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Updating Your Florida Estate Plan [the Winds of Change]

Updating Your Florida Estate Plan

For most people, having any estate plan is preferable than not having an estate plan.  However, like the wind, life changes often occur and when this happens your Florida estate planning can suffer.  An updated Florida estate plan reflects your financial and personal situations as they currently are—not how they stood five years ago when you signed your Florida last will.  By updating your Florida estate plan, I am talking about making sure that your old Florida estate planning documents such as your wills, durable powers of attorney, advance medical directives and guardianship documents.  You may also have a Florida revocable trust as part of your plan and this is atop the list of documents that may need to be updated due the winds of change.

Updating Your Florida Estate Plan Due to Life Changes

Personal changes requiring an estate-plan touchup come in nearly unlimited varieties.  It might be something as simple as a desire to adjust how assets are allocated among beneficiaries.  A fairly common scenario is where one of a testator’s adult children plays a disproportionate role in assisting and supporting the testator in his or her later years.  To acknowledge the effort or make up for some of the financial strain, the testator revises his or her will to give a little more of the estate to the helpful child.

Or, a revision might be needed to ensure an asset stays in the family.  Say you inherited the family farm after creating a living trust.  You want to hold the farm within the trust, but you also want to make sure it ends up with your older child (who has a sentimental attachment to the old farm) and not your younger child (who’s convinced that selling it is the way to go).  In that case, you might revise the successor trustee’s distribution instructions to specify that the farm goes to your eldest and a different valuable asset goes to your youngest.

Changing financial conditions present another common reason for estate plan updates.  Significant newly acquired assets should be addressed promptly.  Or the overall value of an estate might increase to the point where an entirely different strategy is needed to transfer assets efficiently.  On the other hand, if your fixed expenses increase (due to higher rent, utilities, or taxes, for example), it may be necessary to adjust the apportionment of assets between retirement and inheritances.

Health and Age-Related Changes

We could come up with a multitude of financial and asset examples, but those are by no means the only personal changes that can call for updating your Florida estate plan.  The simple passage of time might demand some revisions.  If you’re getting older and want to enjoy retirement rather than spending your time managing assets held in your living trust, you might turn over management duties to your successor trustee early—and just be a beneficiary.  Or, if your chosen successor trustee or the executor named in your will is no longer up to the job or has moved out of the area, you might need to update estate-planning documents to designate someone else.

Medical changes can also justify another look at your estate plan.  For instance, if your health starts to deteriorate—or deteriorate faster than you anticipated—it may be necessary to create or revise advance directives.  Florida recognizes living wills and designations of healthcare surrogates (a/k/a “medical POAs”)—which, in the event of incapacity, identify what kinds of treatment you want or do not want and appoint someone else to make healthcare decisions on your behalf, respectively.  If you already have a living will, it’s a good idea to review it from time to time to ensure it still accurately reflects your wishes.  With a designation of healthcare surrogate, you want to make sure your designee is still available and up to the task.

An arising need for extended long-term healthcare can sometimes call for a major overhaul of an estate plan.  Long-term care is incredibly expensive.  When it proves necessary, the costs can rapidly eat up the estate of someone who appeared to be well-prepared for retirement.  With that in mind, it sometimes makes sense to reorganize an estate to satisfy Medicaid’s income and asset tests—thereby allowing for program eligibility.  Medicaid planning can be very complex and sometimes require numerous different strategies.  But, under the right circumstances, it can be the best way to preserve as much wealth as possible.

Family Changes

Blended family to illustrate Florida estate planning for second marriages

Family changes may be the factor that most commonly necessitates updating your Florida estate plan.  The change could be a birth, divorce, or death in the family—or a change in the health or financial status of a beneficiary.  Either way, whenever a big family change occurs, it’s a smart idea to revisit your estate plan.

Florida law even automatically imposes some estate modifications due to family changes.  If you get married after executing a will, for instance, Florida assumes that your new spouse is entitled to the same share he or she would receive if you didn’t have any will at all.  And that’s a big share—often half or the entire estate.  The rule doesn’t apply if there’s a valid pre- or post-nuptial agreement.  But, even if you have one, it’s still a good idea to revisit estate-planning documents after getting married.

A finalized divorce has essentially the opposite effect.  In that scenario, provisions in a will or revocable trust in favor of a former spouse are rendered void (unless the will or a divorce decree expressly provides otherwise).  Assets devised to the former spouse are treated as if he or she had predeceased the testator.  Updating your will or trust lets you exercise more control over how those assets are ultimately distributed.

Appointments of a former spouse in advance directives are likewise voided.  So, if you were counting on your former spouse to be your designated healthcare surrogate, you’ll need to execute a new document.

Because a deceased person cannot legally inherit property, a death in the family can also have significant ramifications on an estate plan.  This problem can be at least partially addressed by naming secondary beneficiaries.  And Florida’s anti-lapse law says that a deceased beneficiary’s lineal descendants inherit property if the original beneficiary was a close relative of the decedent.  But, of course, that might not be what you want to happen.

Non-probate assets that allow beneficiary designations (like retirement accounts and life insurance) become part of a decedent’s estate in the event of a predeceased beneficiary.  Once in the estate, they are distributed like other estate assets.  For retirement accounts especially, that can lead to big tax consequences because an estate is not a “natural person” and therefore can’t benefit from the income tax deferral advantages of IRAs and 401ks.  Regularly updating your estate plan helps avoid future tax hits on your heirs.

Other changes to a beneficiary’s situation can also create a need for estate-plan revisions.  For example, if a disabled loved one is receiving Medicaid, you might need to create a testamentary special needs trust to avoid jeopardizing eligibility.  Or if a loved one has demonstrated poor money-management skills or has a history of gambling or substance-abuse problems, they may need the protection of a spendthrift trust.  If you’re concerned that a beneficiary’s potential divorce could result in a loss of family wealth, a testamentary dynasty might be in order.

Updating a Florida Estate Plan Due to Changes in Florida Law

State and federal laws change all the time, and it’s not uncommon for estate plans to need brushing up to address the changes.  The recent overhaul to federal estate tax laws, for example, had a big impact on estate planning.  Many estates that anticipated qualifying for the estate tax now fall within the significantly increased exemption—and are therefore no longer liable for the tax in its current form.  And the new rule allowing portability of estate tax exemptions between spouses made it easier for well-planned estates to minimize tax liability.

Back in 1999, the Florida legislature amended the Florida spousal elective share statute (which guarantees spouses a minimum interest in a decedent spouse’s estate, notwithstanding the decedent’s will).  Under the revised version, the elective share extends to certain non-probate assets that weren’t previously considered.  Depending on how an estate plan was structured, the change potentially resulted in a dramatic increase in an elective share’s value.  As a result, more estates needed to implement strategies for protecting inheritance rights of children.

A final statutory change worth mentioning is Florida’s recent authorization for “remote signing” of many important estate planning documents.  Though the change has limited impact on existing estate plans, it potentially makes modifying an estate plan a lot easier.  Instead of visiting your attorney’s office to execute and notarize revised testamentary instruments, you can now do much of the signing virtually.  In light of the increased emphasis on virtual business in the COVID-19 era, the Florida legislature’s new law seems almost prescient.  And it means there’s one fewer excuse for not keeping your estate plan up-to-date.

10 common circumstances which often give rise to updating a Florida estate plan

1. Divorce

Divorce splits your estate in half and removes one of the key players.  In this unfortunate event, a new revocable living trust is needed for obvious reasons.  The updated plan must recognize any Florida estate changes due to divorce as well as changes in the beneficiaries upon death and the change may require removal of the former spouse’s beneficiaries.  Also, a change in your designated appointees will most likely be needed due to the former spouse’s role in the estate.

2. Death or Disability of One Spouse

This circumstance also removes a key player but in a different way.  Another successor trustee may need to be appointed due to the inability of the spouse to serve or to accommodate a change in who receives the estate upon the surviving spouse’s death.  There also may be a need to distribute certain assets to a deceased spouse’s beneficiaries following that spouse’s death so a change would need to be made to exclude those same beneficiaries from a future share of the surviving spouse’s estate. Disability of one spouse may require other changes such as the preparation of a Florida special needs trust.

3. Birth or Adoption of Children or Other Dependents

On a happier note, new children and grandchildren change an estate plan.  Estate documents should generally be updated to reflect this change in either natural birth or adoption situations.  Changes can also become an issue in the cases where grandchildren have been adopted directly by grandparents due to the adult child’s inability to care for their children.  There are also situations where a new adult dependent such as an elderly parent is now needier and requires consideration in the estate plan so the revocable trust would need to be updated to accommodate their care.

4. Relocation to a New Home State of Residence

If the winds of change blew you southward, the old estate planning documents may need to be updated to comply with the laws of your new state of residence.  Older or out of state documents may be difficult to enforce where there are notary problems or witnesses cannot be located.  Documents such as a Florida Durable Power of Attorney and a Healthcare Directive in Florida can become obsolete over time and are subject to unique state laws and should be reviewed for compliance with state laws.

5. Adult Child Facing Addiction or Perilous Financial Circumstances

Self destructive behaviors happen and if an adult child would now be harmed due to receiving an outright sum of money because of his or her life circumstances, there are trust options that can be adopted to protect your estate for adult children by holding it in trust for his or her benefit.

6. Changes in Your Financial Circumstances

If you win the lottery or receive an inheritance, your old estate plan may be rendered obsolete due to the need for federal estate tax planning.  Substantial estate tax planning will need to be looked at to avoid a financial disaster.  If you’ve recently suffered financially, a simplified plan with new fiduciaries may be in order to eliminate any confusion among family members or professionals.

7. Changes in Asset Holdings or New Business or Investments

Did you finally decide to take the plunge and start your own business?  There may be numerous succession planning concerns that must be addressed such as who is authorized to sell or continue the business and this is called business continuity succession planning OR business succession planning in Florida.  Another common change is to assure that your company shares have been transferred to your revocable trust.

8. Death or Disability of a Fiduciary Appointee

How about when your bank trustee met its demise a few years ago?  If your old successor trustee in Florida or Florida appointed power of attorney is no longer able to serve, this change must be made to your estate plan or your plan will not work.

9. Pet Adoption

Did the winds of change blow your kids out of the house for good?  Many retirees with empty nests now have a household that includes a lovable pet.  There are pet trust options in Florida to make sure your fluffy little friend is well cared for and this may necessitate changes to your current plan.

10. Charitable Intentions

Perhaps you’ve joined the Peace Corp or become involved in helping challenged teenagers.  Your new found charitable intent may need to be included in your estate plan. Sometimes larger estates can benefit from charitable trust planning for tax purposes.

Suffice to say, life changes of any nature often necessitate updates to your estate plan and it is advisable to explore what is needed at each pivotal stage of life.  A good rule of thumb is to ask your estate planning attorney to sit down with you every 2-5 years as a status.

Steve Gibbs, Esq.

This is an updated version of a previous post dated February 26, 2015. 

 

 

 

 

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