ESTATE PLANNING
FREQUENTLY ASKED QUESTIONS
What Is Estate Planning?
Estate planning is creating a definite plan for controlling and managing your assets during your life and distributing them after your death. The way you plan your estate can determine whether or not you or your loved ones will have to face the following:
How Should You Plan Your Estate?
You have are four options in planning your estate:
- Do nothing.
- Hold title to your property in Joint Tenancy with right of survivorship.
- Prepare a Will.
- Create a Trust.
What Happens If You To Do Nothing?
If you have no plan in place, Florida law will dictate how your estate is to be distributed at your death, regardless of your wishes. Your estate may be subject to probate costs, attorney fees and estate taxes.
Do You Need A Will?
Without a will, upon your death your property will be distributed according to the laws of your state of residence. In Florida, up to one half of your estate will go to your spouse and the rest to your children or grandchildren. If you have no living heirs, your estate will go to the state. In addition, you will have no control over who the court appoints to administer your estate. Debts and taxes will be paid before any distributions are made to your heirs. A will can set forth your choice of guardian for minor or incapacitated heirs or provide for charitable bequests. However, since a Will does not take effect until after you die, it is of no help with your lifetime planning.
Should Assets Be Held Jointly?
When 2 or more people hold title to property, called a joint tenancy, upon the death of one owner, the property passes automatically to the surviving joint owner or owners regardless of what the deceased owner?s will provides so that beneficiaries under will may receive nothing. Other problems may also arise when property is held jointly, such as the imposition of gift taxes upon the creation of the joint tenancy, or estate taxes on the death of the owner.
Do You Need A Trust?
A properly drafted Trust will allow your heirs to avoid probate and can minimize or eliminate entirely the Federal estate tax. You will continue to control the use of your assets during your life and the distribution of your assets at your death. Title to your assets will be changed to the name of your Trust with you as the initial trustee and beneficiary. When you die, because the assets are not titled in your individual name, they will not be subject to probate and your successor trustee will take over control of their distribution according to your wishes set forth in the trust.
What Is Probate?
Probate is the legal process for the payment of debts and distribution of property according to a Will, or by state law if no Will. The Court appoints a personal representative to handle your affairs supervises his or her actions. The probate process usually takes about one to one and a half years to complete with complex estates taking even longer. And, since the proceedings records are public information, they and available to the public for review. In addition, you will have to file a separate probate in every state where you owned real estate.
Can Probate Be Avoided?
If you have a will alone, generally the property owned by you and controlled by your will must go through the probate process. For those assets held jointly, probate is not necessary because they pass automatically to the survivor. Assets placed in a properly drafted trust will also avoid probate proceedings during life and after death.
What Is A Guardianship?
If you become mentally disabled or seriously physically disabled before you die, the probate court will appoint a guardian to take control of you and all your assets. Like probate, guardianship proceedings are open to public review. Because your will only becomes operative upon your death, having a will alone will not avoid a guardianship if you become incapacitated. In addition, in order to transfer or otherwise transact business related to property jointly owned, it is necessary for all joint tenants to approve. If one of the joint tenants is incapacitated or incompetent, everything will have to wait until a guardian is appointed and the probate court approves.
However, unlike a will or joint tenancy, a properly drafted Trust protects you when you are alive. There will be no need to involve the probate court or guardians. The successor trustee takes over your affairs until you are able to resume control.
Can Estate Taxes Be Eliminated Or Reduced?
With a properly drafted trust, as of year 2002, a married couple can leave up to $2 million, increasing to $7 million by year 2009, free of estate taxes, and can reduce the amount of estate taxes on even larger estates. While under current law, for year 2010, the estate tax is repealed, it will be reinstated in year 2011 back to current exemption amounts.
What Other Planning Devices Should Be Considered?
A total estate plan should include Advance Directives such as a Durable Power of Attorney, Designation of Health Care Surrogate and a Living Will.
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