Florida Probate Litigation Lawyer Blog

Many individuals execute wills before their death, leaving certain gifts to their family members, friends, and other individuals. From time to time, however, certain individuals named in a will (i.e., “devisees”) predecease (i.e., die before) the person leaving them the gift. If a new will is not executed, a question arises concerning who should then be entitled to that property. Before the modern Florida statutes, under common law, if a specific or general devise (i.e., a gift in a will of either specific property or a particular amount of money/stock, respectively) lapsed because the beneficiary predeceased the testator, the gift went to the residuary of the estate, meaning that it would become part of the general estate and would go to the remaining living heirs.

Disagreeing with the common law, many state legislatures drafted statutes which reversed or otherwise altered the common law rule. Florida is among the states that have chosen to deviate from the common law rule by adopting an “antilapse statute.” Under the Florida Antilapse Statute, when a particular devisee predeceases the testator, the gift to the devisee does not fall into the residue of the estate or pass to the heirs of the testator by intestacy. Instead, the gift descends to the issue of the predeceased devisee. Specifically, Florida Statute § 732.603(1) provides as follows: “Unless a contrary intent appears in the will, if a devisee who is a grandparent, or a descendant of a grandparent, of the testator: (a) is dead at the time of the execution of the will; (b) fails to survive the testator; or (c) is required by the will or by operation of law to be treated as having predeceased the testator, a substitute gift is created in the devisee’s surviving descendants who take [in equal shares] the property to which the devisee would have been entitled had the devisee survived the testator.”
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People generally know that the purpose of a will is to facilitate the orderly distribution of assets after a person’s death. Therefore, it logically flows that assets that expire upon death do not need to be handled by a will. They expire. However, the concept of ownership has changed drastically over the past decade. Digital media, social media, and the internet in general have changed how people think they own things and how they actually own things. Would you be surprised to know that you don’t actually own the album you just bought from iTunes? You do not own it in the same way as the CD you bought from a music store. Your rights are limited when you are buying things online. You are buying the digital rights to use a file rather than buying the actual file. Today, most digital licenses are individually owned, non-transferrable, and expire on death. Good examples of these are email accounts, such as Gmail, social media accounts, such as Facebook, and media accounts, such as iTunes and Amazon. Ownership has changed from owning a physical, tangible object to owning a license for use of something with limited rights. You do not have a CD to play wherever you want anymore; you have a digital file that can only be played on certain devices. Usually devices that are made by the company you bought the file from – such as Apple limiting the use of its media files to its products. At the end of the day, you still paid the same amount of money for a digital album as you would have for a tangible CD. So, how is it fair that these licenses expire on death and are non-transferrable? Shouldn’t these files still be considered an asset? And shouldn’t there be a way to protect them?

The operative word in a lot of these digital user agreements is is “individually.” Files you buy on iTunes are owned individually, cannot be transferred, and expire on death. So, you spend thousands of dollars on a digital music collection and instead of being able to bequeath your prized collection of CDs to your favorite grandchild, you lose your collection when you die. Read the user agreements for digital media and see for yourself. However, there are ways to solve this problem. One solution is owning the files by an entity other than an individual. What about digital assets owned by a business or a trust?
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As technology continues to develop, its impact is seen in many areas of law. In today’s world, natural conception is not the only way to conceive a child. Often times, a parent may choose to have a child through in-vitro fertilization, even after their significant other has passed. However, under common law, a posthumously-conceived child (a child conceived after the death of the father) is always considered a non-marital child because marriage ends at the death of one of the partners. Specifically, under Florida law, “a child conceived from the eggs or sperm of a person or persons who died before the transfer of their eggs, sperm, or pre-embryos to a woman’s body shall not be eligible for a claim against the decedent’s estate unless the child has been provided for by the decedent’s will.” Fla. Stat. § 742.17. This statute means that a posthumously-conceived child may not state a claim against his father’s estate, unless that child is deliberately named in the father’s will.

In a recent United States Supreme Court opinion, Astrue v. Capato, a mother conceived and gave birth to twins after the father had passed away from esophageal cancer. The Capatos naturally conceived one son, but the couple wanted that son to have siblings. Before Mr. Capato entered chemotherapy, he had his semen frozen because the doctors explained that the chemotherapy could force him to become infertile. A few months before he died, Mr. Capato executed a will that named the son he had with Ms. Capato and two children from a previous marriage as beneficiaries. The will failed to mention his unborn children as beneficiaries. After her husband’s death, Ms. Capato began receiving in-vitro fertilization treatments, using her husband’s previously frozen sperm. The process was successful, and eventually, she gave birth to twins.
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There are many instances in which a trust can be terminated, e.g., when the trust ceases to be economically efficient to administer or when the trust has been created as a result of fraud, duress, or undue influence. Recently, in Florida, more individuals have been creating revocable trusts. Floridians often choose this type of trust to avoid probate and to keep their private affairs out of the public eye in a probate proceeding. But when is a trust revocable? Who can revoke the trust? What steps must be taken and procedures followed to ensure that the trust is revocable?

One of the key distinguishing features of a revocable trust, as opposed to an irrevocable trust, is control. A settlor has control not just to revoke the trust, but to alter the trust as well. For example, the settlor of a revocable trust may add or remove beneficiaries of the trust during the settlor’s life and may also change the property that is owned by the trust. A major downside of this control is that the trust’s assets are easier for creditors of the settlor or of the beneficiaries to reach. Whereas, with regard to an irrevocable trust, the settlor does not have control once the trust is established, but the assets of the trust are better protected from the settlor’s creditors, and, depending on how the trust is structured, those assets may also be better protected from creditors of the beneficiaries.
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In 2010, congress passed the Foreign Account Tax Compliance Act (“FATCA”) after a series of high-profile tax evasion cases. The main purpose of FATCA is to force foreign financial institutions to comply with reporting requirements of the Internal Revenue Service and curb non-compliance. However, FATCA will have new reporting requirements for individuals, as well. Classically, any United States citizen with an interest in a foreign bank account was required to file an FBAR form disclosing their interest in any foreign bank account with their regular tax return. FATCA has broadened filing requirements “to all specified foreign financial assets” held by “specified individuals” with the implementation of section 6038D to the Internal Revenue Service. The new requirement seeks to ensure that the Internal Revenue Service has all potential information to prevent assets that could produce taxable income from being concealed in foreign jurisdictions. For section 6038D purposes, a specified individual is a United States citizen, a resident alien of the United States (as determined under section I.R.C. 7701(b) and §§301.7701(b)-1 through I.R.C 301.7701(b)-9), or a nonresident alien who has elected under section 6013(g) or (h) to be taxed as a United States resident. Under FATCA, specified individuals with a specified financial interest must file an information form (form 8938) with the Internal Revenue Service. Section 6038D may also apply, at the discretion of the Treasury Department, to domestic entities formed for the purpose of holding a specified foreign financial asset under I.R.C. 6038D(f).
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Trusts are an important tool of estate planning for many reasons, one of which is the tax benefits associated with holding assets in a trust. Trusts are routinely set up as a planning tool and contain various different provisions about how and when trust assets are distributed to the qualified beneficiaries of the trust. Trustees can have different ranges of power depending on the terms of the trust instrument, and the extent of the discretion afforded to the trustee dictates what they are able to do with the trust assets. Trustees with a discretionary power to distribute trust assets may do just that – distribute the assets to the qualified beneficiaries. Trustees with a special power of appointment have greater rights and can have the right to invade the principal of the trust. Giving a trustee a power of appointment, especially an absolute power of appointment, can allow the trustee to distribute assets in ways that can be extremely advantageous to the qualified beneficiaries.

Can a trustee of a trust distribute the principal of a trust to a new trust that may have different terms? The answer is yes, provided certain conditions are met. When a trustee with the discretion to distribute the principal of the trust uses that discretion to distribute the principal into a new trust, it is called “decanting the trust.” Trust decanting is a means of planning that helps beneficiaries retain the tax benefits of a trust. The reason decanting is allowed is that if the trustee, through his power of appointment, has the ability to distribute property to the beneficiaries or for their benefit, then that power of appointment should allow the trustee to distribute property into a second trust for the benefit of the qualified beneficiaries.
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