Archive for Probate
WHY LIFE INSURANCE IS AN IMPORTANT ESTATE PLANNING TOOL
As a Jacksonville, Florida Estate Planning Attorney, I work regularly with life insurance agents as part of the estate planning team. Life insurance is helpful in many estate planning situations. Some examples are:
1. A family with young children. Life insurance can replace the income if a parent dies prematurely in order to help raise the children and put them through college.
2. Blended families. What if a husband is in a second marriage with a new child, and also has grown children from a prior marriage? Life insurance provides a means for him to leave funds to his older children at death while still providing for his new wife and child.
3. Business owners. Most business owners know that a buy-sell agreement is an important planning tool to make sure that there is a smooth transition if one of the owners retires or dies. However, this buy-sell agreement may not work if there is not sufficient cash available to pay off the owner’s family. Life insurance helps provide the cash that makes a buy-sell agreement work.
4. Payment of estate taxes. Many times, estates are not liquid or there is property that everyone wishes to keep in the family. Life insurance provides a means to pay estate taxes without having to sell family property. When combined with gift giving strategies, such as creating an irrevocable life insurance trust, life insurance can provide leverage so that you may use pennies on the dollar to transfer assets to your family without estate taxes.
You may have heard that life insurance is tax-free. Life insurance benefits only are free from income tax. However, they will be subject to estate taxes at your death. We are available to discuss specific estate tax planning strategies that can keep life insurance out of your estate.
If you are considering your estate planning, you may wish to also have an older life insurance policy reviewed. Your insurance agent or financial advisor may be able to help you obtain a better policy now. People are living longer than they were 20 or 30 years ago, so you may be able to obtain a greater death benefit at a lower premium because life insurance generally is less expensive than it was many years ago. These are just some examples of how we utilize life insurance as Jacksonville, Florida Estate Planning Attorneys.
WHY DO ESTATE PLANNING IN ORDER TO AVOID PROBATE?
As a Jacksonville, Florida Probate Attorney, I understand the probate process and why many people seek to avoid it. Probate is the legal process used when the court has to get involved to help transfer assets after someone has died. There are several legal rules and procedures set up to make sure that the transfers are done properly and that the family is aware of what is being done.
There are three major reasons why people wish to avoid probate: First, probate is a relatively slow process. Because of the need to involve the court clerks and judicial officers, finalizing an estate naturally would be more time consuming than if it were done privately. Petitions must be filed with the court, notice given to creditors and family members, inventory lists developed and an accounting of income and expenses given. So, between the more cumbersome court procedures and the necessity of dealing with the court’s calendar, it typically takes many months to finalize an estate.
Second, probate is more expensive than if assets are transferred privately. There are several court fees involved in the probate process, including paying an attorney to assist the personal representative in completing all of the additional tasks required by the court process. Filing fees, fees for publishing notices to creditors and fees for providing accountings to the court and the rest of the family all combine to make transferring assets through the probate process relatively expensive.
Third, probate is a public process. If there is a will, it is required to be filed with the court. The will and all of the probate court documents are public records. Anyone could go to the courthouse or maybe just look online to learn about your assets and who would be receiving them. A nosy neighbor just might want to know how much you were worth at death and to whom you owned debts. People who prey on the vulnerable frequently review probate documents in order to try to obtain assets at a bargain basement price. In contrast, trust administration can be completely private.
My conclusion, as a Jacksonville, Florida Probate Attorney, is that compared with trust administration, the Florida probate process is slower, more expensive, and public. There are several estate planning methods to avoid probate. Attending our “Truth About Estate Planning Workshop” will provide you with information on how you can plan to avoid probate.
JACKSONVILLE, FLORIDA PROBATE ATTORNEY’S HORROR STORIES FROM THE REAL WORLD Story #3
As a Jacksonville, Florida Probate Lawyer, I have been involved in a probate dispute among six siblings. This probate litigation is located in Duval County, Florida. A mother died and left her estate to be divided among her six children. The tangible personal property was to be divided equally among the six children. However, the mother specifically stated that one of the children could continue to live in her home, but that the living arrangements would be subject to an agreement among all of her children. This has made for quite a probate dispute.
The children have been involved in probate litigation, because the mother did not specify what furniture and household items stayed with the house. The children are arguing about who gets the dining room table, living room couch, whether the dishes and toaster remain with the house, etc. One of the children has been appointed personal representative. That child has been accused of breach of fiduciary duty and other misdeeds by the other siblings. The probate litigation is ongoing and creating unnecessary expense which is reducing the size of the probate estate. This is just another horror story I have seen as a Jacksonville, Florida Probate Lawyer.
JACKSONVILLE, FLORIDA PROBATE LAWYER’S HORROR STORIES FROM THE REAL WORLD Story #2
As a Jacksonville, Florida Probate Attorney, I recently was involved in a Duval County, Florida probate case where a mother of 9 children died without leaving a will. The mother owned two homes at the time of her death. Under Florida’s law of intestate succession, each child would be entitled to obtain a 1/9 interest in each property. Because one of the properties was her homestead, the interests in the homestead descended on the date of death. One of the children is in jail and another is a drug addict.
The lack of the mother’s estate planning led to a volatile dispute between the heirs. One of the less responsible family members moved into the house and promptly trashed it. Because the siblings cannot even communicate, much less agree, and the dispute between heirs continues, Duval County, Florida has two additional blighted parcels of real estate in its midst. This is just another horror story I have seen as a Jacksonville, Florida, Probate Attorney.
JACKSONVILLE, FLORIDA PROBATE ATTORNEY’S HORROR STORIES FROM THE REAL WORLD Story #1
As a Jacksonville, Florida Probate Lawyer, I see many examples of how poor planning results in increased probate costs. Recently, a client had to open a St. Johns County, Florida probate case so that the decedent’s 1% interest in a parcel of New York real property could be transferred. Even though we utilized the least costly probate procedure known as “summary administration,” the probate costs still were three (3) times greater than the value of the property being transferred to the probate estate.
Ordinarily, it would not have been cost effective to open a St. Johns County probate case at all, but because the real estate was owned by a total of 14 relatives, family pressures were brought to bear to make sure that everyone was able to agree and participate in the sale of the property. So, just obtaining this small inheritance for a St. Augustine, Florida, resident, resulted in major probate expense that could have been avoided if family members had better communicated their estate planning concerns. Large families particularly must develop a better plan to dispose of real property than to leave small percentages of ownership to multiple siblings, nieces and nephews. This is just one of the horror stories we see frequently as a Jacksonville, Florida Probate Lawyer.
MAJOR CHANGE COMING TO FLORIDA’S HOMESTEAD LAW
A major change in Florida’s homestead law becomes effective October 1, 2010. This change is particularly significant to “blended” families.
For example, Widower Bob has two adult children, Biff and Rock, lives in and owns his home valued at $500,000, free and clear. Bob then meets and marries Goldie Digger who moves into the house with him. Biff and Rock are none to happy about this marriage. Sometime thereafter, Widower Bob dies without having prepared an estate plan.
Under the present law, Goldie, as Bob’s surviving spouse, would be legally entitled to a life estate in the homestead, meaning that she could live in that house for as long as she wished. However, if she ever decided to move out of the house, or upon her death, the house (remainder interest) would belong equally to the two children. While living in the house, Goldie would be under a legal obligation to pay real estate taxes, keep the house insured, and keep it in a reasonable condition for the sons. Under present law, Goldie would have no ownership interest, no right to sell the home or to receive any proceeds from the sale of the home.
However, circumstances change dramatically under the new law. Effective October 1, 2010, in lieu of a life estate, the surviving spouse (Goldie) may elect to take an undivided one-half interest in the homestead as a tenant in common, with the remaining undivided one-half interest vesting in the decedent’s descendants in being at the time of the decedent’s death (Biff and Rock). Unlike the previous law, Goldie now may elect to take an immediate one-half ownership interest in the property, thereby entitling her (if she chooses) to force a partition and sale of the property and pocket her $250,000 share of the proceeds. The right to an immediate ownership interest in the property with the resulting ability to force a sale of the property is a major, major change.
Effective October 1, 2010, if Widower Bob wants to leave that homestead to Biff and Rock, he will need to either execute estate planning documents, which specifically limit Goldie to receiving a life estate, or else execute a prenuptial or post-nuptial agreement (which may limit her even further). Although this new law affects many families, it is particularly important in situations involving second (or 3rd, 4th, or 5th) marriages. In our experience, relations between the surviving spouse (Goldie) and the children from a previous marriage (Biff and Rock) is most often hostile (to say the least).
If you are in a second marriage, if your parents or grandparents are in a second marriage or if you have relatives or close friends in that situation, the Florida legislature now has provided an added reason to consider meeting with your favorite estate planning attorney to prepare an effective estate plan that will make sure your wishes are met and preserve as much harmony as possible between your children and their “step” parent.
Family Feud: Costly in Guardianship Court
Families that have not done proper Estate Planning often end up in Guardianship Court. Without proper documents, when a loved one is no longer able to care for himself or herself, someone else must use the court system to become his or her legal Guardian in order to make medical and financial decisions for that incapacitated person. The Guardianship process itself is public, time-consuming, and expensive, even if matters are uncontested. However, if the court becomes a stage for a “family feud,” both the emotional and financial costs can skyrocket.
Typically, there are at least two attorneys involved in the Guardianship proceeding. The person petitioning to become the guardian is required to have an attorney. Additionally, the person who is alleged to be incapacitated (the “ward”) is appointed an attorney by the court, to protect his or her interests. If several family members vie to become the guardian (such as siblings fighting over a parent), the number of attorneys involved and resulting expense is multiplied. Such family in-fighting also takes an emotional toll on the participants.
The upshot of many guardianship family feuds is that the Judge will decide not to appoint any family member as guardian, but instead will appoint a neutral, “Professional Guardian.” The costs of providing that neutral perspective will be $85 – $100 per hour (in the Jacksonville, FL area), for each hour of the Professional Guardian’s services. Of course, the Professional Guardian also will need to hire her own attorney, to be paid for out of the guardianship estate. Unfortunately, we have seen horrible results from family feuds. No one wins when families quarrel in open court.
Don’t let this to happen to your family!
