Florida Probate Litigation Lawyer Blog

Fifty-four million Americans suffer a disability. In Florida, 6.2% of children five to fifteen years old have a disability and 4.3% of Miami- Dade County children age five to fifteen have a disability. For parents of those children a stand-alone special needs trust can be a useful tool to ensure their child receives the care they need. The trust provides the family peace of mind their child will have the resources he or she needs even after the parents have passed. Special needs trusts are frequently used to receive an inheritance or personal injury settlement proceeds on behalf of a disabled person or is founded from the proceeds of compensation for criminal injuries, litigation or insurance settlements.

There are a number of reasons that a parent of a child who has a disability might consider using a separate stand-alone special needs trust. The tax consequences of establishing such a trust depend on whether it is revocable or irrevocable. If your family lives in Miami-Dade County, Broward County or West Palm Beach County the stand-alone special needs trust will be governed by Florida Statutes Chapter 376. You should seek the assistance of an experience attorney to be sure the trust complies with Florida laws.

A separate trust should make the process of obtaining approval of the agencies administering the Medicaid and Social Security Income programs easier and quicker. Because a stand-alone special needs trust is designed to benefit only the child who has a disability, the trust provisions should deal only with that child. This makes it less likely that the trust will contain language that causes the trust assets to be countable resources to the beneficiary for Medicaid eligibility purposes than would be the case if the trust also contained assets of the parent, or included the parent’s other children as beneficiaries.

Secondly, a stand-alone special needs trust affords parents a way to keep their estate plan private from governmental agencies. If the parents’ living trust contains information about the value of their estate and is used to hold funds for the child who has a disability, that document must be presented to the reviewing government agencies. Using a stand-alone special trust means the parents only need to disclose what assets are in that trust to the government agencies.
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Sometime before her death, a Florida resident living in Ormond Beach made a will using an “E-Z legal form”. She relied on the form and carefully listed the assets she wanted her sister to receive including her house, her IRA account, her life insurance proceeds and all of her bank accounts. The testator, the lady making the will, included all of her current assets and even included a contingency clause that the listed assets would go to her brother if her sister were to pass first. The will seemed simple enough to create and given her small estate and she had in fact disposed of all of her current assets. The testator thought she took care of unexpected events by naming her brother in the event her sister was not around. The will seemed straightforward and many residents of Miami-Dade, Broward, and West Palm Beach County might feel comfortable creating a similar will. They should not! This will, which seemed straightforward, was not. Sadly, this “E-Z legal form” will created a situation where her family members were forced to spend a lot of time and money to litigate against each other. It created greater headaches and legal fees for her family members after she had passed in 2011. She would have been well-advised hire an attorney to create the will to prevent such an unfortunate situation.

The issue in this recent court case was that the sister named in the will had in fact died first. The deceased sister left cash and land in Putnam County to the living sister. The living sister put the cash in a new bank account. The living sister never revised her original will to reflect this inheritance. As a result, there was a significant question as to whether the brother originally mentioned in the will was supposed to receive the newly inherited land and money or if these new assets should pass by intestate succession to the testator’s nieces. The family members spent a lot of time litigating, the case even reached the First District Court of Appeals in Florida. This court ultimately decided that the inheritance acquired after the will did pass to the nieces and the brother received only the property specifically described in the will.

We will never know whom the testator really wanted the property to go to, an argument can be made that since the nieces were never mentioned in the will that she had in fact wanted her brother to take everything. However, since the will contained no mechanism to dispose of the inheritance or any other property not mentioned in the will, those assets passed according to intestate laws. A good attorney would have included a residuary clause in the original will creating such a mechanism.

Florida is an ideal location for a beachside vacation home or condominium. Many northerners or “snowbirds” like to make their way south every winter and enjoy all that south Florida has to offer. Excellent restaurants and weather make Florida a primary location for vacation homes. Miami, Ft. Lauderdale, West Palm Beach and Boca Raton are some of South Florida most desirable cities. These vacation homes make up part of a person or couple’s estate plan. There are no rules on how a person may give their vacation home under a will. This flexibility can sometimes unfortunately lead to unintended disputes among family members.
If you own a vacation home either here or in another state (or country) it is wise to take some time and consider the following questions in deciding how to leave the property in the will. First, if you want to leave the property to a child or family member, consider first asking them if they want it. Often children may have their own preferences as to what they look for in a vacation home. Maybe they want something closer to their home or a location with more activities for their children. Secondly, consider how the family member may wish to use the property. Maybe the family may prefer the property as a rental then for their own personal use. Thirdly, consideration should be given as to how maintenance costs and other costs will be paid. Will they take to property free and clear of the mortgage or will they have to pay the mortgage?
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Some individuals have a will and also have a revocable living trust to distribute assets. Often they are the trustee of the revocable living trust and their children or family members may be the beneficiaries. Why would somebody do this? Won’t their assets pass under the will when they die? The answer is yes, but it may take a while. Using a revocable living trust alongside a will can avoid delay before administration of the estate can proceed as a result of probate proceedings. If assets pass under a will a personal representative has to gain access to the decedent’s assets. They do this by getting letter of administration from the court. This should happen quickly but sometimes the process can take longer. For example, in some counties, such as Palm Beach County, it can take less than a week to have a personal representative appointed and armed with letters of administration. Other counties, such as Miami-Dade, frequently take longer. Sometimes, however, regardless of the county, the delay can be lengthy and estate assets can become at risk.

The revocable living trust allows the successor trustee to take over immediately upon the death of the original trustee. Even if a beneficiary desires to contest the appointment of a successor trustee, more likely than not, the trustee can continue to administer the trust during the litigation process. The successor trustee, without court approval or court appointment, can make distribution of assets, pay claims of creditors, and otherwise proceed to administer the trust.

If you are creating a revocable living trust it is important to remember the assets in the trust are not out of your reach. Generally, the trust creator may withdraw any part or all of the trust assets by written direction to the trustee. Further, the trust permits the creator to revoke or amend the trust at any time. However the trust does not protect the assets from creditors of the trust creator. The beneficiaries of the settlor’s trust also do not have any protection against the creditors of the settlor. If creditors need to be paid after the death of the trustee, the assets in the trust may be used to satisfy the creditor’s claim. The attorneys at Chepenik Trushin can help with creating trusts, funding those trusts and any other estate planning needs. Please feel free to call (305) 981-8889 for an initial consultation.

As Florida lottery ticket sales increase so do the dreams of winning. Scratch-off ticket sales for the week ending March 4, 2012 in Florida, exceeded $60 million, the highest level of sales achieved since the Florida Lottery launched its first ticket in 1988. Some winners plan ahead by attempting to minimize the taxes they will have to pay if they make gifts to family members from lottery proceeds.

Lottery winners may form an entity owned by multiple family members, allowing those family members to share directly in the lottery winnings. Lottery proceeds can be paid directly to the entity. This is all fine if there was in fact a real and binding arrangement to share the proceeds. However, if there was not, the IRS considers this a gift and will impose a tax in the value of the proceeds that the family member receives as a result of the winnings.

Family members are obligated to pay gift taxes depending if the family agreements were in fact pre-existing arrangements or are only a product of post-lottery planning. Some have criticized these arrangements saying there is a “lottery winnings” exception to federal gift taxes that gives a free pass to the sharing of the winnings among family members.
A recent Tax Court case warns that there is no such lottery exception and that the IRS will scrutinize such lottery sharing arrangements and asserts gift taxes when appropriate.
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Florida is famous for its unique attributes. The state is known for having plenty of sunshine, ocean breezes and its “snowbirds”, or its senior citizen residents who return to Florida every winter to take advantage of all the Sunshine State has to offer. Florida has retained the highest percentage of senior residents in the country, with 17.3 percent of citizens older than age 65 in 2010. From 1990 to 2000, Palm Beach County’s 65-plus population grew 25 percent while Broward County saw a 1.4 percent increase in its senior population. Miami-Dade County saw a 17 percent increase in 65-and-older residents in the past 10 years. And while some Broward and Palm Beach cities now have fewer senior residents than before, many still retain vibrant retirement communities, which boost their 65-plus-population percentage high above the 13 percent national average. In Tamarac, where 38 percent of the population was 65 or older in 2000, seniors continued to make up 28 percent of the population in 2010. In Palm Beach County, seniors made up well over 50 percent of the population in the small communities of Briny Breezes, South Palm Beach and Highland Beach.

Senior citizens have their own unique needs when it comes to financial planning and protection of assets. Every senior should aim to utilize the variety of planning devices are available that will allow them to save taxes and protect assets. These devices include trusts, family limited partnerships (FLPs), and limited liability companies (LLCs).

Some concerns senior citizens have are the same concerns as the general population. For example, they, like others, want to save on taxes. They want to pay the IRS the least amount of federal income tax possible. If they decide to give gifts, they want to minimize the transfer taxes involved. The elderly, like others, want to protect their assets from creditors. If they are involved in a business, they may want to shield themselves from the effects of judgments against the business.

However, some concerns are unique to seniors. For example some elderly individuals may face nursing home care and may worry how their Medicaid eligibility will be affected. The elderly may also be concerned about the probate process and may want to control the process to reduce the cost and publicity involved.

Recently, family limited partnerships (FLPs) and limited liability corporations (LLCs) have emerged as financial planning techniques people can use to protect assets from creditors, save taxes, and maintain control over their affairs. Family Limited Partnerships (commonly called FLPs) can facilitate moving wealth from one generation to another. Partners of an FLP are either General Partners (GP) or Limited Partners (LP). General Partners have the responsibility for managing the FLP and its assets. Limited Partners generally have just an economic interest in the FLP. Limited Partners have no ability to control, direct, or otherwise influence the operations of the FLP. They can neither buy additional assets, nor sell existing assets, and they cannot act on the Partnership’s behalf. So why would setting up an FLP ever benefit a senior citizen who wishes to transfer money to a family member? First, FLPs allow one family member, typically the GP, to move assets to other family members (often children who are LPs), while still retaining control over the assets. Because the LPs have no rights of control, they cannot liquidate their partnership interest. The General Partner decides the timing and amounts of distributions. That is, a distribution cannot be made to one partner (GP or LP) unless all partners receive their pro rata portion of any disbursements. Secondly, when calculating the fair market value of a transfer for tax purposes, the transferred money is typically valued less than if the money transfer had been in cash. The interest in a FLP is not liquid and therefore the interest holder may not receive a distribution until sometime in the near (or distant) future. Thus, the fair market value for transfer tax purposes is usually less than the interest transferred.
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Miami-Dade, Broward and West Palm Beach counties are home to some of the finest art in the country. Alongside the many fine art galleries located in South Florida there are private art collectors and individuals who own valuable and sometimes extensive collections. These collections make up part of their estate and careful consideration should be given as to the distribution of these pieces. An experienced estate planner can help you decide when and to whom the art should be gifted.

Often art collectors wish to gift art to their children or members of their family. Art collectors should consider several factors when deciding to do this. The first consideration is that a 28% income tax rate is locked in for the children who receive the art and there are significant expenses for appraisals and the risk of a gift tax audit. Also the giver should consider if the art is something that the children are even interested in receiving. Children’s tastes may be different than the parents, and the children might not appreciate the gift as much as the parents hope. Also, if grandchildren live in the house, there may be a risk of damage to the art!

Sometimes the best and simplest plans when dealing with fine art in an estate is to consider giving the art to public charity. Generally speaking, the art owner gets an income tax deduction for the full value of the art, without ever having to recognize the gain. There are 4 major issues:
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