Benefits of Establishing a Testamentary Trust

A trust involves placing legal title with one person or institution for the benefit of one or more beneficiaries. It can be revocable and changeable, or it can be irrevocable. The person creating the trust is usually referred to as the trustor or settlor. The trustee is the person or entity selected to take legal title and administer the trust assets.

 

Trusts are often an important part of estate planning. Most estate planning trusts do not become effective or funded until the person creating the trust dies. If established by the person’s last will and testament, the trust does not even come into existence until the person dies. When the trust is established by a will, it is termed a testamentary trust. The remainder of this article we will discuss some of the uses for testamentary trusts.

 

Believe it or not, some families have what could be affectionately termed a “black sheep.” This person is not good with money, addicted to gambling, alcohol or drugs, frequently married and divorced or just not good with finances. If the black sheep is a beneficiary of the will, he or she may spend or lose their inheritance quickly.

 

Instead of giving the black sheep an inheritance, his or her portion can be left to a trustee in trust. Terms of the trust can provide for distribution of income, payment of medical bills, rent, emergency expenses and such other items as the person creating the trust deems appropriate. The trust can also include provisions prohibiting assignment by the beneficiary and prohibiting attachment by creditors of the beneficiary.

 

Protection from creditors is done by including a “spend thrift” provision. This provision prohibits assignment or anticipation by the beneficiary, which means a creditor cannot reach the beneficiaries interest in the trust. This feature can be attractive even where a black sheep is not involved, as the funds in the trust can provide a safety net for the beneficiary, free from unforeseen creditors. I frequently refer to the unexpected car accident as creating an unforeseen creditor.

 

Trusts are often used to provide for minor children. Funds are placed in trust until such time as the beneficiary, or beneficiaries, attain a certain age. Funds in the trust can be used for the health, welfare and education of the beneficiary, with the remaining assets not distributed until the minor has reached the age that the person creating the trust felt would be sufficiently mature to deal with a large financial gift.

 

Grandparents often create educational trusts for grandchildren. Such trusts usually limit use of the monies to post high school education and provide for final distribution of any remaining funds at the time the beneficiary reaches a certain age.

 

Estate tax savings may also be realized by creating what is known as a credit shelter trust in the will. Under current estate tax law, each person may give two million ($2,000,000) dollars to beneficiaries other than the person’s spouse, free of estate tax. There is generally no estate tax due on a gift to a spouse. However, when the spouse dies, the spouse will be limited to the two million ($2,000,000) dollar exemption from estate tax when assets pass to children, grandchildren or others. The IRS allows tax payers to have most of their cake and eat it too, if a credit shelter trust is utilized.

 

A maximally funded credit shelter trust will involve a decedent leaving two million ($2,000,000) dollars in trust when he or she dies. In simplest terms, the income from the trust can be automatically paid to the surviving spouse and the trustee can have power to invade principal if needed by the surviving spouse. Assets in the trust when the surviving spouse dies pass to children, grandchildren or others free of estate tax, so that the ability of both spouses to give two million ($2,000,000.00) dollars at death free of estate tax is preserved. Better yet, if the credit shelter trust assets increase in value between death of the first spouse and final distribution, that increase also escapes estate tax. Since the estate tax rate on the non-exempt portion of an estate is 49 percent, fully funding the credit shelter trust can save $780,800 dollars in taxes.

 

Even without tax savings, a trust might be created for benefit of a surviving spouse. This is often done in a second marriage situation, where the first spouse to die sets up a trust for benefit of the surviving spouse. At death of the surviving spouse, the assets remaining in the trust are distributed to children from a previous marriage.

 

A trust is a flexible instrument that can be applied to almost any situation. Creating a trust should be discussed with your estate planning attorney.

 

Source:  William G. Morris, Esq., MarcoNews 

How to Prove a Will in Florida

Mr William Edy has posted another extremely education article in the NewsPress about how to prove a will:

Last week, I mentioned that any document purporting to be a last will, or document attempting to make dispositions of a person’s property after his or her death, must be filed with the clerk of court within 10 days after receiving notice that the will-maker, called the “testator,” is dead. Even if they believe the will is invalid or fraudulent, Florida Statute requires that the custodian of the will deposit the will with the court for the proper county, where the probate judge will decide if it is valid and should be admitted to probate. Even if there are no assets in the probate estate, and even if no one intends to file a petition for administration, the custodian must still file the will with the court. Upon the filing of a petition for probate, the judge will decide if it is a valid will.

 

Florida Statute sets forth the requirements for a will to be valid. Any document which attempts to devise the property of a deceased person after his or her death must be executed or signed by the testator in the presence of two witnesses. No particular form of words is necessary to the validity of the will if it is executed with these formalities required by law. The proper execution of the will must be proven to the satisfaction of the probate judge. Probate comes from the Latin word meaning “to prove.”

 

There are three ways to prove the proper execution of the will. The first method is by the inclusion of an affidavit attached to the will, which is signed by the two witnesses stating that they signed their signatures above the affidavit in the presence of the testator, who also signed above the affidavit. This affidavit must be notarized by a notary public who takes this sworn statement from the witnesses and from the testator. The notary must state that the notary either knows the persons taking this oath personally or has seen acceptable identification. The suggested words for the affidavit are set forth in Florida Statute 732.503 entitled Self-proof of will.

 

Attorneys who prepare wills generally attach this self-proving affidavit to the will because it makes it much easier to commence the probate process. FS 733.201 states that self-proved wills may be admitted to probate without further proof.

 

If the will is not a self-proofing will, the second way to prove the will is by the oath of one of the witnesses. One of the witnesses will be required to sign an oath in front of the judge or deputy clerk of court or commissioner appointed by the court. A commissioner is a notary public that the judge appoints to take the witnesses’ oath based upon the request made by the filing of a written motion. A commissioner is generally used when the witnesses are not located in the same county.

 

The third way to prove the will is by the oath before the judge, clerk of court, or commissioner signed by the personal representative nominated by the will, whether or not the personal representative is named a beneficiary of the estate. If the personal representative nominated in the will is not available, then the oath may be signed by any person who is not interested in, or a beneficiary of, the estate. The oath must state that the will is believed to be the last will of the decedent.

 

Individuals moving to Florida often ask the Florida attorney if their will signed in their former state is valid. Florida Statute states that any will, other than a holographic or nuncupative will, executed by a nonresident of Florida is valid if the will would be valid in the state where the will was signed. If the will does not meet the Florida requirements it may become expensive to prove to the judge that the will would be valid in the other state unless it was already admitted to probate in that other state. A holographic will is a will written in the handwriting of the testator. A nuncupative will is an oral will.

 

Lowell Schoenfeld, a Florida board-certified wills, trusts and estates attorney, e-mailed me asking that I remind our readers that oral wills are not valid. Even written letters or statements from the decedent that, for example, one child is to receive an extra $50,000, if that document is not properly witnessed by two witnesses, will not be considered a valid will or even a valid codicil. A codicil is an amendment to a will. He indicated that he had three cases in one week where this issue arose. That oral statement or un-witnessed document will not be effective by the court to authorize the extra gift.

 

Florida Statute also provides that the testamentary aspects of a revocable trust, that is, those aspects which attempt to transfer interests to others after the death of the trust maker, must be executed with the same formalities of the will and may be proved in the same manner as a will. Recently, a client who executed a trust some time ago sent me a courtesy copy of an amendment to his trust to place in his file. I had to call him and inform him that the amendment was not valid because it was not properly executed, even though he had signed the document he prepared himself. Because not all states have this requirement, it is dangerous to use a form from a self-help book or off the Internet.

 

I believe it is improper for an attorney to do something to ensure he or she will be hired to complete the probate.

 

One way is for the attorney to designate himself or herself to be the personal representative, unless the client is a relative or the client has no other friend or relative to nominate.

 

Another way is for the attorney to retain the original of the will so the beneficiaries will have to come to the law office to obtain the original, at which time they will be pitched. Some attorneys do store the originals, but I believe it looks bad.

 

A third way attorneys used to ensure their hiring is to not prepare a self-proving will so the beneficiaries will have to hire that attorney who witnessed the signing of the will to go to court to sign the oath before the judge or clerk of court. Other than out-of-state wills, I do not often see this practice done by Florida attorneys.

 

If you have signed a will, you should have the original in a safe place and review it to ensure that it is a valid will. You should review it or ask an attorney to review it, every few years, especially if you have married, or have adopted, a child after signing the will, which is called “pretermitted.”

 

A pretermitted child has the right to receive the same share they would have received if the deceased died without a will, unless the will clearly indicates that the omission was intentional or unless the decedent is survived by at least one child which is not pretermitted and the will devises substantially all the assets to the spouse. If the deceased failed to marry the other parent of the pretermitted child, the child could inherit all of the estate and the other parent or siblings receive nothing.

 

A pretermitted spouse has the right to the same share they would have received if the decedent died intestate, unless the right to inherit is specifically waived in a prenuptial or postnuptial agreement, or the spouse is provided for, or the will evidences an intention to not make provision for the spouse. Even if the will omits the spouse or fails to give the spouse 30 percent outright, the spouse may elect to take a 30 percent elective share, which was the subject of an earlier article.

 

The elective share may be a problem if the surviving spouse is receiving Medicaid for nursing home expenses. The receipt of assets from the deceased spouse, or the right to receive them through the elective share, could cause loss of those benefits, unless a certain type of will is used by the community, or at-home, spouse.

 

Assuming the will is valid, the attorney handling the probate process will have to decide whether the estate must utilize formal administration, or whether the estate qualifies for one of the simpler administrations for small estates, which will be the subject of next week’s article.

 

Source

Older Floridians Handbook now available

 

The law firm of Carlton Fields and Florida Justice Institute, Inc. are pleased to announce the publication of the fifth edition of the Older Floridians Handbook: Laws and Programs Affecting Older Floridians. Funds for printing the Handbook came from Florida’s Dept. of Elder Affairs.

The

Handbook, first published by the Florida Justice Institute in 1980, provides basic information relevant to Florida citizens over 60 years old and their families in the areas of financial assistance, including public benefits, health-care, housing, and planning for the future, including sections on wills, trusts, and other advance directives. It includes a particularly useful reference section at the end, listing a wide variety of agency referral contact numbers. In addition to the Handbook, the Institute has worked closely on a variety of pro bono matters over the years with Carlton Fields attorneys. The Institute is housed in office space provided by Carlton Fields.

“This is an invaluable resource for our State’s seniors and their families,” said Randall C. Berg, Jr., Executive Director of the Institute. “It is imperative that seniors have access to the kind of information that will help them enjoy their twilight years which they rightfully deserve.”

This handbook is available for free download here.