Reopening an Estate

Part 2: The Secure Act – Look at your trust, your beneficiaries, and get it reviewed

March 20, 2020 | by Chepenik Trushin LLP

Do I Need to Amend My Trust Because of the Secure Act?

Last month, in our last blog, we addressed the basics of the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act’) and how retirement plan beneficiary designations will be impacted for individuals who die in or after 2020. But what if you already set up an estate plan with a trust as beneficiary of your retirement account? Do you need to amend your trust or your beneficiary designation form as a result of the passage of the SECURE Act?

The answer is that it depends on whether the trust is an “accumulation” trust or a “conduit” trust and how you want such retirement accounts to be treated. Generally, in an accumulation trust, assets payable to the trust are to be distributed in the trustee’s discretion. A conduit trust, on the other hand, generally requires that assets must be distributed to the beneficiary – in other words, the trust simply acts as a conduit to deliver the assets to the beneficiary, and the assets cannot stay (that is, cannot accumulate) in the trust. It is possible to draft the trust as an accumulation trust with respect to all assets except retirement accounts, just as it is possible to draft a conduit trust that requires only outright distributions of retirement accounts (leaving the remainder of the funds at the trustee’s discretion).

What happens when your chosen beneficiary, heir or personal representative (PR) dies before you do?

January 17, 2020 | by Chepenik Trushin LLP

What if Your Beneficiaries Predecease You?

When preparing a will, people assume that the beneficiaries that they name will outlive them. Unfortunately, testator’s live beyond the life of their beneficiaries all the time. What happens to the gift left for someone who is now deceased?

The original common law understanding was that if a beneficiary predeceases the testator, the specific gift to that beneficiary would “lapse,” and therefore fall back into the residuary estate of the testator. However, in some instances, Florida “Anti-Lapse statutes” may change this result. In Florida, barring any contrary intent appearing in the will, if the devise is to the testator’s grandparent or any descendant of a grandparent, and the devisee predeceases the testator, the devise passes onto the devisee’s surviving descendants. Thus, a lapse is avoided when the specific gift is to the testator’s grandparents or descendant of grandparents. However, a devise to anyone who is not a grandparent or descendant of a grandparent would still lapse if that devisee predeceased the testator, unless a contrary intent appeared in the will.

In today’s electronic age, can you trust your Personal Representative (PR) to have control of your digital passwords?

October 23, 2019 | by Chepenik Trushin LLP

Estate Planning with Digital Assets: Should I Give My Passwords to My Personal Representative (PR)?

Much of our access to information is protected by passwords. In the context of estate planning and probate, passwords can lead to expensive complications and third-party subpoenas. For this reason, an important aspect of modern estate planning is planning in such a way that fiduciaries will be able to access the financial and other electronic documents belonging to a decedent.

Florida law gives personal representatives and trustees certain powers with regard to accessing certain digital assets, but such powers are useless unless the fiduciary knows the passwords to access these accounts. Your passwords should not be in your will, as a will may become may be a public document, but you may want to consider maintaining a list, including log-in and password information, for all of your digital assets (including, for example: email accounts; electronic documents; software; internet sites; online user accounts; social media accounts; and electronic content, such as music or photography collections). A viable alternative may be programs or applications that safely store passwords. Some internet browsers have built-in password storage. If you use such programs, you must ensure that your fiduciaries know the master password that will allow them to see the other passwords.

If you are a Personal Representative in an estate, understand the Relation Back Doctrine statute

September 13, 2019 | by Chepenik Trushin LLP

Are Actions Taken Before Appointment as Personal Representative Valid? Yes, if the Actions Were Beneficial to the Estate

Florida law states that the duties and powers of a personal representative commence upon appointment. You may be named as personal representative in a decedent’s will, you are not legally considered a personal representative until the court appoints you. But what happens if you need to take action regarding an estate before a court officially appoints you as the personal representative of the estate, such as paying bills or filing a lawsuit? As it turns out, under the relation back doctrine, any act that you do on behalf of the estate becomes valid after you are appointed the personal representative, if such actions are beneficial to the estate. Florida courts have also clarified that performing the duties of a personal representative is considered beneficial to the estate.

Florida’s Relation Back Doctrine is found in Fla. Stat. § 733.601, which states, “The powers of a personal representative relate back in time to give acts by the person appointed, occurring before appointment and beneficial to the estate, the same effect as those occurring after appointment. A personal representative may ratify and accept acts on behalf of the estate done by others when the acts would have been proper for a personal representative.”

Bitcoin, crypto, blockchain, tokenpots, coin plus, ether pay and Estate planning in 2018

August 29, 2018 | by Chepenik Trushin LLP

ESTATE PLANNING: CRYPTO CURRENCIES AND DIGITAL ASSETS

Although we all unquestionably live in a digital age at least for the past two decades and the legislatures are adopting new laws every day to reflect this reality, digital estate planning remains one of the areas where relying on state-made laws might not be enough. Laws in this area are scarce and only of a general nature. What happens with our digital assets after we die is usually controlled by private companies that store the data. For that reason, and because of the specific nature of digital assets, it is advisable to take these matters in your own hands.

What is a digital estate planning? It is a estate planning that covers any of your digital assets, including cryptocurrencies, websites, email accounts, social network accounts, cloud accounts, and all content stored or communicated trough these tools. What sets these assets apart from the more traditional ones is the fact that there might not be any person other than you who is aware of those assets or who could access them. In other words, no official register, no tax records, no bills, no paper contracts. Yet these assets may have a great value, both personal and monetary.

Ademption, knowing what is not part of your estate

December 26, 2017 | by Chepenik Trushin LLP

When devises are actually not part of the estate

Many unexpected things can happen in the period between the execution of a will and the actual death. For example, a decedent may devise the family house in Key West to her granddaughter. Several years after executing the will, the decedent gets into financial troubles and sells the Key West house. With other matters on her mind, the decedent never gets to adjust the will and passes away. Does the granddaughter still have a right to the house? Does she get money instead? Does she get any value at all?

The legal term describing a situation when a particular asset devised in the will is not part of the estate is ademption by extinction. The Florida statutes cover ademption in Section 732.606 for specific devises, and Section 732.605 for securities. Ademption is not uncommon; the decedent may have owned the asset and later sold it, or could have never owned it all. The situation would be different if the grandmother gave the granddaughter the Key West house as a gift before passing away. In that case, the granddaughter’s devise would have been satisfied during the grandmother’s lifetime. Accordingly, this legal concept is called ademption by satisfaction and is not discussed in this blog post.

Your estate and assets, make sure you know what actually counts for your beneficiaries under Florida laws

July 11, 2017 | by Chepenik Trushin LLP

Ademption: When devises are actually not part of the estate

Many unexpected things can happen in the period between the execution of a will and the death. For example, a decedent may devise the family house in Key West to her granddaughter. Several years after executing the will, the decedent gets into financial troubles and sells the Key West house. With other matters on her mind, the decedent never gets to adjust the will and passes away. Does the granddaughter still have a right to the house? Does she get money instead? Does she get anything at all?

The legal term describing a situation when a particular asset devised in the will is not part of the estate is ademption by extinction. The Florida statutes cover ademption in Section 732.606 for specific devises, and Section 732.605 for securities. Ademption is not uncommon. The decedent may have owned the asset and later sold it, or could have never owned it all. The situation would be different if the grandmother gave the granddaughter the Key West house as a gift before passing away. In that situation, the granddaughter’s devise would have been satisfied during the grandmother’s lifetime. Accordingly, this legal concept is called ademption by satisfaction and is not discussed in this blog post.

Taxes and gifting, estate planning makes a huge difference

June 26, 2017 | by Chepenik Trushin LLP

Estate Planning: Income Tax Strategies

Law firms have had to take a spike in income tax rates, a decline in the estate tax rate, and an increasing annual estate tax exemption threshold into account in devising estate planning strategies. There has been a decreasing gap between the income tax rates and estate tax rates: estate tax has moved to a maximum rate of 40% and a $5.45 million exclusion in 2016, from a 55% percent tax rate and a $675,000 exclusion in 2001; the maximum tax rate on ordinary income is 39.6%, up from a low of 35 percent in 2003; the maximum long-term capital gains tax rate increased to 20% from 15% in that same time frame. Furthermore, in 2013 an additional 3.8% surtax was added for net investment of individuals, estates, and trusts over statutory threshold amounts in certain cases. While these numbers might make you think that estate planning is only necessary for the super wealthy, financial planners advise that it is not. Taxes are just one consideration of estate planning: it is critical to plan for an orderly transfer of assets or for other circumstances such as incapacitation.

The capital gains tax rate – the long-term rate of 20% plus the 3.8% surtax – is significant because it affects the basis of assets. When a decedent dies, her beneficiaries get the benefit of a step-up in basis, which is appreciated assets held in the decedent’s estate are readjusted to fair market value at the time of inheritance. Through this mechanism, the beneficiary receives an income tax advantage because she is not liable for the capital gains tax on any appreciation that occurs up to the point she inherits the asset.

Use of Homestead Property and the impact on estate administration

May 8, 2017 | by Chepenik Trushin LLP

The importance of a Semicolon – Does property partially used as primary residence and partially for business purposes qualify as Homestead?

Does property partially used as primary residence and partially for business purposes qualify as homestead under Article X, Section 4 of the Florida Constitution? Surprisingly, the answer apparently rests on a semicolon.

This question was addressed in 2003 by the Florida Court of Appeal for the First District in Davis v. Davis, 864 So. 2d 458 (Fla. 1st DCA 2003). The facts of this case are as follows: Mr. Horace Davis lived with his wife Carolyn on a contiguous piece of property measuring less than 160 acres outside of municipality in an unincorporated portion of Nassau County. The property included the couple’s residence and on a portion separate from the residence, Mr. Davis operated a mobile home park generating profit through rent. Mr. Davis died in 2000 having written a will.

Homestead sale profits in Florida, a recent court decision

April 21, 2017 | by Chepenik Trushin LLP

Is Investing Homestead Sale Proceeds Okay?

Florida Constitution provides protection from forced sale to homestead property from most creditors. Art. X, § 4, Fla. Const. The protection covers not only the physical homestead property but also the proceeds from the sale of the homestead, provided the proceeds are reinvested in another homestead property. In a scenario where you invest the homestead sale money in securities and then buy another homestead with it, does the money retain homestead protection?

The Florida Supreme Court answered this question in the affirmative in a recent 2016 decision JBK Assocs. v. Sill Bros., 191 So. 3d 879 (Fla. 2016). In that case, JBK Associates, Inc. (“JBK”) obtained a final judgment against Mr. Sill for $740,487.22. Mr. Sill had consequently opened a brokerage account with Wels Fargo and deposited the sale proceeds from the marital home of Mr. Sill and his ex-wife. The account was titled “FL Homestead Account” and was split into three sub-accounts, one containing cash and two containing mutual funds and unit investment trusts.