Archive for Probate
Estate Administration: Another Do-It-Yourself Minefield
Hopefully our faithful readers all know by now that there are many hazards to do-it-yourself estate plans. What you may not know is that trying to administer your loved one’s estate without legal help is just as treacherous. It is a great honor to be named as a loved one’s personal representative (executor) or trustee, but these roles come with great responsibility and many legal duties.
Unfortunately, we recently have encountered several individuals and families who thought that they could simply read the will or trust and hand out assets without speaking to an attorney. Please do not make this mistake! If you are administering a will, you do not have the authority to handle the estate just because your name is in the document – you must be appointed by a probate court. Even if you are a trustee who manages to avoid probate court, Florida law imposes significant duties on you both when you start acting as trustee and every year thereafter. Both personal representatives and trustees may be removed and even held personally liable if they fail to perform their duties properly.
We have seen some serious legal messes created by good people who tried to do the right thing but just did not have the right advice. Don’t become one of them by trying to do it yourself – we are here for you and happy to help. For more information on do-it-yourself disasters, check out our past articles: Perils of Do-It-Yourself Estate Planning; Why Would You Risk Going to Jail Rather than Talk with a Lawyer?; IRS Gift Tax Audits: Yet Another Reason to Avoid Do-It-Yourself Estate Planning
LAWYER’S BEHAVIOR AT TRIAL IS NOT EVIDENCE OF ELDER ABUSE
Here is an interesting case from California that caught our attention. An 83 year old man filed for a protective order against his 56 year old daughter because of alleged abusive treatment. In the court hearing over the matter, the daughter’s attorney’s confrontational cross-examinationof the elderly gentleman was found by the trial court to be consistent with the daughter’s desire to treat her father in such a fashion. He then granted a protective order which stated that the daughter could not contact, molest, attack, strike, threaten, assault or otherwise disturb the peace of her father. The daughter appealed the case arguing that her attorney’s behavior and her lack of response to it should not be used as evidence by the trial court. The appellate court agreed and said that the trial judge was wrong to base his decision on the lawyer’s conduct.
While this decision is good news for us lawyers, it does highlight the fact that we are too often aggressive and confrontational, particularly in guardianship, probate, and other elder law cases. It is important that all lawyers recognize when in the probate court that we are not trying high profile criminal or personal injury matters. We are involved in disputes among family members where emotions are already running high and we should avoid making matters worse. We can represent our clients effectively in elder law matters without being either abusive or confrontational.
SUMMARY ADMINISTRATION: AN EASY AND INEXPENSIVE SOLUTION? OR NOT?
Formal estate administration (the most common form of probate) is a detailed process set out by Florida law which can be expensive and time-consuming. As you might imagine, there are some situations where formal administration does not make sense, economically or otherwise. Florida statutes recognize this and set out an alternative process when the decedent either (1) has been dead for more than two years or (2) left less than $75,000 of assets that need to go through probate.
This alternative process, called “Summary Administration,” is supposed to be simpler, shorter, and less expensive than formal administration. Theoretically, summary administration allows for an estate to be opened and closed, and the assets distributed, with only a few documents filed and no court hearing. The law even says that summary administration may be done without an attorney. However, our experience has been that many summary administrations have legal and procedural issues that even attorneys cannot entirely solve.
For example, summary administration quickly becomes more complicated when the decedent left unpaid bills or other debts because summary administration does not use the streamlined process for creditors’ claims that formal administration offers. Formal administration allows a Notice to Creditors to be published in a local newspaper as soon as the estate is open. This publication of notice gives creditors a maximum of three months to file their claims; if they fail to do so, their claims are barred and the estate does not have to pay them. The estate also has a right to object to any creditor claim that is filed.
In summary administration, however, the estate cannot publish a Notice to Creditors until after the Order of Summary Administration is entered. Any Order of Summary Administration (the order closing the estate and listing the persons who will receive the estate assets) entered by the court must provide for the payment of creditors “to the extent that assets are available.” This is true even though creditors may be unknown.
The result is that beneficiaries may suffer in summary administration because there is no clear way for estates to object to and avoid paying creditor claims. New creditors may pop up after the Notice to Creditors is published, which may diminish the amount each beneficiary receives. Another danger is that no Notice to Creditors is published, because it is not required by law, creating the possibility that unknown and unpaid creditors may be able to come after the estate beneficiaries years later
Although summary administration may be a viable solution in some situations, we recommend that our clients take advantage of the formal administration process if there is any possibility that a decedent left unpaid creditors. We would also recommend at least consulting an attorney before pursuing a summary administration.
DEFINITIONS OF FAMILY: YOURS VS. THE STATE’S
With the holiday season in full swing, you are likely thinking about and spending time with your loved ones, your “family.” Chances are, they are not all related to you by blood. Most of us have spouses, in-laws, stepchildren, stepparents, or even friends that we consider to be part of our family. Sometimes we are more tightly bonded with these people than with our actual blood relations.
Unfortunately, the state of Florida defines “family” much more narrowly for the purposes of intestate succession (who gets your stuff if you die without a will). Your current spouse is your closest family member under Florida law and will get everything if you have a “traditional” family. However, as soon as you get into a blended family situation – i.e. either you or your spouse had a child with someone else – things get messy. Your spouse will have to split your assets with your kids in the proportions dictated by the state, regardless of what you would have wanted. Stepchildren are left out altogether because they are not considered “family” unless you have legally adopted them.
Florida law’s preference for blood relatives can produce even less desirable results if you die without a spouse, children, or a will. We recently had a case where a man’s assets, primarily his home, were split between more than a dozen blood relatives (siblings, nieces and nephews), many of whom did not even speak to the decedent, rather than going to the few people, including his girlfriend of many years, who actually took care of him.
The state’s intestate definition of “family” is one size fits all, meaning that it often fits no one. If you don’t agree with the people that definition includes and, especially, excludes, you need to make your definition of family clear with a will or trust.
PERSONAL REPRESENTATIVE’S PERSONAL LIABILITY FOR PAYING TAXES OWED BY THE DECEDENT
A Personal Representative of an estate (“PR”) is personally liable for paying a decedent’s outstanding tax bills. This would include income taxes, gift taxes or estate taxes that may be owed by the decedent at the date of his or her death. For this reason, it is important that a Personal Representative engage a CPA, in addition to a probate attorney, for assistance in resolving potential tax issues.
A Personal Representative must be careful not to distribute any portion of the estate to beneficiaries before all federal taxes are paid, because he or she could be held personally liable to the extent of that distribution. It is the better practice not to make any distributions until tax issues have been identified and resolved. The costs of estate administration, which include compensation of Personal Representatives and their attorneys, along with reasonable funeral expenses not to exceed $6,000, do take priority over a claim by the IRS. Nevertheless, any family member clamoring to become a PR and take “control” of an estate should be aware of the potential tax liability that comes with obtaining that control.
What is even scarier is that, because failing to pay income taxes is deemed to be a breach of the personal representative’s fiduciary duty, the PR cannot dodge a claim by the IRS by declaring bankruptcy. A breach of fiduciary duty judgment against a Personal Representative generally is not dischargeable in bankruptcy. These are important considerations before you sign on to be PR of an estate.
Will Your Facebook Profile Be Part of Your Estate?
If you are savvy enough to be online reading this blog, you most likely have a Facebook profile. Also, you are probably wondering what on earth Facebook has to do with probate. In most states, the answer to that question is still “nothing,” but that is no longer the case in Oklahoma.
In 2010, Oklahoma legislators passed a law that gives executors (called Personal Representatives in Florida) control over accounts on social media sites like Facebook and Twitter that were registered to the decedent. The idea is that the executor will be able to access, clean up or even shut down each account, according to his or her own judgment or instructions left behind by the account owner, if any.
It is easy to see the logic behind Oklahoma’s social media law; for many people, Facebook has become a virtual scrapbook full of photos, notes from friends, and family trees. It makes sense that the loved ones left behind would want to access and preserve these memories. It is equally clear that the creator of such a detailed profile might have an opinion as to who should access their personal information after their death.
The idea of social media profiles as estate assets is beginning to catch on in other states as well; Nebraska is already developing a law similar to Oklahoma’s and Oregon may be close behind. In states without such laws, your digital accounts and passwords should definitely be included in your overall estate planning.
If you have concerns about securing your virtual assets or any other aspect of estate planning, please feel free to contact us.
Common Estate Planning Myths and Superstitions
In honor of today’s holiday, Groundhog Day, we wanted to share some common myths and superstitions about estate planning. Most Americans know the story of Groundhog Day: if a groundhog comes out of its burrow this morning and sees its shadow, it will retreat back into the burrow and six more weeks of winter weather will follow. On the other hand, if the groundhog does not see its shadow and remains aboveground, winter will soon end.
Most of us recognize that the ability of a groundhog to accurately forecast the weather is just a myth. (The reality is that groundhogs get it right only 39% of the time.) However, many people still believe in the following estate planning myths and superstitions (or at least use them as an excuse not to plan):
#1: You are more likely to die once you complete your estate planning. This is simply absurd; generally, the only people who die shortly after executing an estate plan are people who waited ALMOST too late to plan in the first place.
#2: Estate planning is only for the wealthy. When you hear the word “estate,” do you think of a palatial mansion or fine jewels? The truth is that if you own a home, a car, a bank account, life insurance, etc., then you have an “estate”.
#3: Estate planning only matters after death. A big part of the estate planning we do at our firm is planning for possible future disability. Wouldn’t you like to leave directions for how you want to be treated if you become incapacitated as well as for who gets your stuff when you’re gone? What about requests for who will care for you and/or your children?
Please feel free to post comments on our Facebook or Twitter or make an appointment if you have individual questions or concerns.
Cramer Law Center offers full estate planning services including wills, trusts, durable powers of attorney, health care surrogate designations, living wills, designations of preneed guardian, and more.
THE IMPORTANCE OF THE PRE-ARRANGED FUNERAL
The single most important benefit of estate planning is peace of mind. We often focus on the legal documents necessary for us to create an estate plan that provides such peace of mind. However, I recently had a personal experience that reminded me of the importance of one of the more practical aspects of planning.
My mother passed away a few weeks ago. Although my siblings and I had a general idea of what the funeral arrangements would be, no plans had been finalized. This lack of planning created a chaotic situation when I arrived to visit my mother in hospice care. I was immediately and less than delicately informed by the hospice caseworker that I had to make my mother’s funeral arrangements straight away. So before I could focus my attention on my mother in her final hours, I had to phone different funeral homes until I found the one I needed.
Making last-minute funeral arrangements for my mother added more stress to a situation that was already emotionally taxing. Especially after my experience, I highly recommend taking care of funeral arrangements in advance to avoid creating greater stress for your loved ones at such a difficult time.
In keeping with the theme of August as “What Will Be Your Legacy?” month, we would like to introduce you to “Priceless Conversations”. Share the meaning of your life, the events that shaped your decisions and which causes and people have significance. Thoughtful reflection gives heirs a sense of the wholeness of your wealth and the financial decisions you make. We have a tool for sharing your life story with future generations called “Priceless Conversations” – a precious gift that integrates legacy building into your estate planning.
Recording a “Priceless Conversation” is a way for us to make tangible the “non-financial” dimensions of your wealth for you and your loved ones. Using a handful of interesting questions and a digital recorder, we help you share and save the lessons and experiences of your life. There is no homework, no tedious research, no writing, and no camera. We help you turn a simple chat into a touching and lasting treasure. The process is simple, practical and fun. “Priceless Conversations” can be individual, family, or group events.
Leaving a legacy involves more than just dollars and “cents”. Help future generations have a “sense” of who you are.
When you’re gone, how will you be remembered?
At the end of the day, how will your life have made a difference?
When all is said and done, what will those you love say about what you’ve done?
What have you accomplished with your wealth?
Not just your money, but all the wealth – the real wealth – you have at your disposal?
Whose lives have been touched by your life?
Let us know if you wish to explore how recording “Priceless Conversations” can benefit you.