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Florida Estate Planning [An Ultimate Guide]

Florida Estate Planning

When referring to your Florida estate planning, the term “estate” consists of the bundle of assets and liabilities that  you own at time of your death.  When referring to your “assets”, they consist of anything that you own that has some value.  Your  “liabilities” are basically debts or amounts that you owe to third parties.

Despite the fact that almost everyone dies with at least some assets to give and some liabilities to settle, most people do not create a plan to make this an organized and predictable process, thus leaving others to basically figure it out.

In fact, somewhere between 50% and 80% of people (which varies depending upon demographics) do not have a simple will, and a whopping estimated 92% of persons under age 35 do not have this simple document.

2021 Estate Planning Guidance in Florida

Denial of important life decisions often leads families down a perilous road.  Research suggests that among the top reasons for neglecting to prepare a simple will is the belief that it is not necessary (mostly men) or it costs too much (mostly women).

Florida Estate Planning for 2021 Ultimate Guidance

Other reasons include that it is too time-consuming or the mistaken belief that the surviving spouse will receive all the assets anyway.

Let’s face it; most people would rather work on their taxes or get a root canal than work on their estate planning.  However, a growing knowledge of the need for estate planning, and the desire to get this done cheap and easy has allowed huge “on line form” websites to succeed in peddling inadequate documents as quick and easy solutions.  If you’ve started down that road, I encourage you to read the disclaimer on these websites because the loved ones are always left to pick up the pieces of a disorganized or incomplete estate plan.

Dispelling Common Estate Planning Myths

  • Myth 1 – Having good estate planning documents will only complicate things. Answer – it is already complicated and good documents simplify things.
  • Myth 2 – Doing my estate planning might hasten my death. Answer – nonsense.
  • Myth 3 – Its easier if just put my adult child’s names on everything. Answer – this is often a reckless and irreversible strategy that could destroy the estate
  • Myth 4 – My advisor, accountant, or friends can help me. Answer – highly risky like having your non-mechanic neighbor repair your Audi.
  • Myth 5 – Legal form providers will help me figure it out. Answer – not recommended because these are “self-help” providers who have no duty or motivation to represent you.

Why Having a Good Florida Estate Plan Matters?

When a “life event” happens such as the death of a family member, the other family members are often thrown into some level of disarray due to grief and the temporary destabilization of the family unit.  During this difficult time, there are many financial decisions that need to be made and the situation often becomes very confusing.  The era of electronic records has made this even more complicated because families may not know how to access the deceased person’s records.  The legal backdrop of all of this is that people do not have the legal authority to act for one another or receive inherited assets immediately just because they’re family.  Quite the contrary, the law assumes that each individual has legal authority only over themselves, and assets that are not designated to transfer automatically must go through a court process called probate in order to be passed to the heirs or beneficiaries.

If a last will and testament in Florida (hereafter referred to as “last will”) has been validly prepared, the court will have some guidance in the process of passing assets to heirs.  Remember the statistics?  Having no last will means no guidance for the court, and this means that the court will fall back on the state probate statutes.   The state statutes are essentially the government’s predetermined estate plan and usually result in splitting up the estate between some variation of spouse, kids or other blood relatives.  However, what many don’t know is that the probate fees may be increased due to how “screwed up” the estate is. This issue will be addressed more in this article.

The family members who are appointed to make decisions also involve an important decision, and the failure to designate these responsibilities regularly leads to family disputes.  Finally, the “all-important” question of “who gets what?” is impossible to answer, at least initially, without a last will.

So we’ve established that there is a rational basis to do some Florida estate planning and that it is advisable to have a last will and testament in Florida.  A common assumption that follows is that a last will is all that is needed.  Time to dispel some more common myths…

Although a last will is an important document, for all of the reasons mentioned above, its role is limited to how assets are distributed upon death and 2 other Florida estate-planning documents are needed at a minimum to make all of this stuff work.  A recent “on line” estate plan that I reviewed for a new client included 2 wills and nothing else, and the estate was over $3,000,000 and this scenario would have spelled disaster for the loved ones and the estate itself.

Florida Estate Planning Basics

For any size estate, the 3 critical Florida estate planning documents are:

  1. Last will (with guardianship designation if kids)
  2. Durable power of attorney
  3. Advance healthcare directive

The big 3 Florida estate documents are important because they address different situations or “life events”.  For estate planning purposes the 3 important life events are:

  1. Durable power of attorney – disability
  2. Advance healthcare directive – incapacity
  3. Last will – death

The 3 key estate planning documents in Florida relate to the 3 different life events as follows:

  1. Disability and Florida durable powers of attorney

If you become disabled, your financial concerns do not just stop.  Your bills will continue to need to be paid, and your business will need to continue to operate if you are a business owner.  Your banking will need to be managed, and any other ongoing financial matters will need to continue as efficiently as possible.   A power of attorney is expressly for the purpose of allowing another person to conduct business on your behalf.  Remember, your loved ones do not have the authority to step in for you just because they are family.  In fact, banks and other financial providers tend to be especially paranoid about family members seeking to meddle with another family member’s business affairs.  In the event of disability, all powers of attorney will become ineffective except one distinguished document and that is the Florida durable power of attorney.  The “durability” of this document causes it to survive disability, and this is fundamental to estate planning.  For this reason, regardless of how many powers of attorney you’ve granted, you need to have a durable power of attorney with specific individuals who are designated to act on your behalf in the event that you become disabled.

  1. Incapacity and Florida advance healthcare directives

There are a few terms used to describe the healthcare directive in Florida, two of which are medical directive and advance directive or any combination therewith (i.e. advance medical directive).  This is a document often included with other medical documents such as a Florida living will and a Florida designation of healthcare surrogate.  Other names for these two documents are a do not resuscitate or medical power of attorney.  These two medical documents make up your advance healthcare directive to cover yourself and your family. If you’re asking yourself the question, “do I need both a living well and a healthcare directive,” the answer is a resounding yes. Both of these documents fulfill important legal functions.

  1. Death and the Florida last will and testament

The last will is the stuff of high drama.  This is the most formal and most recognized of the “big 3” estate documents because it is the one that usually makes headlines, notwithstanding the Shiavo case and that big living will splash.  When somebody important dies, the first questions are often did they have a will and what did it say or who got all the money?  These are not unreasonable questions because the last will becomes public record as soon as a probate is filed.

The last will is what is called a “testamentary document,” which means that it provides for a distribution of assets upon death.   Because of this, the formalities for the last will are often stricter than other documents.  By formalities of a Florida last will and testament, I mean the requirements for signing it that make it a valid and enforceable document.

In addition to formalities, the body of the last will must be well drafted so that it clearly identifies who gets which assets and if there are any special distributions, which are often called bequests.

The Florida Probate Process

Scales of Justice to Illustrate Powers of Attorney and Potential Problems

The as Florida probate process is a court process in which it is necessary to retitle your estate assets into the names of your beneficiaries.  The Florida last will is essentially an instruction sheet for the probate court and must be deemed “admissible” to be allowed to be so.  The way that the last will is deemed admissible is for the court to confirm that it meets all of the required formalities for wills in Florida.  A well-drafted last will can make the probate process in Florida much easier.

There are different types of probates to be aware which are:

  1. formal administration,
  2. summary administration
  3. ancillary administration.

A formal probate administration in Florida generally means that there are no shortcuts and that a full petition will be filed complete with a formal “notice to creditors” and full process that will take some time to allow all assets to be inventoried prior to the final court order.  A summary probate administration in Florida is often for cases with less than a minimum amount of around $75,000 (total assets) in the estate and this option usually takes less time and is less expensive to file.  An ancillary probate administration in Florida, and other states usually, is a probate in another jurisdiction from where the testator resided, so an example would be a resident of Florida who also had real property in Indiana.  A probate would need to be filed in both states if the testator had real property in both states, so perhaps a formal administration would be filed in Florida, and an ancillary administration would be filed in Indiana.   The cost and time burden of probate, along with the possibility of multiple probates, has necessitated options to allow beneficiaries to avoid this process altogether.

Beneficiary Designations and Joint Titling of Assets

Assets such as life insurance policies in Florida, IRAs and 401(k) accounts may not be subject to probate if proper beneficiaries are named.  Remember, if the named beneficiary of the account is “the estate” then a probate administration in Florida will be required.

Another common and often misused method of avoiding probate is through joint titling of assets or using transfers upon death (“TOD”) or pay on death (“POD”) accounts.  While these can be effective strategies, they need to be very carefully considered and are not always recommended due to the issues that can arise and the superiority of using a revocable trust for identical planning purposes.

You can visit our article about why to avoid “jointly titling” assets with adult children for some guidance in this area.

Florida Revocable Living Trust Planning

When a revocable living trust in Florida (hereafter “trust” for purposes of this section) is properly in place, and assets are properly titled in the trust, then a probate may not be required.  By “titled in the trust” I mean that, instead having an individual name on assets, one can have “Tom Jones, Trustee of the Jones Family Living Trust” on the title to the assets.  In this case, a private trust administration could then take the place of the public probate administration process.

A Florida trust administration is a private family process, as opposed to the public process of probate, and involves your hand-picked Florida trustee acting to notify all beneficiaries, conduct an accounting of the assets, and privately distribute assets to the beneficiaries in accordance with the specific terms of the trust.  The trustee may be assisted by professionals and may even receive reasonable compensation for serving as trustee.

Trust administration in Florida is a relatively simple process that may be completed in days or weeks rather than months at a fraction of the cost of probate. Also, creditor issues or disputes that can often occur in probates may be entirely avoided by using a revocable living trust.  Additionally, a trust can afford protection for you and your beneficiaries on a number of other fronts, which may include estate tax protection, disability planning, divorce protection and creditor protection.

For our purposes, a revocable or living trust is the one generally utilized for simple estate planning and probate avoidance as distinguished from an irrevocable trust.  Visit our other articles for more insight about Florida revocable living trusts verses irrevocable trusts.  There is also more to learn about Florida joint revocable living trusts for spousal planning.  Finally, there are numerous special provisions that can and should be included in your revocable trust if they are applicable to your estate and these may be necessary to get maximum benefit from your Florida revocable living trust For example, a Florida IRA trust provision may be used to maximize asset protection for inherited IRA beneficiaries; however, you also should know that this option changed significantly with the federal enactment of the Secure Act which impacts Florida estate plans.

Remember, your Florida revocable living trust must be funded if it is to be effective and this means that your assets must either be “titled” in the name of the trust or “pointed” to the trust by some legal designation.  Visit our article about funding a Florida revocable living trust for more insight into this process.

Revocable trust planning, thoroughly done, can solve a variety of estate planning problems.  Probate can be avoided and unnecessary liability from other joint titling schemes can be avoided.  Disability and asset protection planning for heirs can be accomplished and even Florida Medicaid and SSI disability benefits in Florida can be preserved.

Advanced Florida Estate Planning Considerations

Federal Estate Tax Planning in Florida

By definition, federal estate taxes (or death taxes) are exactly what they sound like, which is a federal tax levied upon death based upon the amount of the gross estate of an individual.  In Florida, we are only concerned with estate taxes, a/k/a “death taxes” or “inheritance taxes” at the federal leveland there are exemptions to consider when planning.  If you aren’t a Florida resident, your home state of residence may also have a state estate tax and exemptions may be unique so check on this as well.  For our purposes, we’ll refer to the federal estate tax or death tax.

Often, advanced Florida estate planning focuses on planning for future generations, by minimizing federal estate taxes through maximizing spousal estate tax exemptions in Florida, using gifting strategites in Florida, and  facilitating Florida wealth transfer with generation skipping trusts using federal GST exemptions.   Proper trust planning is utilized in many strategic ways to limit federal estate taxes.  For example, A-B Trust Planning in Florida for estate tax planning, may be implemented within a revocable living trusts in Florida where separate trusts are created upon the passing a first spouse.  Florida irrevocable trusts are also often used in various ways through gifting and using GST exemptions to minimize federal estate taxes.  For some tax planning tips related to irrevocable trusts, check out irrevocable trust strategies for minimizing taxes in Florida, using SLAT Trusts in Florida , using ILITs in Florida, and using Charitable Trusts in Florida to reduce federal estate taxes.

Another estate tax strategy can use a tiered Florida LLC and gifting to provide both estate tax planning and Florida asset protection.

As a bit of history, a number of federal estate tax changes occurred under the Trump administration, and as this has been a continually evolving area, more estate tax law changes are on the horizon under the Biden administration, as well as changes for capital gains in Florida and elsewhere and possibly changes to the step up in basis at death in Florida and elsewhere, leading to new planning considerations.

For all of the above reasons, it is very important to have your estate tax plan looked at for estate tax implications and to consider new strategies and tools for wealth transfer, estate tax mitigation and asset protection.

Business Continuation Succession Planning in Florida

Another common advanced planning issue that arises is blending your Florida estate plan with critical business succession planning otherwise known as business continuation succession planning in Florida.  If you have a family business, a closely held business or investment company of any kind, it is important to ask who will operate that business in the event that a key person dies or becomes disabled.   Usually, if these concerns are a factor, then a Florida buy-sell agreement in some form is used.

Medicaid and Special Needs Planning in Florida

Medicaid and special needs planning in Florida is an advanced area of Florida estate planning because of the complexity of the law governing these areas.  It is important to understand that those who have been qualified for Florida Medicaid planning or Florida SSI benefits can lose their benefits if they receive an untimely inheritance.  The way to manage this risk is to utilize proper legal strategies such as a Florida special needs trust or a Medicaid will in Florida.  All of these measures are very specific and may or may not be advisable based upon the unique circumstances of the estate.

Digital Estate Planning in Florida

Now more than ever, it is becoming critical to gather all information concerning “digital assets” for estate planning purposes.  For a full review of this area, check out estate planning for digital assets in Florida.

For more insight into common Florida estate planning terms or for more guidance about updating old estate planning documents in Florida.

This article is an excerpt which has been updated in 2021, as originally adapted from the book Legal Mumbo Jumbo written by Steven J. Gibbs which is available in hard copy and includes similar guides on a number of other related legal topics.  

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