I’m not rich — why would I need to worry about estate planning?

Many people think they aren’t “rich” so they don’t need an estate plan. But, estate planning is not just for the wealthy and it is really important for everyone in Florida. Estate planning consists of Powers of Attorney, Wills – also known as the last will and testament, which are subject to probate and estate planning also consists of trusts, among other things. Trust are not subject to probate which is the legal process of transferring property ownership to a beneficiary.

Trusts sometimes seem very complicated, but they are not – especially when one considers how they may simplify life for your loved ones after you are gone.

As a brief lesson: a grantor is the person who originally creates the trust. This is the person or persons who determine the rules of the trust. A trust is considered its own legal entity. The grantor transfers property into the trust by changing the way property or assets are titled. The trust can benefit one or more people. A trust is managed according to the trust document, which is the set of rules set out in the trust documents by the grantor. The rules can address who the beneficiaries are and what ages the beneficiaries will receive distributions (the distributions can be spread out over time or a lump sum). The trust allows the grantor more control of their assets, even after they pass away.

Trusts can also set up pet trusts, to ensure your beloved furry child is taken care of if one predeceases their animals. A trust can also establish a special needs trust, which can be used to provide ongoing financial support to children or dependents with disabilities. Sometimes, trusts can protect assets if one may need Medicaid benefits in the future. Transferring assets into an irrevocable trust at the proper time can protect property and prevent a person from exhausting his or her life’s savings before qualifying.  Asset protection trusts are also helpful for protecting assets from creditors.

The grantor can select whomever he or she wants as the trustee, and also controls what property is transferred into the trust. Once the final grantor passes away, a revocable trust becomes irrevocable and no changes can be made, ensuring the grantor’s wishes are followed. While the grantor is alive, the grantor can amend the trust rules and also the trust assets so long as the trust is a revocable trust.

What is probate and can you avoid it?

First, what is probate? Probate is a court-supervised process for identifying, gathering and transferring the assets of a deceased person (decedent). The first step involves paying the decedent’s debts and then the decedent’s assets are distributed to to his or her beneficiaries.

In general, the decedent’s assets are used first to pay the cost of the probate proceeding, then are used to pay the decedent’s outstanding debts, and the remainder is distributed to the decedent’s beneficiaries.

Assets subject to the Court’s probate administration are only probate assets. But, not all assets are probate assets. There are ways that assets can be titled and/or owned that would make them non-probate assets. We can assist you in this.

 

The purpose of probate is to tie up loose ends, pass ownership of the decedent’s probate assets to the decedent’s beneficiaries and pay the decedent’s creditors, if necessary. It is the process that officially transfers legal ownership.

Many people tell us — but I have a will. A will does not avoid probate. If the decedent left a valid will, unless the will is admitted to probate in the court, it will be ineffective to pass ownership of probate assets to the decedent’s beneficiaries. The will must be submitted to the court within ten days of the decedent’s death. Depositing the will with the court does not cost anything, but there is a court fee to open a probate. (This lack of privacy of a recorded will is just one reason people sometimes look for alternatives to wills.)

In the previous blog post, we discussed, “What is a will? And do you need one?” But basically, a will is a written document that is signed by decedent and witnesses. A properly drafted and executed will allows a decedent to name a personal representative, the person who will administer and ensure the decedent’s intent is carried out, and also allows the decedent to name their beneficiaries. Thus, a properly drafted and properly executed will allows a decedent to circumvent Florida’s distribution formula to one that meets their specific wishes. In other words, without a will, the state determines how the assets are distributed.

If the decedent did not have a valid will, or if the will fails in some respect, the Court (via state statute) will determine how the assets will be distributed and who the personal representative will be. If there are no heirs, the state of Florida will take the decedent’s assets. This is rare, as most people have some surviving heir, even if distant.

A circuit court judge will oversee probate proceedings. the judge will making a ruling as to whether the decedent’s will is valid or if there is not a valid will, the judge will determine the decedent’s heirs.

If the decedent had a will that nominated a personal representative, the judge will also decide whether the person or institution nominated is qualified to serve in that position. If the nominated personal representative meets the statutory qualifications, the judge will issue ‘Letters of Administration,’ also referred to simply as ‘letters.” These “letters” are important evidence of the personal representative’s authority to administer the decedent’s probate estate.

If any questions or disputes arise while administering the decedent’s probate estate, the judge will hold a hearing as necessary to resolve the matter in question.

One of the primary purposes of probate is to ensure that the decedent’s debts are paid in an orderly fashion. The personal representative must use diligent efforts to give notice of the probate proceeding to ‘known or reasonably ascertainable’ creditors. Creditors who receive notice of the probate administration generally have three months to file a claim against the estate. The personal representative, or any other interested persons, may file an objection to the statement of claim. If an objection is filed, the creditor must file a separate independent lawsuit to pursue the claim.

So, probate can be a lengthy and complicated process. But, yes, there are ways to avoid probate and we can help. Make an appointment today. We can review your assets and plans and help you determine the plan that best suits your needs. And, we’ll help you execute it.