Archive for the ‘Estates and Trusts’ Category
Joint Property and Probate in Florida
Florida recognizes three types of joint property: tenancy in common, joint with full rights of survivorship, and tenancy by the entirety. Only the last two avoid probate. Here’s the background.
When two people own property as tenants in common, each owns an undivided interest in the whole. If one dies, then probate is required to deal with title to the property of the one who died.
When two people own property as joint tenants with full rights of survivorship, then each still owns an undivided interest in the whole, but when one dies his or her title automatically passes by operation of law to the surviving owner without probate. (There is controversy in Florida now whether creditors of the decedent can reach the joint property even though it does not pass through probate.)
When two people own property as tenants by the entirety, you know they are married because that form of ownership is reserved for married couples. The concept dates back to jolly old England hundreds of years ago when the property owned by husband and wife as tenants by the entirety was considered a “moiety” of title which could only be broken by voluntary act of both spouses. Thus, creditors of just one spouse could not reach tenancy by the entirety property. That rule still applies in Florida, which makes tenancy by the entirety a popular way for married couples here to hold title. In fact, Florida recognizes tenancy by the entirety in both real property like houses and in personal property like bank accounts and investments. And, of course, it avoids probate at each because tenancy by the entirety property passes automatically by operation of law to the surviving spouse.
Let’s apply the above concepts to a typical factual situation. A husband and wife in Florida own investment real estate as tenants by the entirety. One dies, and the property automatically becomes solely owned by the surviving spouse without probate. Should he or she then add the children to the deed as joint owners with full rights of survivorship in order to avoid probate at her death?
Let’s suppose she did and then suppose that one of the children later has a nasty divorce proceeding and another child later has problems with credit card debt. Can the children’s spouse and creditors reach the children’s interest in the joint property? Yes, they can. This is a huge risk for anyone who adds someone else as a joint owner to their property for the purpose of avoiding probate. While it might avoid probate at their death, it places the property at risk of being reached by the new joint owners’ present and future spouses and creditors.
Conclusion: It is simple to put property into joint names in Florida, but the effect is not so simple. Probate might be avoided, but at the risk of loss of the property before then to creditors of the new joint owners. There are other ways to deal with this problem. Ask your Florida lawyer.
Goodbye, Estate Taxes
So, the big news for estate planning on this last day of 2009 is that effective tomorrow there is no federal estate tax. This means that if a Florida resident dies tomorrow 1/1/10 there is no federal estate tax due. Since Florida has no estate tax of its own, it means there is no estate tax at all.
There are two downsides to this:
1-Congress might try to pass a new tax law in 2010 that purports to be retroactive to 1/1/10. Many tax experts think such a law would be unconstitutional. Generally, we Americans like our laws to take effect after the law is passed so that everyone has fair notice of what they are required by the government to do.
2-The other downside is that stepped-up basis also expires with the estate tax law today. This could have a more far-reaching effect on most Americans since most Americans die with less than $1 million so their estates would not incur estate taxes anyway. The loss of stepped-up basis, though, affects everyone because it relates to income taxes. Income taxes are alive and well and are not expiring with the estate tax today.
The bottom line is that Americans who die after today will leave estates that do not incur estate taxes but may very possibly pass assets to their heirs with substantial potential for increased income taxes when they are sold or the gain is otherwise triggered. This should keep the tax lawyers and accountants busy throughout 2010. Not to mention Congress.
Jim Martin 12/31/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
When Is a Car Not an Asset But a Liability?
Putting your name on the title to a car, truck or other motor vehicle in Florida makes you personally liable for the negligence of the driver. The dangerous instrumentality doctrine extends liability of the driver to become personal liability of every owner of the vehicle. This should give pause to parents before putting their names on car titles for children. And it also means that spouses should title their vehicles only in the name of the spouse who is the prinicipal driver. Otherwise, if the vehicle is not insured or if the damages exceed the insurance limits, then an injured plaintiff could recover the damages from the vehicle owners even if they were not driving the vehicle.
This is not a new law. It has been around almost a hundred years. “Adopted in 1920, Florida’s dangerous instrumentality doctrine imposes strict vicarious liability upon the owner of a motor vehicle who voluntarily entrusts that motor vehicle to an individual whose negligent operation causes damage to another.” This is how the Florida Supreme Court described the doctrine in an opinion it wrote in 2000 in Aurbach v. Gallina, a case where an 18 year old driver allegedly caused an accident with a vehicle owned by her mother. In that case, the injured plaintiff also sued the driver’s father on a theory that both parents should be liable as the ones who made it possible for their child to have the vehicle in the first place. (The court decided that, because the father’s name was not on the vehicle’s title, he was not liable.)
So, while a motor vehicle costs lots of money, it’s not really an asset. It’s really a liability.
Jim Martin 10/3/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
Who Gets to Choose the Attorney When Someone Dies?
It is a common misconception that when a Florida resident dies the attorney who drafted the will must be hired to probate the estate. This goes along with the misconception that the attorney represents “the estate”. The reality in Florida is that the attorney represents the personal representative and not the estate and not the beneficiaries. Therefore, it is up to the personal representative to choose the attorney. The same thing applies to living trusts. It’s the successor trustee who has the right to choose an attorney. Thus, the attorney who prepared the will or trust for the person who died has no client.
Jim Martin 8/15/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
The Need to Be Appointed Before Acting After Someone’s Death
It’s happened more than once. A Florida resident dies. A family member finds the will, sees his or her name as personal representative (executor), and starts giving away furniture, cleaning out the house, etc. Unfortunately, doing these things might create personal liability. That’s because the person named in a Florida will as personal representative generally has no right to start acting until the probate court appoints him or her to the office of personal representative. The same thing applies when the person is named successor trustee of a trust, except instead of a court appointment the person generally accepts the position of trustee by a written acceptance. In either case, it’s best to have a Florida lawyer prepare the legal documents for appointment and acceptance.
Jim Martin 8/15/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
An Alternative to Percentage Probate Fees: Hourly Fees
One of the reasons people try to avoid probate, besides the obvious one, is to avoid percentage probate fees. Florida, like many states, expressly allows attorneys to charge attorneys fees based on a percentage of the value of the probate estate. But there is an alternative: hourly fees. An hourly fee more directly compensates the lawyer for the effort involved in the probate proceeding. The effort varies depending on the number of assets, types of assets, number of creditors, number of beneficiaries, unusual facts, and other factors. The value of the probate assets is just one factor. A lower value probate estate can take as much effort as a higher value probate estate, and vice versa. Florida lawyers are allowed to charging hourly attorneys fees instead of percentage probate fees. So, it’s always worth asking.
Jim Martin 8/15/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
When Does a Trust Avoid Probate in Florida: Almost Never
People often create revocable living trusts in Florida to avoid probate. And some of those people actually transfer assets into the trust to fund it. And it’s true that the trust’s assets are not assets of the probate estate when the person dies. But probate is still required for another reason: clearing possible claims of creditors.
You see, in Florida, revocable living trusts are liable for the claims of creditors of the probate estate. In addition, creditors have two years to file claims if there is no probate proceeding. The probate proceeding claims process reduces the time to file claims to just 3 months after notice to creditors is published. That’s why a trust almost never avoids probate in Florida. There is no creditor claims process for trusts, but there is one for probate.
If a trustee ignores this, the trustee could be liable to creditors after distributing the trust. That’s why wise trustees always file a probate proceeding even if the trust is fully funded with all the assets the decedent owned at death.
Jim Martin 8/15/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
All Original Wills Must Be Filed When Someone Dies
Everyone knows that it’s the “last” will that someone makes before they die that counts. But it’s really the last “valid” will that counts. So who’s to say what’s the last valid will? The probate court gets to decide that. And for the probate court to decide, it needs to have all the wills that person ever made. So, if a rich uncle dies and leaves two wills in his desk at home, the person who finds them needs to file both of them with the probate court, and not just the one closer to date of death (and certainly not just the one that names that person). In Florida we have a law that requires all wills to be filed within 10 days, and the law has teeth in it. (See prior blog).
Jim Martin 8/15/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
Florida Wills Must Be Filed Within 10 Days After Death
I hear it all the time. “My uncle died in Florida last month and his brother won’t let me see the will. What can I do?” Well, Florida law requires that anyone holding an original will file it with the Clerk of Court within 10 days after receiving information of the death. If they do not file it within 10 days, then they can be required to pay damages and attorneys fees. It is surprising how effective a letter from a lawyer can be to such a person informing them of this law. The will gets filed with the Clerk, and anyone can obtain a copy of it then.
Jim Martin 8/15/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
Don’t Ignore Formal Notice of a Florida Probate Proceeding
Formal notice of a Florida probate proceeding must be served by a means of delivery requiring proof of delivery. Formal notices are sent along with copies of various probate documents in order to legally bind the person being served. The formal notice in a probate proceeding is similar to a summons in a civil proceeding. Service of a summons in a civil case is intended to give the court jurisdiction over the person being served. Service of formal notice in a probate proceeding is intended to give the court jurisdiction over that person’s interest in the probate estate. Florida Statutes Section 731.301(2) states: “Formal notice shall be sufficient to acquire jurisdiction over the person receiving formal notice to the extent of the person’s interest in the estate.”
When a Florida resident dies, a probate proceeding is usually required. The decedent’s last will and testament is filed with the Court along with a petition for administration asking the Court to admit the will to probate (validate the will) and appoint a PR (personal representative or executor). The PR will publish notice to creditors in a newspaper, serve possible creditors, collect assets, pay debts and expenses and taxes, and then make distributions to beneficiaries.
Various parts of a probate proceeding might call for service of formal notice. For example, Florida Probate Rule 5.025 requires service of formal notice to determine beneficiaries, construe a will, remove a PR and other adversary proceedings. Rule 5.530 requires service of formal notice of a petition for summary administration on beneficiaries and known and reasonably ascertainable creditors who have not signed the petition.
Florida Probate Rule 5.040(a)(1) states what the formal notice consists of, as follows: “�(1) When formal notice is given, a copy of the pleading or motion shall be served on interested persons, together with a notice requiring the person served to serve written defenses on the person giving notice within 20 days after service of the notice, exclusive of the day of service, and to file the original of the written defenses with the clerk of the court either before service or immediately thereafter, and notifying the person served that failure to serve written defenses as required may result in a judgment or order for the relief demanded in the pleading or motion, without further notice.”
Florida Probate Rule 5.040(a)(3) states that formal notice of a Florida probate proceeding shall be served either in the usual way of serving process in Florida (sheriff, process server, etc.) or by sending a copy by any commercial delivery service (e.g., FedEx, UPS, etc.) requiring a signed receipt or by any form of mail requiring a signed receipt (e.g., U.S. Mail certified return receipt requested). The Rule goes on to require that �a verified statement of service be filed with an attachment consisting of the “signed receipt or other evidence satisfactory to the court that delivery was made to the addressee or the addressee’s agent.”
So, it’s important to remember that when it comes to Florida probate proceedings, you don’t need to serve formal notice by sheriff. You can serve it by FedEx, UPS, etc., as long as you follow the rules. And if you receive a formal notice, don’t wait for the sheriff to show up to serve you since the service by mail, FedEx, etc., might be valid enough to bind you under Florida law.
Jim Martin 8/5/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
Electronic Filing in Florida Courts is Here…Soon
It looks like electronic filing of pleadings in state courts will become a reality for Florida lawyers in 2009. The Florida Legislature has mandated the Florida clerks of court to “implement an electronic filing process” in order to “reduce judicial costs in the office of the clerk and the judiciary, increase timeliness in the processing of cases, and provide the judiciary with case-related information to allow for improved judicial case management.” Ch. 2009-61, Laws of Florida. The deadline to begin implementation is October 1, 2009.
Lawyers in Sarasota County got a jumpstart on efiling (also known as e-filing) because Clerk of Court Karen Rushing was an early advocate for efiling. See“Deadlines set for statewide e-filing, integrated court computer system”, Fla. Bar News 6/1/09. Lawyers in bankruptcy and federal practice have also had this capability (responsibility?). Soon, all Florida lawyers will have the luxury of being able to electronically draft, sign and file their pleadings in Florida courts.
The next step is for the Florida Supreme Court to “set statewide standards for electronic filing to be used by the clerks of court to implement electronic filing.” The Legislature requested this by July 1, 2009.
Jim Martin 7/5/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
Florida Probate Court Filing Fees Could Go Sky High
Probate filing fees in Florida might increase by double digits to help close a funding gap if the 2009 Florida Legislature enacts House Bill 5117. The bill, which was filed on 4/1/09, would increase the $280 filing fee for a regular probate administration to $1,000 or $2,000 or $3,000 depending on the value of the estate. The $1,000 fee would apply to estates valued from $75,000 to $250,000. The $2,000 fee would apply to estates from $250,000 to $1,000,000. The $5,000 fee would apply to estates over $1,000,000. Estates under $75,000 would keep the $280 filing fee.
If enacted, the bill would certainly raise much-needed revenue for the courts responsible for these probate cases. Another effect could be the use of more probate avoidance devices, such as living trusts, joint accounts, life insurance, annuities, retirement plans, etc.
The new filing fees would also apply to guardianships and certain other proceedings.
Jim Martin 4/7/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.
Florida Legislature Considers Making Probate Accountings Exempt from Public Disclosure
The 2009 Florida Legislature is considering a bill which if enacted would exempt accountings filed in probate proceedings from public disclosure. The Florida Probate Code requires the personal representative of the estate of a decedent to file an initial inventory of the assets of the probate estate within 60 days of being appointed PR and to file a final accounting of the receipts, disbursements, distributions, capital transactions and remaining assets at the conclusion of the probate proceeding. Interim accountings are optional. Under present law, only the inventory filed in probate proceedings is exempt from disclosure. The interim and final accountings are publicly available.
The reason for this difference in present law goes back to the 1970′s when Norman Dacey wrote his bestselling book on how to avoid probate. Dacey criticized the public nature of probate and encouraged people to write living trusts to avoid probate. Partly in response to the public concern about probate, the Florida Legislature revised the probate code in about 1974 by providing that the inventory not be subject to public inspection. It made no such provision for the accountings, which actually have much more information. This inconsistency has been the law for over 30 years.
The 2009 Florida Legislature has before it Senate Bill 1400 that would provide that both the inventory and all accountings are exempt from public disclosure. Here are the findings in the proposal:
“The Legislature finds that it is a publicnecessity to exempt from public-records requirements all inventories of property of estates of decedents, including amended and supplementary inventories, and all inventories of elective estates of surviving spouses, whether initial, amended, or supplementary. In addition, in order to preserve the privacy of information that would otherwise be available in an accounting filed in an estate proceeding, the Legislature finds that it is a public necessity that all accountings, whether interim, final, amended, or supplementary, filed in the estate proceeding be made exempt from public-records requirements. The Legislature finds that the public disclosure of estate inventories and accountings would make public the decedent’s financial information and would produce undue harm to the decedent’s heirs or the beneficiaries of the decedent’s estate.”
Jim Martin 4/7/09
FLORIDA BAR STATEMENT The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you free written information about the lawyer’s qualifications and experience.