Frequently Asked Questions
Generally our clients have a lot of questions, as you should, so we have put together a list here with answers to some of the most requested thoughts.
To view detail, simply click on the heading of each question.
What a Will DOES.
A will provides for the distribution of property owned by you at the time of your death in any manner you choose (subject to certain limitations). Your will cannot, however, govern the disposition of properties that pass outside your probate estate (such as certain joint property, life insurance, retirement plans, and employee death benefits) unless they are payable to your estate.
Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will establishes one or more trusts, it is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created in your lifetime), in which case it is called a pour over will. In either case, the purpose of the trust arrangement (as opposed to outright distribution) is to ensure continued property management and creditor protection for the surviving family members, to provide for charities, and to minimize taxes.
Aside from providing for the intended disposition of your property to spouse, children etc., there are a number of other important objectives that may be accomplished in your will.
You may designate a guardian for your minor child or children if you have survived the other parent and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child’s estate.
You may designate a personal representative of your estate in your will and eliminate the need for a bond and eliminate the need of a court appointment personal representative.
You may choose to acknowledge or otherwise provide for a child (e.g., stepchild, godchild, etc.) in whom you have an interest, an elderly parent, or other individuals.
If you are acting as custodian for the assets of a child or grandchild under the Uniform Gift (or Transfers) to Minors Act, you may designate your successor custodian and avoid the expense of a court appointment.
Good planning can also enhance your support of religious, educational, and other charitable causes.
What a Will DOES NOT Do.
A will does not govern the transfer of certain types of assets, called non-probate property, which by operation of law or contract pass to someone else on your death. For example, real estate and other assets owned with rights of survivorship pass automatically to the surviving owner. Likewise, an IRA or insurance policy payable to a named beneficiary passes outside the will. A Will does not guarantee the avoidance of Probate. In fact, it likely ensures that probate will be necessary, if you pass away with probate-able assets.
If you own property with another person as joint tenants with right of survivorship, that is, not as tenants in common, the property will pass directly to the remaining joint tenant upon your death and will not be a part of your probate estate. (It will, however, be a part of your taxable estate.) Frequently, people (particularly in old age) will cause bank accounts or securities to be placed in the name of the owner with one or more children or trusted friends as joint tenants with right of survivorship. This is sometimes done to avoid probate or as a matter of convenience to give the joint tenant continuing access to accounts to pay bills.
It is important to realize that the ownership of property in this fashion often leads to unexpected or unwanted results. Disputes, including litigation, are common between the estate of the original owner and the surviving joint tenant as to whether the survivor’s name was added as a matter of convenience and/or management or whether a gift was intended. It also can cause unintended and significant capital gains tax to the beneficiary, which would have been avoided through smart estate planning. The planning built into a well-drawn will may be partially or completely thwarted by an inadvertently created joint tenancy that passes property to a beneficiary by operation of law, rather than under the terms of the will.
Many of these problems are also applicable to institutional revocable trusts and “pay on death” forms of ownership of bank, broker, and mutual fund accounts and savings bonds. Effective planning requires knowledge of the consequences of each property interest and technique.
The term trust describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or bank) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. A person (in some cases and depending on the trust) may be both a trustee and a beneficiary of the same trust. A trust created by your will is called a testamentary trust and the trust provisions are contained in your will.
If you create a trust during your lifetime, you are described as the trust’s grantor and/or settlor, the trust is called a living trust or inter vivos trust, and the trust provisions are contained in the trust agreement or declaration. The provisions of that trust document (rather than your will or state law defaults) will usually determine what happens to the property in the trust upon your death OR incapacity.
A living trust may be revocable (subject to change and terminated by the settlor) or irrevocable. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust.
Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by them to indicate sufficient maturity to handle property. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.
Probate is a court-supervised process for transferring the assets of a deceased person (called a descendent) to the people of organizations that are entitled to the assets. The process can vary depending on whether or not you have a valid Last Will and Testament.
If you do not have a valid Last Will and Testament, your assets will be distributed among a group of your relatives as determined by Florida law. In that case, you will be said to have died intestate (without a Will) and the people who receive your assets are called heirs at law.
If you have a Last Will and Testament (which everyone should), the people or organizations named in the Will are entitled to the assets. Those people or organizations are called beneficiaries and you will be said to have died testate (with a Will).
Many people are under the mistaken impression that having a Will avoids probate. That is not the case. There are many reasons why you should have a Will, but having a Will does NOT avoid probate.
Probate can be a long process involving complicated legal issues. In some instances, you are required to hire an attorney to help navigate the process. Regardless, the process is usually complex and creates liability for anyone involved.
There are many reasons why people want to avoid Probate.
Some of the most common are:
- Saving Money. Probate can be expensive, often costing thousands of dollars in legal fees. The larger and more complex the estate, the higher the legal fees.
- Minimizing Hassle. Probate is time-consuming. Your person representative must inventory estate assets, file accountings with the court, notify (and possibly negotiate with) creditors of the estate, open estate bank accounts, and transfer assets to your heirs or beneficiaries. This can be quite a burden on the friend or family member who is handling the estate.
- Avoiding Delay. Probate ties up your assets in court. Courts are reluctant to allow assets to be transferred until the estate is closed. At a minimum, the personal representative must wait until all creditors have had a chance to submit claims, a process which could take several months. This delays the distribution of your assets to your heirs or beneficiaries.
- Protecting Privacy. Once your estate is opened with the Court, it becomes a matter of public record. Anyone who wishes can go to the courthouse and obtain a copy of your Will, although the State of Florida has taken steps to restrict the information available to the public. Some people would prefer to keep the final disposition of their assets private.
- Liability. Your personal representative (who likely is a family member or friend) may be liable for any mistakes made during the probate administration. For example, if the personal representative does not properly notify a creditor or causes an asset or assets to be distributed before all creditors’ claims are satisfied, then the personal representative could be held liable.
These are all valid reasons for avoiding probate. But not all of them apply in every case. Before you ask how to avoid probate, be sure that it’s something you need to do. The truth is that probate avoidance is not for everyone. To make an informed decision, you need accurate information. Consider:
- Probate Avoidance Costs Money. To avoid probate, you will most likely need a living trust a handful of related documents. Needless to say, these documents can be expensive to prepare. If you are basing your decision on cost alone, you should compare these costs with the cost of probate.
- Probate Avoidance Can Itself Be a Hassle. Probate avoidance requires a careful examination of how each of your assets is titled. At least some of your assets will need to be re-titled to work with your estate plan. This requires some work on your end. Of course, the work that you do now is work that the personal representative will not have to do later.
That being said, most of these downsides are offset by the benefits. In many cases, it’s pay a little now or pay a lot later. You can either go through the expense and hassle of arranging your affairs while you are still alive so that you avoid probate, making things easy on your loved ones and ultimately preserving more of your legacy, or you can let them sort it all out through the court system after your death. Either choice can be reasonable, depending on your situation.
The term “living trust” is generally used to describe a trust (a) which you can create during your lifetime, and (b) which you can revoke or amend whenever you wish to do so. You can also create an “irrevocable” living trust, but that is permanent and unchangeable and is almost exclusively done to produce certain tax results beyond the scope of this summary.
A “living trust” is legally in existence during your life, has a trustee who is currently serving, and owns property which (generally) you have transferred to it during your life. While you are living, the trustee (who may be you) is generally responsible for managing the property as you direct for your benefit. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries. Like a will, a living trust can provide for the distribution of property upon your death. Unlike a will, it can also (a) provide you with a vehicle for managing your property during your life, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.
A power of attorney gives one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself). It may give temporary or continuous authority to act on your behalf until the authority is revoked by the grantor or by operation of law.
Why would anyone give such sweeping authority to another person? One answer is convenience. If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a power of attorney. Another important reason to use power of attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity. Such a disability may be temporary (e.g., due to travel, accident, or illness) or it may be permanent.
If you do not have a power of attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you.
People appointed in this manner are referred to as guardians. If a guardianship court proceeding is needed, than you may not have the ability to choose the person who will act for you. Not to mention, a court proceeding is costly and time-consuming. With A power of attorney
With the increasing ability of medical science to sustain our lives, people are living much longer than ever before. Unfortunately, as we grow older and experience poor health, we may find ourselves in a position where decisions need to be made as to how we wish to be treated in a variety of medical situations at the end of our lives. Further, sometimes we find ourselves in a condition where we can no longer express our preferences. Advance health care directives allow us to deal with these situations. Without such directives, your family may find it necessary to obtain court orders to deal with your medical situation.
In Florida, these documents are known as “living wills,” “health care proxies,” or “advance health care directives.”
A living will is your written expression of how you want to be treated in certain medical conditions. This document may permit you to express whether or not you wish to be given life-sustaining treatments in the event you are terminally ill or injured, to decide in advance whether you wish to be provided food and water via intravenous devices (“tube feeding”), and to give other medical directions that impact the end of life.
A living will applies in situations where the decision to use such treatments may prolong your life for a limited period of time and not obtaining such treatment would result in your death. It does not mean that medical professionals would deny you pain medications and other treatments that would relieve pain or otherwise make you more comfortable. Living wills do not determine your medical treatment in situations that do not affect your continued life, such as routine medical treatment and non life-threatening medical conditions. In Florida, the determination as to whether or not you are in such a medical condition is determined by medical professionals, usually your attending physician and at least one other medical doctor who has examined you and/or reviewed your medical situation.
HEALTH CARE PROXY
A “health care proxy,” sometimes called a “health care surrogate” is the appointment of a person to whom you grant authority to make medical decisions in the event you are unable to express your preferences. Most commonly, this situation occurs either because you are unconscious or because your mental state is such that you do not have the legal capacity to make your own decisions.
Normally, a single individual is appointed as your health care proxy, though quite commonly one or more alternate persons are designated in the event your first choice proxy is unavailable. As with the living will, medical professionals will make the initial determination as to whether or not you have the capacity to make your own medical treatment decisions.
The health care proxy is a durable power of attorney specifically designed to cover medical treatment.
WHY HAVE HEALTH DIRECTIVES?
Health Care Directives allow you to express your preferences concerning medical treatment at the end of your life. By expressing such preferences in a written legal document, you are ensuring that your preferences are made known. Physicians prefer these documents because they provide a written expression from you as to your medical care and designate for the physician the person he or she should consult concerning unanswered medical questions. Rather than the physician having to obtain a consensus answer from your family as to your treatment, the physician knows your preferences and knows who you want to provide decisions when you cannot do so.
These documents provide your expressed wishes, rather than making the family guess your desires. Making your wishes known in advance prevents family members from making such choices at what is likely one of the most stressful times in their lives. Further, providing such information and designating a health care proxy means that the physician knows whose direction is to be followed in the event your family disagrees as to what medical treatment you would want.