state planning in Florida involves using legal tools to manage your property and provide for an efficient distribution of your assets. With a comprehensive estate plan, you can take care of your loved ones and minimize the tax consequences and costs associated with probate. You can manage your estate now by using Wills, Trusts, and Advanced Directives. There is no “one size fits all” estate plan. Since every person’s situation and goals are different, it is important to consult with an attorney who can ensure your personal goals are met.
- REVOCABLE TRUST
- ADVANCED DIRECTIVE (Living Will & Healthcare Surrogate)
- POWER OF ATTORNEY
- OUT OF STATE ESTATE PLAN
- BENEFITS OF FLORIDA RESIDENCY
- HOW TO ESTABLISH FLORIDA RESIDENCY
- PROBATE & TRUST ADMINISTRATION
A Will is a legal instrument which transfers your property to your named beneficiaries when you die. When you pass away without a Will, your property will be distributed according to Florida law. This is called dying “intestate.” If you die intestate, the state will appoint an administrator and distribute your assets according to the requirements of Florida’s succession law. In other words, when you do not have a Will, the state determines who benefits from your estate, and who is responsible for taxes and costs. There is no guarantee that the administrator will distribute your estate in accordance with your wishes. If you want to ensure that your loved ones are protected and your estate is distributed in the way you want, you must have a valid Will. A Florida Will should include the following:
- Distribution of personal property
- Distribution of real estate
- Provisions for the care of minor children, including a guardian
- Provisions for the care of adult children who have special needs
- Appointing a personal representative
- A funeral plan which provides for burial, cremation and other arrangements
- A plan to distribute specific possessions (bequests)
A Will may or may not be used in conjunction with a Trust. Often times, a “pour-over” will is a good tool to use with a Trust. For more on Trusts, see the next section.
- How a Will Appoints an Executor or Personal Representative – The State of Florida calls the executor of a Will a “personal representative.” A proper Will names one person as a personal representative, and one or more persons as alternates just in case the first person is unable to serve. The Will appoints this person to administer your estate. This person is held to high standards and is considered a fiduciary.
- How a Will Impacts the Probate Process – The probate process is simplified when you have a Will because your designated personal representative is not required to post a bond. Empowering your representative to make decisions about your estate is one of the key benefits of estate planning, since it makes things easier for your surviving loved ones. A clear and valid Will also deters family disputes which often happen after a person dies.
- How a Will Provides for Minor Children – One of the most important decisions you make is who you want to care for your minor children in the event of your untimely death. Your Will can name the person you want to serve as the guardian. Since Florida law has its own definitions about who meets the definition of “children,” you may want to consider defining what you mean by children. For example, if you want to provide for the care of step-children, it is best to be clear about identifying which children are included. An attorney can give you peace of mind about the care of your children.
A Revocable Trust, which is also called a “living” trust, in combination with a Will has some advantages over a traditional Will by itself. In some circumstances, a Revocable Trust can avoid probate and save taxes. However, there are many factors which determine if a Revocable Trust is appropriate for your situation, so consulting with a lawyer will help you figure out if it is right for you. A Revocable Trust is a document which manages your assets during your lifetime and distributes the remaining assets after your death. The person appointed to manage the Trust is known as a “trustee.” You can serve as a trustee during your life, or you can appoint someone else to act as trustee on your behalf. After your death, another person, trust company, or bank will act as your trustee. The reason the Trust is “revocable” is because it can be modified or terminated during your lifetime, provided you are not incapacitated. The Revocable Trust invests and manages property placed in the trust during your lifetime. In most situations, the Trust Agreement permits you to withdraw money from the Revocable Trust at any time. In the event you become incapacitated, a trustee will continue to manage the assets, pay bills, and make investment decisions. This is one of the primary advantages of a Revocable Trust, because it can eliminate the need for a court-appointed guardian of your property to make the decisions instead. After you die, the trustee will pay the claims and taxes due on your estate. The trustee will distribute the remaining assets to the beneficiaries you identified in the Trust Agreement. What does it mean to “fund a trust?” In many cases, to get the maximum benefit from a Revocable Trust, you must fund it before your death by transferring ownership of assets, like bank accounts, investment and real estate, to the Trust. Assets which are not transferred to the Revocable Trust could still be subject to probate.” Some assets should not be transferred to the Trust due to the tax consequences, so it is essential to consult with your lawyer, tax advisor and other professionals before funding a Revocable Trust.
- How a Revocable Trust Avoids Probate – A Revocable Trust effects the transfer of assets during your lifetime, changing ownership from you to the trust. This means the property will not need to go through probate when you die. The trustee can manage trust assets at your death immediately, and need not wait for the court for appointment or permission. A Revocable Trust does not need to be recorded or registered with a court or government agency. Those who seek privacy in their transactions can use a Revocable Trust to keep their affairs private.
Probate is the legal process of settling your estate. It determines your Will’s validity, settles outstanding claims, determines tax liabilities, makes arrangements to pay creditors, and distributes the remaining assets to your heirs. Probate in Florida usually lasts between six to eight months, but some variables may lengthen the time. Probate may not be avoided completely, especially when there is a large estate, but there are ways to dispose of assets while you are still living and minimize the assets which go through probate. Trusts, joint ownership of property, payable on death designations, and transferable on death designations are some of the ways you can avoid probate in Florida.
- Joint ownership of property
You can protect your property from the probate process by owning it jointly with someone else. Joint ownership carries with it the “right of survivorship,” which means when one owner dies, the other automatically takes ownership of the property. There will be no probate proceedings to transfer the property. In Florida, two forms of joint ownership are available: joint tenancy and tenancy by the entirety.
- Joint Tenancy – Property which is owned in joint tenancy automatically passes to the surviving owners when one owner dies, without probate. This arrangement works well for couples who co-own real estate, bank accounts or other property. The joint tenants must own equal shares in the property. Joint tenants can be married, but they do not have to be married or even related in order to jointly own property together.
- Tenancy by the entirety – Property which is owned as tenancy by the entirety is only permitted for married couples in Florida. It operates the same as joint tenancy, and property held this way avoids probate.
- Payable-on-death (POD) designations for bank accounts – Florida allows you to add a special designation to bank accounts, like savings accounts or certificates of deposit (CODs), which requires them to be paid out immediately upon your death. With a POD designation, you continue to have exclusive rights to control the money in the accounts during your life. However, if there is still money in the accounts at death, the beneficiary can claim the money straight from the bank without any proceedings in probate court.
- Transfer-on-death (TOD) registration for securities – In Florida, you can register stocks and bonds in transfer-on-death (TOD) form. This is similar to POD designations on bank accounts, but it applies to brokerage accounts instead. If your account is registered in TOD, your named beneficiary will inherit the account automatically when you die. The beneficiary will work with the brokerage company to transfer the account, and no probate involvement is necessary.
ADVANCED DIRECTIVE (Living Will and Health Care Surrogate)
Every competent person has a legal right to make decisions about his or her own health, including what treatments to take, and the right to choose or refuse treatment. When a person is unable to make their own decisions because of a physical or mental change in their health, such as being in a coma or developing dementia, they are considered incapacitated. Florida enacted legislation that is designed to ensure the person’s decisions and wishes about health care are respected. The legal documents which govern these situations are called Advanced Directives.
- What is an Advanced Directive? – An Advanced Directive is a written or oral statement about how medical decisions should be made on your behalf if you are not in a condition to make and communicate the decisions yourself. Advanced Directives can be made when a person is diagnosed with a life-threatening illness, but sometimes that is too late. Most people make an Advanced Directive as part of their overall estate plan. There are two types of Advanced Directives: Living Wills and Designation of a Health Care Surrogate. You may also have both Advanced Directives combined in one document.
- What is a Florida Designation of Health Care Surrogate? – In the event you are incapacitated, a Florida Designation of Health Care Surrogate lets you name a competent adult to make decisions about your medical care, including decisions about life-prolonging procedures. Designating a health care surrogate is helpful because it appoints a person you trust to speak on your behalf when you are unable to make medical decisions. The Designation of Health Care Surrogate is effective any time you are not able to make your own medical decisions, not just at the end of life. Typically, for the surrogate’s powers to become effective, your doctor must determine that you are physically or mentally unable to communicate a knowing and wilful decision about your medical care.
- What is a Florida Living Will? – A Living Will gives you the power to state your wishes about what kind of health care you want – and do not want – if you become unable to make your own decisions. It is called a Living Will because it is effective while you are still living. Unlike the Health Care Surrogate, a Living Will does not appoint a person to make decisions for you. Instead, a Living Will is a set of instructions about your medical care.
POWER OF ATTORNEY
In addition to Advanced Directives, it is often useful to designate a Durable Power of Attorney. This is a written document giving another person the right to act on your behalf. The Durable Power of Attorney allows another person to perform a variety of activities for you, such as financial, legal, or real estate matters. A Durable Power of Attorney survives incapacitation, allowing your chosen representative to continue to act on your behalf even when you physically or mentally cannot act yourself. You can only give these powers to the designated agent when you are already competent to make decisions about your own affairs. This ensures that you know exactly what documents you are signing, and what powers you are giving your agent. Once the Durable Power of Attorney is granted, your chosen representative has the power to act in all areas specified by the document. This may include paying bills, cashing checks, buying property, paying rent, or even selling assets. Since these activities must be authorized by the document, lawyers will help you cite specific provisions of Florida law so that banking and investment transactions are fully legal. Any competent person who is 18 years or older may serve as an agent for a Durable Power of Attorney. You should carefully evaluate any person you are considering naming your agent, focusing on the person’s trustworthiness, reliability and honesty. The agent does not need to be a relative, nor do they need to be an attorney or physician.
OUT OF STATE ESTATE PLAN
If you move to Florida from another state, it is important for you to reconsider your estate plan. Although not every document which was authorized in another state will need to be reauthorized, it is still essential for a Florida lawyer to review your estate plan.
- Wills – Many out-of-state Wills are valid in Florida, however differences in estate laws may impact the content of the Will and how your property is distributed under the law. Florida accepts Wills made in another state as valid as long as the Will is valid under the law of the state in which it was executed. For example, if you have a will which was executed in Michigan and you later die in Florida, the Michigan Will is usually upheld as long as it complies with Michigan law. Military wills are valid as long as they comply with military law, and they will be upheld in any state. However, there are a few exceptions to this rule. Florida does not accept holographic (handwritten) or nuncupative (oral) Wills under any circumstance. If you made a holographic or nuncupative Will, it needs to be redrafted in Florida under Florida law to ensure the Will is still valid. In addition, your Will may be executed differently in Florida due to differences in Florida law. For example, in Florida, your will is only considered “self-proved” if it is witnessed and signed by a Notary Public and two witnesses. Even if your Will is still valid after you move to Florida, it is still best to speak with an attorney with experience in estate planning. This will ensure that your Will fully upholds your wishes and that nothing has changed. If you need a new Will to be executed in accordance with Florida law, an attorney can guide you through the process.
- Durable Power of Attorney – On October 1, 2011, Florida made sweeping changes to the laws governing Durable Powers of Attorney. The new law required powers delegated to an agent under the Power of Attorney to be very specific. These changes were made to stop elder abuse. This means catch-all phrases like “my agent is authorized to do all actions I would normally do under the law” are invalid. If you own assets in Florida and have an out-of-state Power of Attorney, you should consider redrafting the document to enumerate the granted powers in detail.
- Hiring a Florida Estate Lawyer – The bottom line is that many estate planning documents drafted under the laws of other states do not work effectively in the state of Florida. If you are considering moving to Florida after retirement, or have already moved to Florida but have yet to update your estate plan, it’s important to have a Florida estate lawyer review these documents to ensure the plan will still meet your goals.
BENEFITS OF FLORIDA RESIDENCY
Florida is a very attractive state for those seeking a carefree lifestyle involving warm weather, outdoor activity, and beautiful beaches. One significant benefit is that Florida does not have a state income tax. But fewer tax obligations and nice weather are not the only reasons Florida is a great place to live. If you are concerned about estate planning, there are several factors that may make Florida the best choice for you.
- There is No Individual Income Tax Florida is one of just seven states which does not collect personal income taxes at the state level. Moving from a high-tax state like New York to Florida can save you thousands, or even millions, of dollars in taxes. The prohibition against individual income taxes is included in the Florida Constitution, so it is unlikely that it will change in the near future.
- There is No Estate Tax Florida does not collect an estate tax when you die. This prohibition is also enshrined in the Florida Constitution. Moving from a state like Massachusetts can eventually save a wealthy family significant money in death taxes.
- Asset Protection Benefits Most people fear the possibility of losing assets to a creditor or a lawsuit. Florida has many ways to protect your assets, such as tenancy by the entirety for real and personal property, the homestead exemption, protection of the cash value of life insurance, and protection of assets held by a business entity.
- There are Property Tax Benefits for a Primary Residence Florida law provides for a “homestead” exemption if the property is your primary residence. The homestead exemption ensures that certain creditors cannot force you to sell your house to pay a debt or settle a judgment. You will also receive an exemption for the first $50,000 of value for property tax purposes. In addition, since your homestead residence increases in value the longer you own it, your assessed value for property tax purposes will be capped at 3% per year. By owning Florida property, you will be building equity which will be sheltered from property tax increases. If you’ve decided to move to Florida, or make it your primary residence while maintaining a home elsewhere, then a Florida lawyer can advise you on the steps you need to take. Although it is easy to convince Florida that you intend to make the state your permanent home, tax authorities in other states may still attempt to collect income taxes and impose an estate tax even after you’ve moved to Florida. To avoid this, you must take concrete actions to terminate your resident status in the state you are leaving and confirm your new residency in Florida.
HOW TO ESTABLISH FLORIDA RESIDENCY
In legal terms, the place you consider your legal home is called a “domicile.” But what happens if you own a home in another state as well as in Florida? If you spend time in two or more states during the year, it is important to clearly indicate which one is your domicile. To do this, you need to establish relationships to the state of Florida. This will show your former state of domicile that you have established a new domicile in Florida. There is no clear cut way to establish residency, however a variety of factors are considered to ensure you have the necessary intent and have taken the necessary steps to make Florida your domicile. In order to make Florida your permanent home, you can take the following steps:
- File a Declaration of Domicile. This document allows you to declare yourself as an official resident of Florida because you live in and maintain a residence in the state which you consider your permanent home. The Declaration of Domicile must be signed in the presence of a Notary Public or Deputy Clerk of a Florida Court. It will then be recorded in the public records of the county where you reside. Recording a Declaration of Domicile is not required to establish Florida residency, but it does serve as notice you have made Florida your permanent home. This can be useful in proving to your former state that you have indeed made the move.
- Get a Florida Driver’s License. If you are a resident of Florida, you are required to obtain a Florida Driver’s License. This serves as more evidence to the state you are leaving that you are no longer a permanent resident. When you receive your Florida license, the license from your former state will be confiscated.
- Register Vehicles in Florida. You must register your vehicles and boats with the Florida Department of Motor Vehicles if they are located in Florida.
- Register to Vote in Florida. Registering to vote is important and helps you demonstrate your true intent to make Florida your permanent home.
- Notify Tax Authorities. File your final income tax returns in all states where you are required to pay taxes, then notify the state taxation officials that you have moved to Florida. List your Florida address as your residence for federal income tax purposes and notify the Social Security Administration of your new Florida address.
- Apply for the Homestead Exemption. If you own real estate in Florida, apply for the Homestead Exemption. This provides significant asset protection and tax benefits, as well as helping to establish your new domicile in Florida.
- Update Estate Planning Documents. Florida law will govern your new estate planning documents and recognize validly executed documents from another state. However, Florida law is unique and may disrupt your estate planning goals due to conflicts with other state laws. Update your estate plans with lawyers, tax advisors and other professionals who understand the ramifications of Florida laws.
PROBATE & TRUST ADMINISTRATION
When a loved one dies, it can be overwhelming for surviving family members. In addition to grieving the loss, services must be arranged and legal papers must be filed. Proper estate planning can help mitigate the number of things loved ones are required to do to wrap up a person’s legal, financial and personal affairs. The process of closing out an individual’s affairs is known as probate. This is handled by a special court. The probate process pays taxes, settles debts and distributes assets to beneficiaries. Florida probate requires the appointment of a personal representative to take control of the deceased person’s estate. There are many different types of Florida probate proceedings, including the following:
- Florida Formal Administrations: When someone dies with more than $75,000 in assets or has outstanding debts, their estate must go through the formal probate process. This is known as a “Formal Administration.” The process includes preparing and filing legal documents, settling estate taxes or loans, estimating value of property, and notifying beneficiaries and heirs. The Formal Administration process requires many steps to complete, and assets cannot be distributed right away, even when probate is uncontested. Probate drags on for at least six months, and in some instances it can take years.
- Florida Summary Administrations: Summary administrations are limited versions of probate. They apply when a person has died with less than $75,000 in assets, died with debt, or died over two years ago.
- Florida Ancillary Administrations: Many residents in other states buy a second or additional home in Florida. The Florida home often causes confusion to family members about what happens to the property. In order to transfer Florida real estate to a beneficiary, the property must go through Ancillary Administration.
- Florida Trust Administration: Florida residents who placed their assets in a Revocable Trust can avoid or minimize the probate process. Even though these assets are not handled by the probate court, it is still important to see an advisor about the administrative affairs of handling the trust. A lawyer can handle matters related to administering or terminating the trust, if necessary, as well as finalizing taxes, bills and other matters.
- Identifying Probate and Non-Probate Assets When a person dies, it is important to identify which assets are subject to probate. The first thing that must be done is creating a probate inventory. Generally, if an asset has a title and the person who died is the only one whose name is on the title, without any designated beneficiary, it should be included in the estate and valued on the probate inventory. Such assets may include cars, boats, bank accounts, stock shares, real property, units in a limited partnership, etc. Assets which have no title, like art, cash, jewelry or valuable collections, are sometimes subject to probate administration as well.
FREQUENTLY ASKED QUESTIONS:
- Who Can Create a Florida Will?
In Florida, any person who is of sound mind and who is either 18 or more years of age or an emancipated minor may make a Florida Will.
- Can a Florida Will Be Modified?
Yes, a Florida Will can be modified. A modification or amendment to a Will is called a “codicil.” All codicils must be executed with the same formalities as a Will in order to be valid.
- What are the Legal Requirements to Create a Florida Will?
In Florida, a will must be made in writing. Oral wills and holographic wills are not valid. The person who makes the Will is known as the “testator.” The testator must sign the document. There must be at least two witnesses. Although Florida law permits adults who may have an interest in the Will to serve as witnesses, it is smart practice to have witnesses who do not have an interest in the Will to serve as witnesses.
- Are Trust Assets Protected from Creditors?
In Florida, assets placed in a revocable or living trust are not protected from creditors’ claims when the grantor is alive. As a result, during your life, creditors may satisfy a claim using trust assets. However, once the grantor is deceased, the assets which remain in trust are protected from creditor claims as long as there is a “spendthrift” provision in the trust agreement. Further, assets placed in an irrevocable trust, may be protected from creditors’ claims even when the grantor is alive.
- In Florida Can a Trust Hold Title to Homestead Property?
Yes, in some situations homestead property can be transferred to the Trust. In most Florida counties, there are specific requirements in order for a person to properly maintain the homestead tax exemption. Often, special language is required in the Trust Agreement and/or deed in order to make the exemption valid. If the homestead property is held in trust, it may lose its exemption from creditors in some situations. An attorney can advise you on when placing your homestead property in your Trust is a good idea.