Living Trust

Living Trust Questions and Answers

A living trust is a written document that creates a form of ownership in which assets originally owned by the grantor of the trust are legally re-titled in the name of a trustee (who can be the same person as the grantor) who manages the assets for the benefit of the trust’s beneficiaries named in the writing. Creating a revocable living trust is the most effective means of avoiding probate and guardianship.

It is safer than joint ownership to avoid probate because the trustee named by the grantor does not personally own the assets of the trust, as is the case with joint property; the trustee hold title to the assets IN TRUST for the benefit of the beneficiaries named in the trust. Continue reading “Living Trust”

How to help your trustee make good decisions for your family

Yogi Berra.  File photo 1965 by Indy photographer Fred Parrish.
Yogi Berra. File photo 1965 by Indy photographer Fred Parrish.

As Yogi Berra supposedly said, “It’s hard to make predictions, especially about the future.” Yet when you create a trust for your heirs you have little choice but to make predictions about what their needs will be many years down the road.

Because circumstances change, it’s a good idea to make your trust flexible enough to accommodate the unexpected. If you tell your trustee what to do in too much detail, the trust might end up being useless or counter-productive if something unforeseen happ Continue reading “How to help your trustee make good decisions for your family”

Inherited IRAs are not protected from creditors

If you’re planning to leave an IRA or other retirement account to your heirs, you might want to consider creating a trust to hold the account. That’s the upshot of a recent ruling from the U.S. Supreme Court.

That’s because IRAs that are inherited from anyone other than a spouse are no longer protected from creditors in a bankruptcy. Heidi Heffron-Clark and her husband Brandon filed for bankruptcy after their pizza shop failed in 2009. They owed their landlord $74,000, but didn’t have enough cash on had to pay the debt. Continue reading “Inherited IRAs are not protected from creditors”

Points To Ponder In Picking An Executor

Thinking Smiling Woman With Questions Mark Above Head Looking UpOther than how you want to dispose of your assets, one of the most important things that you will have to decide in devising an estate plan is who your executor will be. The law requires that an executor {in some states called a personal representative) be appointed to handle an estate because someone must be responsible for collecting the estate’s assets; protecting the estate’s property; preparing the inventory of the property; paying valid claims against the estate (including taxes); representing the estate in claims against others; and distributing the assets to the beneficiaries.

Sounds like a lot of work, doesn’t it? And some of it can be complicated. However, the executor does not have to shoulder the entire burden. He or she can pay a professional out of the assets of the estate to take care of most of these functions, especially those requiring legal or financial expertise. Such an option will, of course, reduce the amount that goes to the beneficiaries. Therefore, handling an estate is often a matter of balancing expertise, convenience, cost, and other factors. There’s no consensus, even among lawyers, about who makes the best executor; it all depends upon your individual circumstances.

One approach is to appoint someone with no potential conflict of interest—that is, someone who does not benefit from the will. For this reason, many individuals avoid naming family members and business partners as their executors. This helps the estate to avoid claims by disgruntled relatives who may accuse the executor of dishonesty. Having a professional such as a lawyer handle the job can also save a spouse or other family member the hassle of dealing with estate issues while they are grieving, and the embarrassment of things such as collecting the debts that the estate is owed from friends and relatives. For a large estate, a paid professional executor is advisable.

For small estates, the fees of a paid professional executor may not be worth it. For estates under one million dollars, a spouse or a mature child is generally the best choice for an executor. However, be aware that choosing a child may create animosity among siblings.

If you decide to appoint an interested person as the sole executor and give that person discretionary power to decide who gets certain property, it makes sense to include the methodology by which those decisions should be made. The appointment of coexecutors may be another way to help deal with potential conflicts of interest.

So, what qualities should you look for in an executor? It’s important that the executor be capable of doing the job. Persistence in paying bills is a key trait of a good executor. Pick someone who has the time and inclination to deal with bureaucrats and forms.

The executor will probably have to hire a certified public accountant to deal with the final income tax return for income the deceased person accrued prior to death; the estate tax return; and the estate income tax return for income accrued after the person’s death.

The executor may have to hire an investment advisor if the estate includes stocks, particularly if the asset value has changed due to fluctuations in the market. However, no legal expertise is required to be an executor; the estate may hire a lawyer to help resolve legal issues.

Whoever you choose as executor, make sure your will provides for a backup in case the original executor is unable or unwilling to serve. If you do not, the court will assign one for you.

Probate Q&A

Close up Questions & Answers too many question marks

Probate is a court-supervised process for identifying and gathering the decedent’s assets, paying taxes, claims and expenses and distributing assets to beneficiaries. Generally, probate assets are those assets 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. Continue reading “Probate Q&A”


We Specialize in Wills

Florida residents must sign wills at the end of the document in the presence of at least two witnesses who are both present at the same time and place with the testator (person making the Will), and also signed in the presence of a notary public so that the Will is self-proving in case of death. Self-proving Wills can be admitted to probate after the death of the testator without having the witnesses come to the courthouse. Continue reading “Wills”

Name Change

Hello, My Name IsGenerally it is possible to effect a name change through legal proceedings or, in some cases, without any legal proceedings at all. The following paragraphs set out the parameters of changing names.

Change of Name Without Any Legal Proceedings:

  1. At common law it is possible to assume another name as long as there is no fraudulent reason for doing so. Florida law does not prohibit someone from using a different name than the one they were given at birth. There are restrictions on the use of fictitious names, however.
  2. A woman’s name is changed by marriage and the marriage itself will serve to change her name on government records. There is no requirement for a court proceeding. A woman cannot be compelled to adopt her husband’s surname but if she does, she can keep that name for as long as she wishes, even after the marriage has ended by death, dissolution or annulment. She cannot be compelled to adopt her maiden name after the marriage ends. Also, she can change her name back to her maiden name after the marriage if she wants.
  3. The name of a child born out of wedlock may be changed if the mother and father later marry and they both request a change and there is no father’s name on the birth certificate. The name of a child can also be changed if both mother and father sign an affidavit acknowledging their paternity. Or, the father can sign an affidavit voluntarily acknowledging his paternity. This will also result in a change of name for the child. If the father’s name is listed on the birth certificate, however, both mother and father must resort to legal proceedings to change the name of the child and to change the name on the birth certificate.

Change of name as a result of legal proceedings:

Name changes can occur as a result of legal proceedings such as adoption, dissolution of marriage, annulment or establishment of paternity. In these cases, the name change is a part of the legal proceeding and no separate proceeding is required.

Change of name through formal proceedings:

F.S. 68.07 sets out the procedure for a formal change of name. Generally this can be done if there is no illegal or fraudulent motive. A petition is filed along with a set of fingerprints of the person requesting the name change. The petition must allege the reason for the request and show the court that there is no fraudulent motive for the name change. The petition must contain detailed information about the petitioner’s credit history and criminal records, if any.

Note: This article discusses name changes through legal proceedings in a family law context and does not cover corporate names, fictitious names or professional names. These are all governed by separate statutes.

What You Can Learn From Actor Philip Seymour Hoffman’s Will

Actor Philip Seymour Hoffman
Actor Philip Seymour Hoffman

When actor Philip Seymour Hoffman died unexpectedly this past February, he hadn’t updated his will in about 10 years, and his estate planning left something to be desired.

Hoffman’s will created a trust for his son Cooper, and left the rest of his roughly $35 million fortune to his longtime companion Mimi O’Donnell.

It’s worth taking a look at what Hoffman might have done differently:

• First of all, apart from the trust for his son, everything passed through probate, which tied up the assets and caused the estate distribution to be made public (which is how we know these details). If Hoffman had used additional trusts, the world wouldn’t know the extent of his wealth or how he planned to distribute it.

• Second, Hoffman never updated his will after his other two children were born. So while Cooper will benefit from a trust, Hoffman’s other children will get nothing. Presumably, O’Donnell (the mother of all three children) will take care of them. But if O’Donnell remarries and becomes part of another family, she could eventually leave a big chunk of Hoffman’s wealth to complete strangers rather than to his own children. Hoffman could have largely avoided this prospect through the use of trusts.

• Third, although Hoffman and O’Donnell were a couple for 14 years and had three children together, they never formally married. As a result, his estate will probably have to pay about $15 million in federal and state taxes – whereas if the couple had tied the knot at some point, the entire estate would probably have been tax-free.

Of course, the decision to marry is complex and involves many considerations other than estate taxes. Still, one has to wonder whether Hoffman might have felt differently about marriage if he had known that remaining legally single would be so costly to his partner and his children. It’s also worth noting that even if Hoffman had still wanted to remain single, he might have been able to use other techniques to reduce the tax burden for his heirs.

Divorced Couples Need To Update Beneficiary Designations

last will and testament.
last will and testament.

One of the most important things people can do after a divorce is to update their beneficiary designations, and indicate who should get the assets in various accounts if they should unexpectedly pass away.

Most married people name their spouse as the beneficiary of their accounts, but in the stress following a divorce, they often forget to update these designations.

And even when people make an effort, they might not remember every account. Pensions, 40l(k) plans, life insurance policies, brokerage accounts, bank accounts, and more may all have listed beneficiaries. Remember that if you die, who gets the money in these accounts usually depends on who is the listed beneficiary – not who is named in your will. Even if your will says that “everything” will go to a new spouse or a child or other relative, the will doesn’t govern a separate account such as a 401(k) or an insurance policy. Some states have tried to help divorced people by passing laws that say that a divorce automatically revokes these types of beneficiary designations. But even where that’s true, you need to name a new beneficiary, or the money might still go to someone who is not your choice.

Also, these laws don’t always work. For instance, Warren Hillman was a federal employee in Virginia who had low-cost group life insurance through a special program for federal workers. Warren married Judy in 1996 and named her as his life insurance beneficiary, but he divorced her two years later. In 2002, he married Jacqueline, but for whatever reason he never changed the beneficiary on his life insurance.

In 2008, Warren died. Both his wives claimed his $125,000 life insurance proceeds.

The case went all the way to the U.S. Supreme Court. The court said that, under Virginia law, a divorce revokes beneficiary designations such as on a life insurance policy. However, because the life insurance in this case was arranged under a federal program, and federal law trumps state law, the Virginia law didn’t apply – and therefore first-wife Judy, not second-wife Jacqueline, got the funds.

Of course, even people who haven’t been through a divorce should periodically review their beneficiary designations to make sure they’re all current, because these designations are an important part of a well-constructed estate plan.

Divorcing couples need to update beneficiary designations:

“Florida Statute 732.703 generally provides that beneficiary designations upon death may be voided upon divorce, dissolution or annulment of a marriage. BUT THIS IS NOT AUTOMATIC. THERE ARE EXCEPTIONS, PARTICULARLY FOR ASSETS GOVERNED BY CERTAIN FEDERAL STATUTES SUCH AS RETIREMENT PLANS OR IRAs OR EMPLOYEE BENEFIT PLANS. BE CAREFUL. CONSULT AN ATTORNEY.


Trust Could Force Beneficiaries To Arbitrate Dispute Rather Than Go To Court

This male referee has gone madAndrew Reitz set up a trust to benefit his sons, with an independent trustee. The trust document said that if there was a dispute between his sons and the trustee, it would be decided by a private arbitrator rather than a court.

When John Reitz, one of the sons, became unhappy with the trustee, he sued to have the trustee removed. The trustee argued that the suit should be thrown out of court, and decided by an arbitrator.

The dispute over who should decide the dispute went all the way to the Texas Supreme Court.

That court said the issue should go to an arbitrator. The judges ruled that (1) the trust should be handled according to Andrew’s clear intentions, and (2) it would be unfair to let John receive all the benefits of the trust, but ignore the one part of the trust he didn’t like.

If you set up a trust and you think there’s a chance that there could be disputes among the beneficiaries or between a beneficiary and the trustee, you might consider adding an arbitration requirement. Arbitration can be quicker and cheaper than a lawsuit, so money might be saved that could help the other beneficiaries. Also, arbitration is typically private while lawsuits are public, so arbitration could prevent an unhappy family’s internal disputes from being aired for all the world to see.

On the other hand, there can be disadvantages to arbitration as well. There are many procedural safeguards in a court proceeding that simply don’t exist when people go to arbitration.

Also, outside of Texas, it’s not always clear whether arbitration requirements in trusts are valid. A few courts have suggested that while arbitration requirements are valid in a contract, a trust isn’t a contract, and beneficiaries can’t be barred from going to court by a requirement in a document that they never signed.