Estate Planning Overview
decisions in life are as unpleasant, yet as important,
as planning for its end. Those who do such planning save
their heirs much anguish and frustration, and often a
great deal of money. This report will attempt to explain
in broad terms various estate planning vehicles, such
as the probate system,
living wills, guardianship,
The probate system has a bad reputation, as something always
to be avoided. Like most institutions, the probate system is
sometimes wrongfully criticized by those who are misinformed.
Probate is the process by which a decedent’s bills are
paid and property held in the decedent’s name alone are
transferred by court authorization, in accordance with the decedent’s
will, if there was one, or by general law if no will is found.
Contrary to what some people think, if you don’t have
a will, the State does not “take” your property.
Rather, State law just writes a will for you, based upon what
is generally accepted in our society as the standard will. However,
if your titled assets are transferred properly prior to death,
there is no need for judicial involvement. That is the purpose
and goal in “avoiding probate,” but there are pitfalls
to be avoided. By “adding names” to property during
one’s lifetime, it may be difficult to have the property
returned to, or conveyed by, the donor, or to the donors intended
The most common types of probate in Florida are formal administration
and summary administration. Summary administration applies to
probate assets less than $75,000 in total value, excluding the
value of the homestead; attorney’s fees and court costs
would typically amount to between $1,000 to $1,500. The process
takes approximately two weeks from beginning to end. Formal
administration can take between 5-24 months, in large part because
of the three-month period for any creditor claims to be filed
against the estate and the complexity of the estate. Attorney
fees for formal administration are specifically set forth in
the Florida Statutes.
There are many ways of avoiding probate of one’s assets.
The major ones are a living trust, putting property in joint
ownership with a survivorship interest, such as life estates
on real property, or joint tenancy with right of survivorship
for real property, bank accounts, stocks and bonds. Again, beware
of the many pitfalls. Even though one plans to avoid probate,
it is still an excellent idea to have a current Florida will,
to cover assets which inadvertently or unavoidably were not
transferred into the name of the trustee, remainderman, or joint
tenant. If even one titled asset is in the decedent’s
name alone at death, probate would still be necessary in order
for title of that asset to be transferred. Although out-of-state
wills are generally valid in Florida, it is time consuming and
therefore expensive to go out-of-state to find the witnesses
to those wills, if need be. Life insurance proceeds also pass
outside of the probate system, unless your estate is a beneficiary
of the policy. You can expect to spend between $500-600 for
two reciprocal husband and wife simple wills. Expect to pay
more for complicated wills, testamentary trusts, or a separate
contract between spouses that the will shall not be revoked
or modified after the death of the first spouse.
One can avoid the probate of real property by signing and delivering
a deed to the grantee, or to an escrow agent. You can keep the
full homestead exemption by reserving a life estate, with the
remainder to whomever you choose. Retaining an “Enhanced
Life Estate” enables you to sell the property without
getting formal approval of the remaindermen. You can place an
automobile in joint names, and do the same with bank accounts
and stocks and bonds. You should use the magic phrase “joint
tenancy with right of survivorship” in order to do so.
Legal assistance is strongly advised; please don’t do
Medicare pays less than two percent of all nursing home bills.
Medicare will pay only for skilled care in a Medicare approved
skilled nursing facility which follows a period of hospitalization
of at least 3 days. Medicare will not cover merely custodial
care. Even when all the requirements are met, Medicare will
pay the entire nursing home bill only for the first 20 days.
It will pay part of the bill for an additional 80 days, with
the client or his family paying co-insurance amounts. After
100 days, Medicare provides no assistance. There are a number
of long-term nursing home health care insurance policies available,
which differ significantly in terms of eligibility and benefits.
Medicaid is a federally-funded program, administered
through the several states, which will pay nursing home expenses
to those who qualify. Very generally speaking, in order to qualify,
income eligibility and resource eligibility must be established.
Property divested within 36 months (60 months if to or from
a trust) prior to application is included in the determination
of eligibility, although you may transfer a nominal amount of
cash each month without affecting eligibility. The regulations
are both confusing and illogical, and elder law specialists
should be consulted long before nursing home care is required.
One has the right to compel the termination of life support
systems, if one is terminally ill, so long as that intention
is expressed properly, preferably in writing. A living will
may be obtained at your attorney’s office for a nominal
charge, or from most local physicians or hospitals.
Powers of Attorney/Health Care Surrogates
A power of attorney is a vehicle whereby one may authorize another
person to act in one’s behalf. The authority is typically
given to handle one’s financial matters. By placing certain
language in the power of attorney, the document becomes a “durable
power of attorney”, and thereby one may authorize any
person to act on one’s behalf, even though one is disabled.
By signing a durable power of attorney, one can avoid or at
least minimize the risk of a guardian being appointed. A separate
Health Care Surrogate form is usually used to authorize routine
medical care and decisions relating to one’s health.
Florida has a large number of senior citizens, with no local
family for support. If one has not executed a Durable Power
of Attorney while one is still competent, upon being declared
incompetent by a judge, the judge would also appoint a guardian
to take care of one’s person or one’s property,
or both. Because of past abuses of the system, the legislature
has imposed a great deal of restraint on guardianships to the
point where the cure, in my opinion, is often worse than the
disease. That is, fees and expenses in guardianship, and the
red tape involved, prevent many incapacitated people, who would
otherwise need a guardian, from getting the benefits thereof.
One often overlooked aspect of dealing with estate planning
clients is the lack of accurate records kept by the client.
It is important to give a list of your assets (including secret
hiding places), your important papers, your debtors and creditors,
life insurance policies, death benefits, funeral arrangements,
to your loved ones, your banker, your attorney, (this is redundant
if you love your attorney) or some other trusted person who
is likely to survive you. Otherwise, assets may be thrown away,
go unclaimed and wind up in the State treasury, or be taken
by those who may not be authorized. If you have worked hard
for your assets, then you should see the need to preserve what
you have left for your friends, family, charities, or whomsoever
you have intended to receive the benefits of your life’s
Federal Estate and Gift Taxes
A federal estate tax return is due when one has an estate in
excess of $2,000,000. However, if you give everything to your
surviving spouse, there is no federal estate tax on the estate
of the first spouse to die. By proper planning, by will or by
trust, each spouse can transfer $2,000,000 free of estate tax.
The $2,000,000 amount gradually increases to $3,500,000 in 2009.
The federal estate tax rate goes from 20% to 47% of taxable
values as of 2005 and is gradually changing until 2010. All
assets are included (real estate, bank accounts, auto and life
insurance proceeds, cars, boats, stocks, bonds, mutual funds,
C.D.’s for example), even if title passes outside of the
probate system. In addition, one of the many benefits of living
in Florida is that there is no additional Florida inheritance
The annual federal gift tax exclusion allows one to give $11,000
per calendar year (adjusted for inflation) per recipient, free
of estate, gift, and income tax. By giving during your lifetime,
you would also be able to see how your descendants use your
property, help them with proper management, share the joy and
appreciation they may have, and give them an opportunity to
extend their appreciation to you. By the way, you may also think
about sharing your bounty with local charities or institutions
which helped you get where you are today.
The trust is an enormously flexible vehicle for all kinds of
legal maneuvers. In the typical “revocable living trust”,
the settlor (one who makes a trust) appoints himself as trustee
until his death, disability, or resignation, and then appoints
a successor trustee or trustees to manage trust property and
dispose of it by giving the settlor the use of the property
during his period of disability, and then distributing it to
the settlor’s successor beneficiaries. Some non-tax benefits
1. avoidance of probate delays and expenses;
2. opportunity for professional asset management;
3. permit distribution over time (probate without a testamentary
trust requires immediate distribution to all adults);
4. minimize risk of multiple inheritance taxes by having the
real estate and personal property held in one Florida trust;
5. prompt transfer of management of assets at disability;
6. avoidance of publicity;
7. insulation from pleas for money (“Fred, I’d lend
you the money, but it’s tied up in trust”);
8. avoidance of mental blocks about signing wills;
9. avoidance of guardianship;
10.reduce the likelihood of will contests;
11.restrict the wasting of assets by spendthrift beneficiaries
and their creditors; and
12.avoidance of surviving spouse deviating from predeceased
spouse’s estate plan.
attorney’s fees for the preparation of simple living trusts
usually are between $500 to $1,500 depending on complexity.
On occasion, the goal of avoiding probate is accomplished by
a method simpler and less expensive than a living trust. After
the trust declaration is executed, you still must transfer the
assets into the name of the trustee. Again, by transferring
the asset during one’s lifetime, to a trustee (even oneself
as trustee) one avoids probate of that asset. Many people prepare
elaborate living trusts, but improperly fund the trust by failing
to put all appropriate assets into the name of the trustee,
thereby not implementing what was intended.
A corporate trustee would probably charge around one percent
of principal per year as the trustee’s fee. Corporate
trustees are held to a higher standard of care than an individual
trustee, and for many reasons, the peace of mind created with
a professional, independent, impartial, experienced, fully insured,
fully regulated corporate trustee may be well worth the expense.
For example, suppose your child is trustee for the benefit of
your grandchild. If the trustee does not invest the money wisely,
is the grandchild really going to sue the parent for negligence
or breach of fiduciary duty?
This report is written with the hope that you will contact your
attorney, accountant, and other advisers, to discuss these matters
in more detail. Estate planning is a constantly changing field,
rife with loopholes and potholes. Please understand that the
scope of this report is general in nature, and should not be
used as a basis to plan your estate matters without professional
assistance. Each of us is unique, and the use of “do-it-yourself”
estate planning or the use of a “Will kit” is not
much different from “do-it-yourself” hospital surgery.