing home. Only after the Florida Medicaid requirements have been met do you apply for Medicaid in Florida. Nursing home expenses currently are typically more than $80,000 per year. The average stay for a nursing home resident is over two years (Alzheimer’s and dementia are usually much longer). Only after a nursing home resident has spent down his or her assets to the allowable maximum can one become eligible for Medicaid benefits to pay for nursing home care. After the nursing home resident’s assets are spent down, he or she can apply for Florida Medicaid. “Medicaid spend down planning” is the process through which the Florida elder law attorney and Medicaid planning lawyer at The Coleman Law Firm assists our clients in preparing their financial affairs so that they can legally qualify for Medicaid benefits to pay for nursing home costs, while preserving and protecting assets for enhancing the lives of the nursing home resident during the period of time they are in the nursing home, and preserving assets for family members and loved ones who are devoted to the care of the elderly person confined to the skilled nursing facility. The reasons for Medicaid planning include the following: To ensure that the healthy spouse, who lives at home, will have the financial resources to continue doing so. To preserve a family’s limited assets to ensure the next generation can live in a home or afford an education. Long-term care is very expensive, and families want to ensure their loved one receives the care they require, which they could not otherwise afford. Medicaid eligibility is extremely complicated and even simple errors can result in a denial which can be devastating to the health and happiness of the applicant, their caregivers and family members. The application and review process are time-consuming. Working with a Medicaid planner can accelerate this process.
If you are a concerned relative, loved one or friend of a person who is resident in a nursing home, and you want to legally protect some of that person’s assets from unnecessary payment of nursing home costs, then you should contact the Jacksonville, Florida, elder law attorneys and Medicaid planning lawyers with The Coleman Law Firm at (904) 688-3324, or toll-free at (866) 510-9099, to explore how we can help you achieve that objective legally. We also can assist you with applying for Medicaid in Florida. The information that follows will provide some information about the Medicaid planning process in Florida and the rules and regulations governing a nursing home resident’s eligibility for Medicaid benefits. For additional information about nursing homes in Florida, the Florida Agency for Healthcare Administration provides a nursing home guide that rates all the nursing homes that operate in the state.
The Basics For Qualifying For Medicaid Benefits To Pay For Nursing Home Costs Many courts have commented that the Federal Medicaid Laws are the most complicated laws that have ever been put into effect by Congress, with the exception of the Internal Revenue Code. In addition, Florida has many special Medicaid laws, rules, regulations and interpretations that increase the confusion about how to qualify for Medicaid nursing home benefits. Proper Medicaid planning with a Florida elder law attorney is absolutely essential to obtain Medicaid benefits. Applying for Medicaid in Florida is a complicated process that we recommend you do not undertake without professional assistance.
Why do I Need Help Applying for Medicaid Benefits? Can I Just Submit the Application? Achieving Medicaid eligibility can be an overwhelming challenge for anyone, even for Florida elder law attorneys and Medicaid planning lawyers who practice in Florida in this area every day! Yet, a knowledgeable Florida elder law attorney can provide proper guidance for Florida Medicaid planning. With that help, the benefits to be derived from Florida Medicaid, eligibility can be substantial.
If you need the assistance of a Florida elder law attorney to assist you in determining the eligibility of a family member, preparing a qualified income trust (Miller trust), preparing a Medicaid spend down plan to protect family assets from nursing home costs or to apply for Medicaid benefits from the state of Florida, please contact your Jacksonville lawyer for Medicaid planning at (904) 688-3324, toll-free at (866) 510-9099 or email us at [email protected].
In Florida, there are a number of different Medicaid programs, including a long-term care assistance program for the financially needy. This program is called the “Institutional Care Program” and is referred to as the ICP Medicaid benefits program. If certain eligibility criteria are met, which may be achieved through proper Florida Medicaid spend down planning, Medicaid can absorb most of the costs, if not the entire cost, of skilled nursing home care that exceeds the elder person’s income, as well as providing for most of the medical needs of the eligible person. The amount of the elder person’s income that must be paid to the skilled nursing facility depends on the Florida nursing home resident’s marital status and the needs of the spouse who is not in the nursing home (the “community spouse”), and often involves the use of a qualified income trust.
Protect The Community Spouse Who Is Not In The Skilled Nursing Facility. What is the Difference Between An Assisted Living Facility And A Nursing Home? In Medicaid terminology, when there is a married couple, the spouse who is residing in a skilled nursing home is called the Institutional Spouse. The spouse who continues to live someplace other than the skilled nursing facility is called the Community Spouse.
If my Spouse Enters a Nursing Home, Must I Give Away My Assets To Keep Them From Being Taken to Cover the Cost of Care? A married couple’s assets are considered separately for determining Medicaid eligibility. It does not matter if the assets are held jointly or separately in each spouse’s name. Some assets can be specifically exempt for the Community Spouse, such as a home and its contents, a vehicle and a prepaid funeral plan that meets certain criteria specified by Florida law. Proper Medicaid planning may help an individual or a couple meet Florida Medicaid qualifications while preserving significant assets to assist the community spouse maintain his or her financial security. When the Institutional Spouse goes into the skilled nursing home, that person’s “countable” assets must be less than $2,000, but the community spouse is entitled to retain significantly more assets. That amount changes each January, and you should consult a knowledge Medicaid planning attorney or lawyer in Florida to confirm the amount of the community’s spouse’s allowable resources at any given time. For the year 2015, the amount of “countable” assets the spouse not living in the nursing home can retain without affecting the eligibility for Medicaid benefits to pay for the cost of the nursing home for the spouse living there is $119,220. The objective of Medicaid spend down planning is to rearrange one’s financial affairs and the structure of their assets, in a manner that is legal and does not constitute Medicaid fraud, so that the “countable” assets fall within the limits required to be eligible to receive Medicaid benefits to pay for nursing home costs, without using those assets in payments to the nursing home. The objective is achieved by using the provisions of the law that allow certain transactions that can result in protecting significant amounts of assets for the future use by the elderly person confined to the nursing home, that person’s spouse, or the other family members who are assisting with the care of the elderly person. Florida Medicaid qualifications, including the Medicaid laws, regulations, interpretations and applications are complicated. The person who is not familiar with the intricacies of Medicaid is unable to determine what should be done to ensure eligibility for benefits, and still preserve assets for the family. Many people believe their only option is to spend their life savings before they are eligible to obtain Medicaid benefits. But, if couples avail themselves of advice from an experienced Florida Medicaid planning attorney who works in this area of the law, they will find that it may be possible to preserve substantial assets and resources. Additionally, a Florida resident can qualify for Medicaid benefits even if their income is above the allowable income limits through the use of a qualified income trust through the use of provisions of the Medicaid law allowing the use of qualified income trusts. Although the basic Medicaid rules allow a Community Spouse to protect a certain amount of countable resources, this is, in many cases, a fraction of what could have been preserved for the Community Spouse, or the family, if proper Medicaid spend down planning strategies were followed. A knowledgeable and experienced Florida elder law attorney frequently can have the protected resource amount for the Community Spouse increased to a level that would be far above what someone will obtain merely relying on the Department of Children and Families, simply because the experienced elder law attorney has an intimate knowledge of the Florida Medicaid laws, and how to protect the elderly person’s legal rights to avoid creating financial hardship or spousal impoverishment, with proper Medicaid planning. If you would like to schedule an appointment with our experienced elder law attorney, please call (toll-free) (866) 510-9099 or complete the Contact Form at the bottom of this page, or email us at [email protected].
Can I Transfer My Assets To My Children Just Before I Go Into a Nursing Home And Still Qualify for Medicaid? There are several money saving Medicaid planning strategies that are available and should be considered by each family who is facing the reality of a skilled nursing facility for one of its family members. In order to develop the legal strategy that is most beneficial for a particular family, a thorough review of the individual’s or couple’s financial and family circumstances must first be completed. Only after carefully reviewing all the financial and family circumstances can the proper legal options be identified and evaluated, and appropriate recommendations be made to the family. For Florida Medicaid planning and advice to be appropriate the needed relevant facts about the couple include: Age, medical condition, mental condition, lifestyle, prognosis and desires of each spouse. All the couple’s assets, ownership of each asset, values and tax cost basis. All income sources amounts and survivorship rights, which may require the use of a qualified income trust. Full understanding of each spouse’s family members or other people who are involved with the family. Potential for veterans benefits and much more.
Eligibility For Medicaid Benefits To Pay For Nursing Home Costs Medicaid eligibility is extremely complicated and even simple errors can result in a denial which can be devastating to the health and happiness of the applicant, their caregivers and family members. There are three separate criteria that must be met by the elderly person applying for Medicaid benefits to pay for nursing home costs. Those three criteria are: 1. Medical Necessity 2. Income Test 3. Asset Test Basic and Medical Necessity This includes criteria such as medical necessity, age, citizenship and residency requirements. To obtain nursing home Medicaid benefits, a person must be at least 65 years of age, blind or disabled, and have the medical necessity to be in a nursing home. For someone medically qualified for nursing home care but who is still at home, Florida also has certain pilot programs such as the Diversion Program and the Alzheimer’s Initiative, which provide certain specific services. As a qualified and experienced Florida elder law attorney, we can assist you in determining whether your elderly family member might qualify for such Medicaid benefits in Florida. Please call us at (904) 688-3324, or toll-free to (866) 510-9099 or email us at [email protected].
Income Test How Much Income Can I Make and Still Qualify for Medicaid? Florida is an Income Cap state, which means there is an upper-income limit for Medicaid eligibility. A person’s total gross income includes the received from Social Security, pensions, IRAs and all other forms of income. The upper-income limit typically goes up by a few dollars each year. For 2015, the upper-income limit is $2,199 per month. In many cases where an elderly person’s income exceeds the upper limit, a “Qualified Income Trust” (also known as a “Miller Trust” or a “QIT” or an “income only trust”) can be used to legally solve the problem of too much income. As an experienced Florida elder law attorney, we can assist you in the preparation and proper implementation of a Qualified Income Trust. Following the detailed Florida Medicaid requirements for administering a qualified income trust is important for maintaining Medicaid eligibility for the elderly person after it is first obtained. Your Medicaid planning elder law attorney should provide you with detailed and specific direction for the proper administration of your qualified income trust. Income for Medicaid eligibility purposes is gross income. This means that all deductions are added back into the income before one can determine the total amount of income for Medicaid eligibility purposes and is another example of why proper Medicaid planning is so important for each involved individual, and how a qualified income trust may be necessary.
Asset Test Should I Just Give All My Assets to a Relative to Hold for Me When I Go Into a Nursing Home? The Florida nursing home resident must have less than $2,000 of countable assets. Some assets are exempt. Exempt assets may include a home and its contents, a vehicle, prepaid funerals and cemetery lots. However, it is important to evaluate each asset carefully before one can know if the asset is countable or exempt. Such determinations require the expertise that an experienced Florida elder law attorney that we can provide you, through proper Medicaid planning. Examples of countable assets are cash in the bank, cash, stocks, annuities, bonds, land, minerals, non-homestead property, notes receivable, boats and certain extra vehicles. Countable assets must be less than $2,000. Often there are legal alternatives available to remove assets from the category of “countable” assets so that they can be preserved for family use. Included among the options that are often available are personal care contracts, certain types of rental real estate, and other alternatives that can save a family significant sums from nursing home expenses. Even if a Medicaid spend down plan is part of the plan to obtain Medicaid benefits, a knowledgeable Florida elder law attorney who is experienced in Medicaid planning in Florida is able to counsel clients about options that may be financially advantageous to the Medicaid benefits applicant and to the other members of the family.
Medicaid FAQs: The following Florida Medicaid planning frequently asked questions and answers should provide some insight into how a Florida elder law attorney like The Coleman Law Firm can assist you and your family with appropriate asset protection through effective Medicaid planning. 1. My children’s names are on my checking and savings accounts and my CDs. Does that make them exempt or partially exempt for Medicaid benefit eligibility purposes? Generally, no. Those are your assets and countable for Medicaid eligibility purposes even though the children have access to the funds. 2. I put my assets in a revocable living trust a few years ago. Does that protect the assets from Medicaid spenddown? Most often not. If the Trust is a revocable trust, or if the assets can be used for your benefit, then the assets in the trust are available to pay the nursing home, or for your home care costs. However, if your trust is an irrevocable Medicaid qualifying income only trust, the assets owned by that trust may not be included in the countable assets that must be spent down before qualifying for Medicaid benefits to pay for nursing home costs. 3. Why can’t I just give my assets to my children and then apply for Medicaid benefits to pay for my nursing home costs? Federal and Florida Medicaid rules do not allow you to give away money within a certain time period called the lookback period. If you give away money within that period you could make yourself ineligible for Medicaid for an extended period of time. Starting in 2011, that lookback period is five years for all transfers that are made by the person applying for Medicaid benefits where there is no fair value consideration provided for the transfer. 4. Can I give away my assets or my money without penalty? Medicaid eligibility and gifting, Medicaid spend down plan for nursing home benefits I heard I can give away $10,000 and not have any problems? Is that true? No. Gifting for Medicaid purposes should not be confused with gifting for federal gift and estate tax purposes. A gift, or any other transfer without receiving fair consideration in return, is presumed to be for the purpose of qualifying for Medicaid benefits. While you may rebut that presumption, it is difficult and the burden is on you to establish that the purpose of the transfer was not to qualify for Medicaid benefits. 5. What about just putting the money into a Medicaid Qualified Annuity? People finding themselves in a situation where a family member is going into the nursing home, are sometimes led to believe that the purchase of an annuity is the best or even the only way out. This is rarely the case. In fact, annuities in Florida Medicaid planning are useful in only a small percentage of cases where both spouses are still alive and the annuity is structured to provide income for the community spouse. Often, with the aid of a Florida elder law attorney or lawyer, there are other legal alternatives that are more advantageous to the applicant for Medicaid benefits for nursing home care in Florida or the other family members. A Medicaid compliant annuity, usually is a low-yielding investment and under the Medicaid law the remainder interest in the annuity must be paid to the state of Florida Medicaid recovery. There are some instances where the use of a Medicaid compliant annuity may be appropriate. A review of the applicable facts and proper Medicaid planning will help determine whether such an annuity is advantageous in a given person’s situation. Federal and Florida Medicaid laws, rules and interpretations are constantly changing. Before you rely upon any Medicaid information or advice, you should make sure your Florida Elder Law and Medicaid planning attorney or lawyer knows all the facts of your particular situation and the most current Federal and Florida Medicaid laws, rules and interpretations.
I heard Medicaid can take our house for reimbursement. Is that true? You also should be aware that each state implements the Federal Medicaid program in slightly different ways, with different rules and eligibility requirements. Florida Medicaid is different in several respects to other states. For instance, in Florida, the home is considered an exempt asset. As an exempt or noncountable asset, it is not necessary for the Florida Medicaid benefits recipient to sell the home that is the primary personal residence as a prerequisite to qualifying for Medicaid benefits. The homestead can be preserved in Florida, though there are various rules that do apply to how the home is used during periods of nursing home confinement. In most other states, it is necessary to sell the homestead and spend down the proceeds from the sale before being eligible to qualify for Medicaid benefits to pay for nursing home care. The important point to remember is that information you may receive from friends or neighbors who have gone through the Medicaid qualifying process in another state may not be applicable in Florida. That’s one of the reasons why it is so important for you to consult with a Florida elder law attorney when contemplating Medicaid planning alternatives for paying for long-term care, and Medicaid planning in Florida for nursing home benefits in particular. If we can assist you provide a long-term-care plan for your loved one, please call us at (904) 688-3324, toll-free at (866) 510-9099 or email us at [email protected].
Can Medicaid take my assets after I die? The probate assets of a deceased person who received Florida Medicaid benefits to pay for nursing home costs are at risk of being taken by the state of Florida to repay for Medicaid benefits provided through a process called Medicaid recovery. Thorough consideration of Florida Medicaid estate recovery should be part of good Medicaid spend down planning by a Florida elder law attorney. A careful review of beneficiary designations for life insurance policies, retirement plans and the titling of real property is necessary to avoid any assets going through probate. If the assets are transferred at death without probate, then those assets will likely not be subjected to Medicaid recovery by the state of Florida. Any funds remaining in a qualified income trust at the death of the person receiving Medicaid benefits are subject to Medicaid recovery by the State of Florida.
What are some of the tools and techniques of Medicaid spend down planning that are used to legally preserve and protect assets from nursing home costs? There are a number of tools and techniques that are legally allowable to preserve and protect assets from nursing home costs through a properly designed Medicaid spenddown plan. Some of those tools with brief descriptions include: a. Personal Care Services Contracts: A personal care contract, or personal services contract, is a written contract between the elderly person who resides in a nursing home and a family member, or any other third party, whereby the family member/third party agrees to provide personal care services to the nursing home resident in return for compensation. The compensation provided by the personal care contract or personal services contract must be reasonable and comparable to what it would costs to hire someone unrelated to the nursing home resident to perform the same or similar services. The personal care contract must be in writing and must specify the specific services that the family member/third person has agreed to provide. Compensation for the personal services contract or personal care contract may be paid in a lump sum in advance, or in some cases, can be spread over the remaining life expectancy of the nursing home resident. The requirements for such a contract are detailed, and the assistance of an experienced elder law attorney is recommended.
What is a pooled trust? A special needs pooled trust must be administered by a recognized nonprofit organization. The use of a pooled trust allows the nursing home resident to transfer money to the pooled trust and then have funds from the pooled trust available for the resident’s needs that are not met by the nursing home or Medicaid. Those needs can range from such things as computer, clothing, personal services (manicures, pedicures, beauty salon, etc.), future attorneys’ fees, travel, meals, etc. Any sums remaining in the pooled trust at death either must be paid to the state or left in the pooled trust for the benefit of other incapacitated persons or nursing home residents. c. Medicaid Qualifying Annuities In certain circumstances, typically where the community spouse has assets above the allowable limit, those funds in excess of the allowable limit can be used to purchase a Medicaid qualifying annuity for the community spouse. The effect of using the funds to purchase an annuity is that the community spouse has converted a countable asset into a stream of income, which may allow the institutional spouse to immediately qualify for Medicaid benefits to pay for nursing home costs. d. The Purchase of Income Producing Real Property If certain requirements are met, an elderly person seeking to qualify for Medicaid benefits to pay for skilled nursing home care may use funds above the allowable limit for countable assets to purchase income-producing real property. There are many issues involved with the purchase of income-producing real property, including titling of the real property and management of the property, and the net income derived from the rental of the property must be paid over to the nursing home as part of the nursing home resident’s patient’s responsibility under the Medicaid law. However, where there are substantial assets owned by the elderly person seeking eligibility for Medicaid benefits, this may be the only option that allows the protection of all, or substantially all, of the funds. e. The Purchase of a Homestead As indicated above, the homestead is an exempt asset in Florida, up to $500,000 of equity. If the elderly person seeking Medicaid benefits has the opportunity to reside in the home prior to becoming a resident of the skilled nursing facility, then funds above the allowable asset level can be used to purchase a homestead. f. The Purchase of Other Exempt Assets An elderly person’s assets can be used to pay existing debt of the elderly person without interfering with the elderly person’s eligibility for Medicaid benefits to pay for nursing home care.
Repayment of Existing Debt: An elderly person’s assets can be used to pay existing debt of the elderly person without interfering with the elderly person’s eligibility for Medicaid benefits to pay for nursing home care. h. Spousal Refusal or Assignment of Rights to Support Florida currently allows one spouse to refuse to provide financial support for the nursing home care of the other spouse. The state of Florida is legally entitled to seek recovery of the Medicaid benefits paid on behalf of the institutional spouse from the community spouse, but so far has not elected to pursue that course of action. In addition to those tools and techniques outlined above, there are many other options that can be explored based upon the facts and circumstances of your particular situation and the needs you have for your family members and loved ones. A consultation with an experienced elder law attorney or Medicaid planning lawyer can help you identify, decide upon, and implement the tools and techniques that are most appropriate for you and your family.
Conclusion: If you, or a loved one, or family member, needs long term care or Medicaid spend down planning in Florida, please contact the Jacksonville, Florida, elder law attorneys and Medicaid planning lawyers at The Coleman Law Firm at (904) 688-3324 or toll-free at (866) 510-9099, so that we can assist you in protecting your assets from an unnecessary spend down, and allow you to protect as many assets as legally possible from nursing home costs, through proper Medicaid planning. The information contained above is general in nature and subject to change frequently with changes to Federal and Florida Medicaid law, court cases, fair hearings and many other actions that may impact your particular circumstances. You should consult an experienced Florida elder law attorney or Medicaid planning lawyer in Florida to assist you when seeking eligibility for Florida Medicaid benefits. For additional information, you may want to review our companion website
What Are VA Pension Benefits, And Do I Qualify For Those Benefits?
One of the areas of our practice is assistance in helping Veterans and their Widow(er)s obtain Veterans Pension Benefits and Veterans Aid and Attendance Benefits that are available through the US Department of Veterans Affairs (VA). Such VA benefits can provide financial support to help pay for long-term care needs, including in-home care to avoid the necessity of assisted living or skilled nursing care, or the cost of assisted living facilities and skilled nursing homes.
If you need the assistance of a Florida elder law attorney to determine your eligibility for VA benefits or to apply for Aid and Attendance benefits, please contact your Jacksonville lawyer for Veterans Benefits at (904) 688-3324, toll-free (866) 510-9099 or email us at [email protected].
These Veterans Administration benefits are often misunderstood and are greatly underutilized because most Veterans are unaware of the VA benefits and the Veterans Administration does not promote the availability of the benefits to eligible veterans, even though these benefits have been available in some form since the Spanish America War. In 1979, Congress substantially improved the level and availability of the Veterans basic pension and aid and attendance benefits. With our knowledge and experience working within the VA rules and regulations, tax law and trust law, we can help qualify many veterans, including you, for Veterans Pension benefits and for Aid & attendance Pension Benefits. Often we are able to obtain qualification for Veterans Benefits even when the veteran has been told by the VA that they do not qualify. These benefits are not dependent on a service-connected disability or injury. These VA benefits are “pension” benefits, not “compensation” for service-connected disabilities. All veterans over 65 years of age, who have significant medical needs from any source are potentially eligible for these veterans benefits. VA benefits are in part dependent on meeting the means testing required by VA benefits law. Some veterans require planning to meet the requirements to receive the VA benefits. In some cases, a Veterans Asset Protection Trust can be established to ensure that the veteran meets the eligibility requirements for the VA benefits.
If you are a veteran and would like to identify those VA benefits for which you may be eligible, please call us toll-free at (866) 510-9099. We provide Veterans benefits planning for veterans and their families for the following Veterans services:
- Assistance to Veterans, their widows or widowers, and families with planning and qualifying for both the Veterans Pension Benefits and the Aid & Attendance Pension Benefits
- Medicaid Asset Protection Planning and other Long-Term-Care Planning to provide in-home care, assisted living facilities or skilled nursing home care
The information that follows provides a general discussion of available Veterans Benefits that are offered through the Veterans Administration (“VA”). This information is merely an overview of the types of benefits that are available for Veterans through the Veterans Administration. Your eligibility for Veterans Benefits will be based on your individual facts and circumstances. The following information is designed to provide you an overview of the veterans benefits for which you may be eligible, and if so, what VA benefits you may be entitled to receive from the VA. If you would like our assistance with helping you determine which of the VA Benefits you may be eligible to receive, rearranging your financial affairs to qualify for VA Benefits, or applying for the VA benefits you are eligible to receive, please complete the form below and return it to us. Someone will contact you promptly to discuss your situation with you.
What are the VA Pension Benefits Qualification Requirements? The Veteran must:
- Have served at least one day on active duty during a war period.
- Have served 90 days consecutive active duty (24 months if service was after 1980) – or 90 days of active service during war periods.
- Have received a discharge that was better than dishonorable.
- Be over 65 years of age or 100% disabled.
The Widow must:
- Have been married to the veteran at the time of the veteran’s death.
- Have been married to the veteran for at least 12 months, unless they had a child.
- Cannot have divorced the veteran (there are very limited exceptions).
- Cannot have remarried (there are some exceptions).
- Allowable income, after authorized deductions, may not exceed the maximum pension provided for each veteran’s specific circumstances.
- The income after subtracting the un-reimbursed medical expenses of the veteran or the widow must be less than the maximum pension for that Veteran’s classification; un-reimbursed medical expenses include Medicare premiums and co-pays.
- All the income of the veteran and any dependent living with the veteran must be counted.
- All the veteran’s family (spouse and dependent child) income from all sources must be counted.
- The total amount of “countable assets” is limited to the amount that is reasonably expected to be utilized within the veteran or widow’s lifetime.
- There is no government regulation or rule that provides a specific limitation on the exact amount of “countable assets.”
Pension Levels There are three levels of VA Pension benefits:
- Basic Pension Benefits
- Housebound Pension Benefits
- Aid and Attendance Pension Benefits
There are medical needs requirements the Veteran must meet to qualify for Housebound pension benefits or Aid and Attendance pension benefits. The veteran must be over age 65 or if under 65, 100 percent disabled to qualify for any benefit. Basic Pension:
- Is the lowest payment level among the various VA pension benefits.
- There are no medical need requirements to qualify for basic VA pension benefits.
Pension With Housebound:
- Higher pension benefits than Basic, but less than Aid and Attendance amounts.
- Claimant must be housebound:
- Is unable to drive an automobile.
- Is unable to leave home without assistance from another person.
- There is no requirement that the veteran is totally disabled or have a disability rating.
Pension With Aid And Attendance:
- Highest pension amount provided for veterans who are not disabled as a result of a service-connected injury or disease.
- Requires that the veteran need the aid and attendance of another person to complete at least three of their activities of daily living (ADLs) (eating, dressing, toileting, bathing, mobility).
- Aid and attendance benefit amount is based on the veteran’s health and medical condition.
If you would like the assistance of your Jacksonville lawyer for Veteran Benefits in determining your eligibility for Veterans Pension Benefits, to help you rearrange your financial affairs to legally qualify for VA Pension Benefits, or to properly file your application for VA benefits, please complete the form below and email it to us, or call our office at (904) 688-3324 (toll-free (866) 510-9099) to schedule a consultation regarding your eligibility and planning for VA pension benefits.
Do I Need A Last Will And Testament?
The Jacksonville lawyers and attorneys with The Coleman Law Firm have more than 30 years’ experience providing wills-based estate planning. We have provided literally thousands of wills in Florida. The proper preparation of a last will and testament in Florida requires knowledge of Florida’s wills statute, the Florida intestacy statute and the Florida probate code. When you need a Florida wills and trusts lawyer, you can count on our estate planning law firm to provide you with responsive service at reasonable legal fees. If you need a Florida wills lawyer in Jacksonville or the Beaches, Orange Park, St. Augustine, Ponte Vedra Beach, Amelia Island or Fernandina Beach call our estate planning law firm toll-free at (866) 510-9099 or in Jacksonville at (904) 688-3324.
What Is A Last Will And Testament?
A last will and testament is a written legal document providing direction for controlling the disposition of property at death. The laws of wills and trusts for each state set the formal requirements for making a legal will. Under Florida law, for legal will making;
a. You, the maker of the last will and testament in Florida (called the testator), must be at least 18 years old. b. You must be of sound mind at the time you sign your last will and testament in Florida. c. Your last will and testament must be written. d. Your will must be witnessed and notarized in the special manner provided by Florida law for wills. e. Under Florida law, it is necessary to follow exactly the formalities required for the execution of a will when you make a will. A Florida estate planning attorney or wills lawyer can assist you in ensuring that the formalities required by Florida wills law for making a valid last will and testament are properly followed. f. To be effective, when you make a will, your will must be proved in and allowed by the Florida probate court. A “self-proved” will allows for the Florida probate court to immediately allow the will’s admission to probate. A Florida wills lawyer or estate planning attorney can assist you in self-proving your last will and testament. If you need the assistance of a Florida estate planning lawyer, please contact your Jacksonville lawyer for estate planning at (904) 688-3324, toll-free at (866) 510-9099 or email us at [email protected]. No last will and testament in Florida becomes final until the death of the testator, and it may be changed or added to by the testator by creating a new will or by a “codicil,” which is simply an addition or amendment executed with the same legal formalities of a last will and testament. A will’s terms cannot be changed by writing something in or crossing something out after the will is executed. In fact, under Florida probate law, writing on the will after its execution may invalidate part of the will or all of it.
What Can Be Accomplished By A Making A Last Will And Testament?
- When you make a will, you decide who gets your property instead of the Florida intestacy law making the choice for you. b. You may name the personal representative (executor) of your will as you choose, provided the person or institution you have named can qualify under Florida wills and trusts law. A personal representative is one who manages a probate estate, and maybe either an individual or a bank or trust company, subject to certain limitations. c. A testamentary trust may be created when writing your last will and testament whereby the probate estate or a portion of the probate estate will be kept intact with income distributed or accumulated for the benefit of members of the family or other beneficiaries. A Florida wills and estates attorney can show you how to draft a will to include a testamentary trust. Minors can be cared for without the expense of proceedings for probate court-supervised guardianship of the property of a minor child. d. Real estate and other probate assets may be sold without probate court proceedings if your last will and testament adequately authorizes it. e. You may make gifts, effective at or after your death, to charity. f. You decide who bears any tax burden, rather than the Florida probate law making that decision. g. When you make a will, a Florida guardian may be named for minor children.
What Happens When There Is No Last Will And Testament?
If you die without a will document (this is called dying “intestate”), your property will be distributed to your heirs according to a formula fixed by Florida intestacy law. Your property does not go to the state of Florida unless there are absolutely no intestate heirs at law, which is very unlikely. In other words, if you fail to make a will, the Florida intestate inheritance statute determines who gets your property. The Florida intestate inheritance statute contains a rigid formula and makes no exception for those in unusual need.
What happens if I die without a will?
When there is no will, the Florida probate court appoints a personal representative, known or unknown to you, to manage your Florida probate estate. The costs of probate may be greater than if you had planned your estate by making a last will and testament, and the administration of your probate estate may be subject to greater probate court supervision.
May A Person Dispose Of His Or Her Property In Any Way He Or She Wishes By Making A Will?
While any sort of property may be transferred by writing a last will and testament, there are some particular interests in property that cannot be willed because the right of the owner terminates automatically upon his or her death or others have been granted rights in the property by Florida law. Some examples of these types of property rights or interests are:• Except in certain very specific circumstances as an exempt Florida homestead (that is, the residence and adjoining lands owned by a person who is survived by a spouse or minor child, up to one-half acre within limits of an incorporated city or town or up to 160 acres outside those limits); • A life estate: property owned only for the life of the owner; • Any property owned jointly with another person or persons with right of survivorship (a tenancy by the entireties, which is limited to joint ownership between a husband and wife, would be one of these, as would a tenancy in common, and a joint tenancy with right of survivorship). Wills lawyer Jacksonville Florida estate planning attorney for wills and trusts, Randy Coleman: Must I leave something to my spouse and my children in my will? A person may not disinherit his or her spouse by making a will, without a properly executed premarital or postmarital agreement. Florida probate law gives a surviving spouse a choice to take either his or her share under the last will and testament or a portion of the decedent’s property determined under Florida’s “elective share” statute. This Florida statute uses a formula to compute the size of the surviving spouse’s elective share, which includes amounts stemming from the decedent’s jointly held and trust-owned property, life insurance and other nonprobate assets. Because this formula is very complicated, it is usually necessary to refer this matter to a Florida estate planning attorney or a Florida probate lawyer with extensive experience in this area of Florida probate law. Also, if your will was made before the marriage and the will does not either provide for the spouse or show your intention not to provide for him or her, then your spouse would receive the same share of your probate estate as if you had died with no will (at least one-half of your estate) unless provision for the spouse was made or waived in a premarital or postmarital agreement.
Must A Person Leave A Child At Least One Dollar?
No. This is not necessary and can actually cause considerable added expense to the probate estate. It is better simply to state in the will writing that no provision is being made for that child.
How Long Is A Last Will And Testament Good?
When should I review my existing will? It is “good” until it is changed or revoked in the manner required by Florida wills and trusts law. Your will may be changed as often as you desire while you are sane and not under undue influence, duress or fraud, provided it is changed with the formal legal requirements. Changes in circumstances after the execution of the will, such as tax law amendments, deaths, marriage, divorce, birth of children or even a substantial change in the nature or amount of your estate, may raise questions as to the adequacy of your will. All changes require a careful analysis and reconsideration of all the provisions of your will and may make it advisable to make a will to conform to the new situation. The help of a qualified, experienced Florida estate planning lawyer will ensure that the changes you want are properly made so that those changes will be accomplished.
Does A Will Increase Probate Expenses?
No. If there is property to be administered or taxes to be paid or both, the existence of a will does not increase probate expenses. A will frequently reduces expenses. If there is real or personal property to be transferred at your death, the Florida probate court will have jurisdiction to ensure that it is transferred properly, either according to your will, or, if there is no will, in accordance with the Florida inheritance statute. Thus, even if you have no will, your heirs must retain a Florida probate lawyer and go to Florida probate