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Should I become a Florida resident?

The State of Florida has a constitutional prohibition against any state inheritance tax being levied against the estate of Florida residents.  (State personal income taxes are also constitutionally prohibited.)  Many northern states do impose substantial state inheritance taxes on their residents.  These states include California, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, West Virginia, Wisconsin and others.  If you are now a resident of one of these states with a taxable estate and you become a Florida resident, your total tax burden will be reduced by eliminating or reducing the state inheritance tax.  We have additional information explaining how you go about becoming a Florida resident.

Why should I make a Will?

If you do not make a Will to name your heirs, the laws of the state will decide who gets your property, who administers your estate, and who becomes the guardian of any of your children who are minors.  If you are married, part of your property may go to your children or other relatives instead of all to your spouse as you might expect.  You can create special trusts for minors or others which contain specific provisions providing for education, health care or emergencies.  If tax planning is desired, clauses can be inserted which are specially tailored for your estate to substantially reduce or totally eliminate estate taxes.

Why should a lawyer prepare my Will?

Your Will should cover many possibilities to avoid serious problems for your beneficiaries.  Only an experienced attorney can assure the correct language, form, and manner of signing the Will and having it witnessed, so that it is an effective legal document.

Why is the legal language necessary?

The terms and phrases used by the lawyer in your Will have a very special meaning to the courts and if the wrong words are used, or the right ones omitted, your estate may not be left to those you planned to provide for.  Much archaic language has been eliminated, but there are still accepted legal terms which should be used to make your wishes very clear to the courts.  However, to the extent we can, we strive to make your Will as simple and to-the-point as possible.

If I own everything jointly with my spouse or with my children (or in trust for them), won't my estate save time and taxes, and why would I need a Will?

Joint ownership is no substitute for a carefully drafted Will.  You or your spouse may have assets in your sole name which you have forgotten; either of you may inherit from others; you may both die in a common accident; or for a number of other reasons it is prudent to have a Will.

All jointly owned assets will be included in your estate for Federal estate taxes.  If your estate is moderate or large, the total tax burden on the estate may be increased.

Under some circumstances, it may even trigger Federal gift taxes (if the joint owner or one of the joint owners is not your spouse).  On the other hand, joint ownership of substantially all of your assets may be prudent.  We will advise you on this matter.  No single planning device is correct for all situations, just as no medicine cures all diseases.  You, as well as your estate, are unique, and require a competent professional analysis.

Joint ownership of assets may inadvertently distort your intended estate plan to the substantial disappointment of your intended beneficiaries.  This may result in hurt feelings and occasionally in lawsuits being brought by unhappy beneficiaries.  Bank employees and stockbrokers frequently recommend this type of ownership without realizing the consequences or impact on your estate plan.  No joint or "in trust for" ownership should exist without discussing it with your attorney.

I have a Will but I want to make a small change; can't I do that without an attorney?

You may invalidate the entire Will if you cross out or add anything.  Let us draft a Codicil (amendment) to your Will, or draw up a new one to make the change.

How often should I revise my Will?

Any time there is a change in circumstances, such as moving from another state, births or deaths in the family, a substantial change in your assets or changes in the tax or probate laws, you should discuss it with us; otherwise, we recommend a brief review of your Will every three to five years.

What can I do to plan my Will before my appointment with an attorney?

  • You can make an Inventory of your property.  It is important that the inventory indicate how your assets are owned; for example, by you individually or jointly with someone else.
  • You can decide who will be the personal representative (executor), the trustee of any desired trusts, and/or the guardian of your minor children, in the event you and your spouse die together.
  • You can decide who will receive your personal clothing, jewelry, furniture, car, etc.  Often, these are left to the spouse.
  • You can decide who will receive cash sums, if any.
  • You can decide who will receive your residence, unless you are survived by a spouse or minor child.
  • You can decide to make gifts of income by setting up a trust.
  • You can decide whether your personal representative should reserve or sell an interest you have in a business or other special asset.
  • You can decide who receives the balance, or residue, of your estate, and how and when.

Whom should I name as Personal Representative (Executor) of my estate?

Spouse, relative, friend, bank trust department, lawyer; the answer depends on your individual circumstances, the nature of your assets and your over-all estate plan.  Each offers advantages and disadvantages, and there is no universal answer.  There are certain limitations which prevent a non-resident of the State of Florida from serving unless that person is a blood relative of yours.  We will discuss this in more detail at your conference.

A common estate plan involves a bequest of all assets to the surviving spouse, but if both die in a common accident, then to the children.  In this instance, the common approach is to want to name all the children as co-executors.  We do not recommend having co-personal representatives.  Multiple personal representatives generally mean added expenses to the administration of your estate.  We always recommend that you consider naming a bank or some other entity as your final successor personal representative in case your individual successor personal representatives are unable to serve because of some catastrophic event.  Let us discuss the alternatives with you.

What does my Personal Representative have to do?

Basically, the duty of the Personal Representative is to collect all the assets, notify creditors, pay all the bills and taxes, and distribute the balance to the beneficiaries named in your Will.

Specifically, your Personal Representative must gather together your records and examine them to determine what you own and where it is; (our asset list form is very helpful there), he must invest estate assets while the estate is in probate; he must investigate to determine the identity of your creditors, notify them to file claims and then determine the validity of all claims made; he must collect any benefits due the estate from Social Security, Veterans Administration, insurance, wages, profit sharing plans or Medicate; he must cancel charge accounts, subscriptions, memberships, (and obtain refunds when available), and provide for the care and maintenance of your residence.

Your Personal Representative must file tax returns, determine and pay any estate taxes, and make decisions concerning allocation of deductions between estate and income tax returns to produce the lowest tax result.  He must decide when to make distributions from the residue and what assets to distribute; and these decisions may have a substantial tax impact on the beneficiaries.  He must make an accounting of all transactions to the court and to the beneficiaries to wind up the administration.

Who selects the attorney for my estate?

One of the most important duties your Personal Representative will perform is the selection of an attorney to represent him or her with regard to the probate of your estate, the associated tax matters and the other duties mentioned above.  You may be surprised to learn that you cannot select the attorney for your own estate.  That is a duty which lies exclusively within the authority of your Personal Representative.

The law does not require your Personal Representative to select the attorney who drew your Will to represent the estate.  If that attorney is competent in this field, there is certainly some logic to doing so; for example, that attorney is one of the few people who has discussed your intentions regarding your estate with you in depth.  However, the Personal Representative is legally free to retain his son-in-law, or his golfing buddy or his bridge partner (if that person is a Florida lawyer).  If you have a strong preference for whom should represent your estate, you should make that known to the person you designate as your Personal Representative as this may have a bearing on the person you select to serve in that capacity.

Should my Will contain a Trust, and what can it do for me?

A Trust is a transfer of legal title of assets to a Trustee while the beneficial interest belongs to the named beneficiaries.  A Trust may be a good way for you to protect your child's or your widow's inheritance and save taxes.  It may allow for flexibility to meet special matters or contingencies (disability, remarriage, etc.)

Certain Trusts may be tailored to your special needs and may also be designed to save taxes as well.  There are Living Trusts (discussed below) and Trusts Under a Will (Testamentary Trusts).  We can discuss their advantages and disadvantages in your situation at your conference if you desire further information.

What effect does my Will have on my jointly owned assets and my insurance?

This is very important and frequently misunderstood.  Also, please see the comments in the questions discussing joint ownership above.  The provisions of your Will affect only those assets in your own name.  You cannot will your joint bank account or other assets you do not own as individual and sole owner.  Thus, assets owned jointly (with right of survivorship), joint bank accounts or certificates of deposit, including those designated "In Trust For . . .", life insurance proceeds (unless the estate is named beneficiary) joint and survivor annuities, and proceeds from a qualified retirement plan may not be willed.  The joint owner or designated beneficiary will inherit regardless of the provisions of your Will.

Special caution needs to be taken in the ownership of these non-probate assets since your Will does not govern their disposition on your death.  This may unintentionally distort your intended plan of ultimate distribution of your assets.

Many people believe if they will one-half of their estate to A and one-half to B, that each will receive one-half.  This is untrue if A or B is also a joint owner of a bank account (even if only for convenience), or is designated in an "In Trust For" account.  In such instance, A or B receives the bank account (or CD) and one-half of everything else in the estate.  Well-meaning personal bankers may recommend this form of ownership without understanding the effect on your overall estate plan.  Caution should be exercised to be certain you understand the full effect of such account ownership before it is created.

A further caution must be added.  Many people place the name of a child or friend on their bank account so that child or friend can write checks if they become temporarily disabled from illness or otherwise.  They do this without realizing that the amount remaining in that account upon death becomes the legal property of the child or friend and does not go to the relatives in the shares provided in the Will.  If you carefully read the provisions of the signature card which you sign, you will discover the provisions regarding the account survivor's entitlement to these funds.

Finally, there is another myth about joint accounts, living trusts and insurance.  Most people believe these will be exempt from estate taxation.  This is untrue.  Generally speaking, all assets, whether passing through probate (under your Will) or not, insurance, jointly owned assets, as well as living trusts, are included in the "gross estate" for federal estate tax purposes.  Contrary to what you may have been led to believe, neither joint ownership nor a Living Trust will avoid estate taxation any more than a properly drawn Will.

Can I avoid estate taxes by creating a Living Trust, and is my life insurance free of estate tax?

Living Trusts in which you retain the right to receive the income during your lifetime have no estate or income tax advantages.  Also, the proceeds of your life insurance policy are usually included in your estate for tax purposes.  There are perfectly legal ways to avoid this taxation which we will discuss with you.

What about annual tax-free gifts?

You may make gifts of $10,000 per person per year.  The number of persons to whom you may make these gifts is unlimited.  If yours is a taxable estate, annual gifts may be a way to save estate taxes; however, they should be a part of a coordinated tax plan.  In addition to the $10,000 annual gift, under limited circumstances, you may also pay medical and educational expenses in an unlimited amount for the same or other persons.

Should I have a Revocable Living Trust?

There are instances where the Living Trust is an excellent tool in the estate planner's tool kit.  There are also other situations where it is not.

It is a common belief that the use of a Living Trust (as opposed to a Will which must be probated) will save estate taxes.  This is misleading.  Actually, if the disposition provisions of a Living Trust are structured properly, estate taxes for a husband and wife may be reduced or eliminated; however, this same reduction or elimination of estate taxes may be accomplished through a Will.

One of the most beneficial aspects of a Living Trust is its ability to provide for incapacity.  If you should become incapacitated or otherwise unable to effectively manage your property, a Living Trust permits the successor Trustee to take over the management of your property.  Depending on the terms of your trust, the successor Trustee will provide for your needs and those of your loved ones.

We would be pleased to discuss both the advantages as well as the disadvantages of the Revocable Living Trust with you as it applies to your individual case.  One size does not fit all.

We do frequently both recommend and prepare Revocable Living Trusts, when we believe that is the correct device for the client's particular needs.  We do not, however, recommend it as the universal solution.

Whom should I name as Trustee of my Revocable Living Trust?

Most clients name themselves as the initial Trustee and provide for a successor or substitute Trustee if they should die, resign or become incapacitated.  In deciding whom to name as your successor Trustee, you should consider the same points mentioned above when naming your Personal Representative (Executor).

What is a Durable Power of Attorney?

Most people believe that a power of attorney may be used if you become incapacitated.  In fact, most powers of attorney automatically become invalid upon incapacity or death.  There is a special type, a Durable Power of Attorney, which continues to be valid even after incapacity.  This must be in a special form.

What about a Living Will?

This is sometimes referred to as an Advance Directive.  This document is a legal set of instructions to your family and physicians if you fall gravely ill and cannot then instruct them, that typically heroic measures or machines are not to be used to prolong your life if there is no hope of recovery.  While Living Wills usually include a direction that life-prolonging procedures be withdrawn or withheld; a Living Will may direct that such procedures be provided.  This set of instructions, to be effective, may not be informal or simple "understood by the family", but must meet strict requirements of law to be valid.

What is a Health Care Surrogate Designation?

This document provides that if one becomes incapacitated and is unable to make a rational decision regarding health care of medical treatment or procedures, the person named in this Designation is authorized to make such decisions.  On admission to a health care facility (a hospital, etc.) the facility is required to note in its records whether such a Designation exists, and if it does, the name and address of the person designated.

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Douglas L. Hilkert, P.A.
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