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probate FL

All About Probate in Florida

All About Probate in Florida

What is Probate?

Probate is a court-supervised process for identifying and gathering the assets of a deceased person (decedent), paying the decedent’s debts, and distributing the decedent’s assets to his or her beneficiaries. In general, the decedent’s assets pay the probate proceeding’s cost, the decedent’s funeral expenses, then the decedent’s outstanding debts. The remainder of the assets is distributed to the decedent’s beneficiaries. You can find the Florida Probate Code in Chapters 731 through 735 of the Florida Statutes. You can find the rules governing Florida probate proceedings in the Florida Probate Rules, Part I and Part II (Rules 5.010-5.530).

There are two types of probate administration under Florida law: formal administration and summary administration. This pamphlet will primarily discuss formal administration.

There is also a non-court-supervised administration proceeding called “Disposition of Personal Property Without Administration.” This type of administration applies only in limited circumstances.

WHAT ARE PROBATE ASSETS?

Probate administration applies only to probate assets. Probate assets are those assets owned in the decedent’s sole name at death or owned by the decedent and one or more co-owners and lacked a provision for automatic succession of ownership at death. Examples of assets or property that may be probate assets may include:

  • A bank account or investment account in the sole name of a decedent is a probate asset. A bank account or investment account owned by the decedent and payable on death or transferable on death to another, or held jointly with rights of survivorship with another, may not be a probate asset.
  • A life insurance policy, annuity contract or individual retirement account payable to the decedent’s estate is a probate asset. A life insurance policy, annuity contract, or individual retirement account payable to a beneficiary may not be a probate asset.
  • Real estate titled in the sole name of the decedent, or the decedent’s name and another person as tenants in common, is a probate asset (unless it is homestead property). Real estate titled in the name of the decedent and one or more other persons as joint tenants with rights of survivorship is not a probate asset.  Also, property owned by spouses as tenants by the entirety is not a probate asset on the death of the first spouse to die but goes automatically to the surviving spouse.

This list is not exclusive but is intended to be illustrative.

WHY IS PROBATE NECESSARY?

Probate may be necessary to transfer ownership of the decedent’s probate assets to the decedent’s beneficiaries. If the decedent left a valid Will, the Court will admit the Will (according to procedures) to probate to transfer ownership of probate assets to the named beneficiaries. If the decedent had no Will, probate might be necessary to pass ownership of the decedent’s probate assets to those receiving them under Florida law.  Some assets do not require a probate proceeding to transfer ownership.  You should contact a probate attorney to provide specific guidance.

Probate may also be necessary to wind up the decedent’s financial affairs. Administration of the decedent’s estate ensures that the decedent’s creditors are paid if certain procedures are correctly followed.

What is a Will?

A Will is a writing, signed by the decedent and witnesses, that meets Florida law requirements. In a Will, the decedent can name the beneficiaries whom the decedent wants to receive the decedent’s probate assets. The decedent also can designate a personal representative (Florida’s term for an executor) to administer the probate estate.

WHAT HAPPENS IF THERE IS NO WILL?

Someone who dies without a valid Will dies “intestate.” Even if the decedent dies intestate, the probate assets are rarely turned over to the state of Florida. The state would take the decedent’s assets only if the decedent had no heirs.

If the decedent died intestate, a couple of examples of how the decedent’s probate assets will be distributed to the decedent’s heirs are as follows: (found in Part I, Chapter 732 of Florida Statutes):

  • Suppose the decedent was survived by a spouse but left no living descendants. In that case, the surviving spouse receives all of the decedent’s probate estate. A “descendant” is a person in any generational level down the descending line from the decedent and includes children, grandchildren, parents, and more remote descendants.
  • Suppose the decedent was survived by a spouse and left one or more living descendants (all of whom are the descendants of both the decedent and the spouse). The surviving spouse has no additional living descendants (who are not a descendant of the decedent). In that case, the surviving spouse receives all of the decedent’s probate estate.
  • Suppose the decedent was not married at the time of death but was survived by one or more descendants. In that case, those descendants will receive all of the decedent’s probate estate. If there is more than one descendant, the decedent’s probate estate will be divided among them in the manner prescribed by Florida law. The division will occur at the generational level of the decedent’s children. So, for example, if one of the decedent’s children did not survive the decedent, and if that child has surviving descendants, the share of the decedent’s estate that would have been distributed to the deceased child will instead be distributed among the descendants of the deceased child.
  • Suppose the decedent was not married at the time of death and had no living descendants. In that case, the decedent’s probate estate will pass to the decedent’s surviving parents, if they are living, otherwise to the decedent’s brothers and sisters.
  • Florida’s intestate laws will pass the decedent’s probate estate to other, more remote heirs if the decedent is not survived by any of the close relatives described above.

There are certain exceptions for homestead property, some personal property, among other exceptions to the distribution of the decedent’s probate estate under Florida’s intestate laws, as discussed above. Assets subject to these exceptions will pass in a manner different from that described in the intestate laws.

For example, if the decedent’s homestead property was titled in the decedent’s name alone, and if a spouse and descendants survived the decedent, the surviving spouse takes a life estate in the property.  The descendants receive the decedent’s homestead property only after the surviving spouse dies. The surviving spouse also, however, has the right to make a special election within six months of the decedent’s death to receive an undivided one-half interest in the homestead property instead of the life estate provided specific procedures are timely followed.

Who is Involved in the Probate Process?

Depending upon the facts of the situation, any of the following may have a role to play in the probate administration of the decedent’s estate:

  • Clerk of the circuit court in the county of the decedent’s domicile at the time of the decedent’s death.
  • Circuit court judge.
  • Personal representative (also known as an executor).
  • Attorney providing legal advice and services to the personal representative throughout the probate process.
  • Those filing claims in the probate proceeding relative to debts incurred by the decedent, such as credit card issuers and health care providers.
  • Internal Revenue Service (IRS), as to any federal income taxes that the decedent may owe, any income taxes that the decedent’s probate estate may owe, and, sometimes, federal gift, estate, or generation-skipping transfer tax matters.

WHERE DO YOU FILE PROBATE PAPERS?

The custodian of a Will must deposit the original copy of the Will with the clerk of the Court having the venue of the decedent’s estate within 10 days of receiving information that the testator is dead. (S. 732.901, Florida Statutes.) There is no fee to deposit the Will with the clerk of Court. However, a filing fee must be paid to the clerk upon opening a probate matter. The clerk then assigns a file number and maintains an ongoing record of all papers filed with the clerk for the administration of the decedent’s probate estate.

In the interest of protecting the decedent’s beneficiaries’ privacy, any documents containing financial information about the decedent’s probate estate are not available for public inspection.

WHO SUPERVISES THE PROBATE ADMINISTRATION?

A circuit court judge presides over probate proceedings.

The judge will consider evidence to confirm the beneficiaries’ identities or decedent’s heirs as those who will receive the decedent’s probate estate.

Suppose the decedent had a Will that nominated a personal representative. In that case, the judge will also decide whether the person or institution appointed is qualified to serve in that position. Suppose the nominated personal representative meets the statutory qualifications. In that case, the judge will issue “Letters of Administration,” also referred to simply as “Letters.” These “Letters” are evidence of the personal representative’s authority to administer the decedent’s probate estate.

Suppose any questions or disputes arise while administering the decedent’s probate estate. In that case, the judge will hold a hearing as necessary to resolve the matter in question. The judge’s decision will be set forth in a written directive called an “Order.”

What is a Personal Representative, and What Does the Personal Representative Do?

The personal representative is the person, bank, or trust company appointed by the judge to be in charge of the administration of the decedent’s probate estate. The term “personal representative” is used in Florida instead of such terms as “executor, executrix, administrator, and administratrix.” The personal representative has a legal duty to administer the probate estate according to Florida law. The personal representative must:

  • Identify, gather, value, and safeguard the decedent’s probate assets.
  • Publish a “Notice to Creditors” in a local newspaper to notice potential claimants to file claims in the manner required by law.
  • Serve a “Notice of Administration” to provide information about the probate estate administration and procedures required to be followed by those having any objection to the administration of the decedent’s probate estate.
  • Conduct a diligent search to locate “known or reasonably ascertainable” creditors and notify these creditors of the time by which their claims must be filed.
  • Object to improper claims, and defend suits brought on such claims.
  • Pay valid claims.
  • File tax returns and pay any taxes properly due.
  • Employ professionals to assist in administering the probate estate, for example, attorneys, certified public accountants, appraisers, and investment advisers.
  • Pay expenses of administering the probate estate.
  • Pay statutory amounts to the decedent’s surviving spouse or family.
  • Distribute probate assets to beneficiaries.
  • Close the probate estate.

Suppose the personal representative mismanages the decedent’s probate estate. In that case, the personal representative may be liable to the beneficiaries for any harm they may suffer.

WHO CAN BE A PERSONAL REPRESENTATIVE?

The personal representative can be an individual or a bank or trust company, subject to certain restrictions. To qualify to serve as a personal representative, an individual must be either a Florida resident or, regardless of residence, a spouse, sibling, parent, child, or other close relative of the decedent. An individual who is not a legal resident of Florida and is not closely related to the decedent cannot serve as a personal representative.

Individuals are not qualified to act as a personal representative if they are either younger than 18, mentally or physically unable to perform the duties, or have been convicted of a felony.

A trust company incorporated under the laws of Florida, or a bank or savings and loan authorized and qualified to exercise fiduciary powers in Florida, can serve as the personal representative.

WHOM WILL THE COURT APPOINT TO SERVE AS PERSONAL REPRESENTATIVE?

If the decedent had a valid Will, the judge will appoint the person or institution named by the decedent in that Will to serve as personal representative, as long as the named person or bank or trust company is legally qualified to serve.

If the decedent did not have a valid Will, the surviving spouse has the first right to be appointed by the judge to serve as a personal representative. If the decedent was not married at the time of death, or if the decedent’s surviving spouse declines to serve, the person or institution selected by a majority in interest of the decedent’s heirs will have the second right to be appointed as personal representative. If the heirs cannot agree among themselves, the judge will appoint a personal representative after a hearing is held for that purpose.

WHY DOES THE PERSONAL REPRESENTATIVE NEED AN ATTORNEY?

A personal representative should always engage a qualified attorney to assist in the administration of the decedent’s probate estate. Many legal issues arise, even in the simplest probate estate administration, and most of these issues will be novel and unfamiliar to non-attorneys.

The attorney for the personal representative advises the personal representative on the rights and duties under the law and represents the personal representative in probate estate proceedings. The attorney for the personal representative is not the attorney for any of the beneficiaries of the decedent’s probate estate.

A provision in a Will mandating that a particular attorney or firm be employed as the attorney for the personal representative is not binding. Instead, the personal representative may choose to engage any attorney.

What are the Estate’s Obligations to Estate Creditors?

One of the primary purposes of probate is to ensure that the decedent’s debts are paid in an orderly fashion. The personal representative must use diligent efforts to give actual notice of the probate proceeding to “known or reasonably ascertainable” creditors. This gives the creditors an opportunity to file claims in the decedent’s probate estate if any. Creditors who receive notice of the probate administration generally have three months to file a claim with the clerk of the circuit court. The personal representative, or any other interested persons, may file an objection to the statement of claim. If an objection is filed, the creditor must file a separate independent lawsuit to pursue the claim. A claimant who files a claim in the probate proceeding must be treated fairly as a person interested in the probate estate until the claim has been paid or until the claim is determined to be invalid.

The legitimate debts of the decedent, specifically including proper claims, taxes, and expenses of the administration of the decedent’s probate estate, must be paid before distributions are made to the decedent’s beneficiaries. The Court will require the personal representative to file a report to advise of any claims filed in the probate estate and will not permit the probate estate to be closed unless those claims have been paid or otherwise disposed of.

HOW IS THE INTERNAL REVENUE SERVICE (IRS) INVOLVED?

The decedent’s death has two significant tax consequences: It ends the decedent’s last tax year for purposes of filing the decedent’s federal income tax return, and it establishes a new tax entity, the “estate.”

The personal representative may be required to file one or more of the following returns, depending upon the circumstances:

  • The decedent’s final Form 1040, U.S. Individual Income Tax Return, reporting the decedent’s income for the year of the decedent’s death.
  • One or more Forms 1041, U.S. Income Tax Return for Estates and Trusts, reporting the estate’s taxable income.
  • Form 709, U.S. Gift Tax Return(s), reporting gifts made by the decedent prior to death.
  • Form 706, U.S. Estate Tax Return, reporting the decedent’s gross estate, depending upon the value of the gross estate.

The personal representative also may be required to file other returns not specifically mentioned here.

The personal representative has the responsibility to pay amounts owed by the decedent or the estate to the IRS. Taxes are normally paid from probate assets in the decedent’s estate and not from the personal representative’s own assets; however, under certain circumstances, the personal representative may be personally liable for those taxes if they are not properly paid.

The estate will not have any tax filing or payment obligations to the state of Florida; however, if the decedent owed Florida intangibles taxes for any year before the repeal of the intangibles tax as of Jan. 1, 2007, the personal representative must pay those taxes to the Florida Department of Revenue.

What are the Rights of the Decedent’s Surviving Family?

The decedent’s surviving spouse and children may be entitled to receive probate assets from the decedent’s probate estate, even if the decedent’s Will gives them nothing. Florida law protects the decedent’s surviving spouse and certain surviving children from total disinheritance.

For example, a surviving spouse may have rights in the decedent’s homestead real property. A surviving spouse also may have the right to come forward to claim an “elective share” from the decedent’s probate estate. The elective share is, generally speaking, 30 percent of the decedent’s assets, including any assets that are non-probate assets. A surviving spouse and/or the decedent’s children also may have the right to a family allowance to provide them with funds before the final distribution of the estate assets and rights in exempt property that will be paid to them instead of to creditors in satisfaction of claims against the probate estate. It is important to note that a spouse may waive rights to an elective share, family allowance, and/or exempt property in a valid pre-marital or post-marital agreement.

In addition, if the decedent married or had children after the date of the decedent’s last Will, and if the decedent neglected to provide for the new spouse or children, an omitted family member may nevertheless be entitled to a share of the decedent’s probate estate.

The existence and enforcement of these statutory rights require knowledge about the applicable laws and procedures and are best handled by an attorney.

WHAT RIGHTS DO OTHER POTENTIAL BENEFICIARIES HAVE IN THE DECEDENT’S PROBATE ESTATE?

Except as provided in the immediately preceding section, a Florida resident has the right to entirely disinherit anyone. It is not necessary to give the disinherited beneficiary a nominal gift of, for example, $1.00.

How Long Does Probate Take?

It depends on the facts of each situation. For example, the personal representative may need to sell real estate before settling the probate estate or resolve a disputed claim filed by a creditor or a lawsuit filed to challenge the validity of the Will. Any of these circumstances would tend to lengthen the process of administration. Even the simplest of probate estates must be open for at least the three-month creditor claim period; it is reasonable to expect that a simple probate estate will take about five or six months to properly handle.

If the estate does not have to file a federal estate tax return, the final accounting and other documents necessary to close the probate estate are first due within 12 months after the Court issues Letters of Administration to the personal representative. This period can be extended if necessary.

If the estate is required to file a federal estate tax return, the return is initially due nine months after the date of the decedent’s death; however, the time for filing the return can be extended for another six months. If a federal estate tax return is required, the final accounting and other documents to close the probate administration are due within 12 months from the date the estate tax return, as extended, is due. This date can also be extended if necessary.

HOW ARE THE PERSONAL REPRESENTATIVE’S COMPENSATION AND PROFESSIONAL FEES DETERMINED?

The personal representative, the attorney, and other professionals (such as appraisers and accountants) are entitled to receive reasonable compensation. The personal representative’s compensation is usually determined in one of five ways:

  • As set forth in the Will.
  • As set forth in a contract between the personal representative and the decedent.
  • As agreed among the personal representative and those who will bear the impact of the personal representative’s compensation.
  • The amount is presumed to be reasonable as calculated under Florida law if the amount is not objected to by any of the beneficiaries.
  • As determined by the judge.

The fee for the attorney for the personal representative is usually determined in one of three ways:

  • As agreed among the attorney, the personal representative, and those who bear the impact of the fee.
  • The amount presumed to be reasonable calculated under Florida law if the amount is not objected to by any of the beneficiaries.
  • As determined by the judge.

WHAT ARE ALTERNATIVES TO FORMAL ADMINISTRATION AVAILABLE?

Florida law provides for several alternates, abbreviated probate procedures other than the formal administration process.

“Summary Administration” is generally available only if the value of the estate subject to probate in Florida (less property, which is exempt from the claims of creditors; for example, homestead real property in many circumstances) is not more than $75,000, and if the decedent’s debts are paid, or the creditors do not object. Those who receive the estate assets in a summary administration may remain liable for claims against the decedent for two years after the date of death. Summary administration is also available if the decedent has been dead for more than two years and there has been no prior administration.

Another alternative to the formal administration process is “Disposition Without Administration.” This is available only if probate estate assets consist solely of property classified as exempt from the claims of the decedent’s creditors by applicable law and non-exempt personal property, the value of which does not exceed the total of (1) the cost of preferred funeral expenses; and (2) the amount of all reasonable and necessary medical and hospital expenses incurred in the last 60 days of the decedent’s final illness, if any.

What if There is a Revocable Trust?

If the decedent had established what is commonly referred to as a “Revocable Trust,” a “Living Trust” or a “Revocable Living Trust,” in certain circumstances, the trustee might be required to pay expenses of administration of the decedent’s probate estate, enforceable claims of the decedent’s creditors and any federal estate taxes payable from the trust assets. The trustee of such a trust is always required to file a “Notice of Trust” with the clerk of the Court in the county in which the decedent resided at the time of the decedent’s death. The notice of trust gives information concerning the identity of the decedent as the grantor or settlor of the trust and the current trustee of the trust. The purpose of the notice of trust is to make the decedent’s creditors aware of the existence of the trust and of their rights to enforce their claims against the trust assets.

All of the tasks that must be performed by a personal representative in connection with the administration of a probate estate must also be performed by the trustee of a revocable trust, though the trustee generally will not need to file the same documents with the clerk of the court. Furthermore, if a probate proceeding is not commenced, the assets making up the decedent’s revocable trust are subject to a two-year creditor’s claim period, rather than the three-month non-claim period available to a personal representative.

The assets in the decedent’s revocable trust are a part of the gross estate for purposes of determining federal estate tax liability.

Read more related articles here:

HOW DO I ACCESS PROBATE RECORDS?

Duval County Probate

Also, read one of our previous Blogs here:

Is An Attorney Required For Probate In Florida?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

death taxes

Where Not To Die In 2022: The Greediest Death Tax States

Where Not To Die In 2022: The Greediest Death Tax States

Where Not To Die In 2022: The Greediest Death Tax States. Should death be taxing? Amid budget surpluses, states started slashing income taxes last year. But only two have made significant changes to their estate or inheritance taxes so far. Last year Iowa legislators decided to phase out the state’s inheritance tax by January 1, 2025. And this year Nebraska legislators made pro-taxpayer tweaks to its inheritance tax for deaths occurring on or after January 1, 2023.

Other jurisdictions have lessened the tax bite for dying in 2022—through previously scheduled changes or inflation adjustments. But some, without inflation adjustments, are still taxing estates at levels that haven’t budged for years, meaning more families are getting surprise death tax bills. In one of those states—Massachusetts—Democratic legislators are pushing for changes to spare more estates from the tax as part of a broader tax reform package this summer.

In all, 17 states and the District of Columbia levy estate and/or inheritance taxes. Maryland is the outlier that levies both. If you live in one of these states—or might retire to one—pay attention.

These taxes operate separately from the federal estate tax, which applies only to a couple of thousand estates a year valued at over $12.06 million per person. (That number is set to drop roughly in half on January 1, 2026, when the Trump tax cuts that temporarily doubled the base exemption from $5 million to $10 million expire.) While few individuals need to plan around the federal estate tax, the state levies all kick in at much lower dollar levels, often making it a middle-class problem.

Consider the current state estate tax in Massachusetts. The $1 million estate tax exemption hasn’t been adjusted for inflation since 2006, so it can hit the heirs of middle-class folks who have seen their houses and retirement accounts appreciate. “You can be real estate rich with a modest home, and your estate could be subject to this,” says Scott Cashman, a tax manager with Bowditch & Dewey in Worcester, Massachusetts. “It’s becoming more of an issue every year.” If the $1 million exemption amount set in 2006 had been adjusted for inflation, it would be closer to $1.5 million today.

Say a widow or widower died with a house worth $535,000, a $200,000 bank account, a $350,000 retirement account, and a $15,000 car, for a $1.1 million gross estate. Assuming $50,000 in deductions, the estate tax would be $20,500, he calculates. (There’s no estate tax when assets are left to a spouse, but in this case the heirs are children.) If the house is worth $1 million, however, the tax would be $65,360— one third of the cash in the bank. Adding to the pain is what’s known as the cliff: Once the $1 million mark is crossed, the estate tax applies to everything over $40,000. “I don’t know if most legislators understand that,” he says.

A bill introduced by Democratic state senators would double the Massachusetts exemption amount to $2 million and only levy tax above that amount, removing the dreaded cliff. “We have such a surplus now, this is the time to do it,” says Cashman. “There’s broad-based support for reform.”

Inheritance taxes—levied in six states—can kick in at far lower levels, with the exemption and tax rate depending on the heir’s relationship to the deceased. In New Jersey, for example, if you leave your estate to a Class D beneficiary—including a nephew or non-civil-union partner—they’re taxed at 15% on assets up to $700,000 and 16% on assets above $700,000.

In Nebraska, lawmakers this year fell short of inheritance tax repeal but succeeded in chipping away at the state’s inheritance tax. The new law, effective January 1, 2023, cuts the top tax rates (from 18% to 15%, for example) and increases the exemption amounts (from $10,000 to $25,000, for example). It also eliminates inheritance taxes for heirs under 22, and it makes unadopted step-relatives taxed at the lower rate for nearer family members and not the higher rate for unrelated heirs. “Lawmakers wouldn’t agree to a general phasedown of the tax at this point that would apply to everyone, but they were willing to accept that if a younger person were to inherit property or cash (and we can use a lot more young residents and entrepreneurs in Nebraska) that it’s not in the state’s economic interest to take any of it away from them,” says Adam Weinberg, communications director with the Platte Institute, which is continuing its effort to repeal the inheritance tax in Nebraska.

Meanwhile, Connecticut, the least taxing of the estate tax states, is on schedule to increase its exemption to $9.1 million in 2022, and then to match the federal exemption for deaths on or after January 1, 2023. In an unusual nod designed to keep the richest taxpayers in the state, Connecticut has a $15 million cap on state estate and gift taxes (which represents the tax due on an estate of approximately $129 million).

Other states with 2022 changes: Washington, D.C., reduced its estate tax exemption amount to $4 million in 2021, but then adjusted that amount for inflation beginning this year, bringing the 2022 exemption amount to $4,254,800. Several states, which all have set their exemption amounts at different base levels, also see inflation adjustments for 2022. Maine’s is $6,010,000, while New York’s is $6,110,000. In Rhode Island, the 2022 exemption amount is $1,648,611.

TOD vs Revocable Trust

TOD Accounts Versus Revocable Trusts – Which Is Better?

SAVINGS

TOD Accounts Versus Revocable Trusts – Which Is Better?

Both help you pass down assets while avoiding the time and expense of probate, but one comes with a lot more flexibility than the other.

What is a TOD account or POD account?

A TOD account allows the account holder to name a beneficiary on a non-retirement financial account to receive assets at the time of the account holder’s death, thereby (generally – i.e., when used correctly) avoiding probate.  A TOD account generally handles distributing stocks, brokerage accounts or bonds to the named beneficiary when the account holder dies.

A POD account is similar to a TOD account except that it handles a person’s bank assets (cash), instead of securities.

Both TOD and POD accounts are quick and dirty ways of avoiding probate, which can be slow, expensive, public and possibly messy.  Financial institutions offer TOD and POD at their discretion.  But, almost all major brokerage houses and investment houses now have these types of accounts, as well as most banks for standard bank accounts.  Many even allow you name such a beneficiary easily online.

What is the benefit of using a POD or TOD account?

Probate avoidance. As mentioned, TOD and POD accounts avoid the probate process by naming a beneficiary or beneficiaries to receive the asset directly when the account owner dies.  They distribute assets quickly and (usually) seamlessly to the intended beneficiary when the account owner dies.

What are the pitfalls to using a POD or TOD account?

When someone passes away, there can be creditors, expenses of administering the decedent’s estate, and taxes owed. The person or persons responsible for administering the decedent’s estate are typically empowered under the law to seek contributions from the POD and TOD beneficiaries to pay those debts, expenses, and taxes. If the beneficiaries do not voluntarily contribute, then there may be no choice but to file a lawsuit to obtain the contributions.

In addition to the beneficiary choosing not to contribute, the beneficiary may have spent those assets, have other circumstances, such as involvement in a lawsuit or a divorce, that will complicate turning over those assets, be a minor or otherwise legally incompetent, or be the recipient of government benefits. All of these circumstances will cause complications.

Revocable trusts give you much more than probate avoidance.

A trust allows you to plan for incapacity. If the creator of the trust becomes incapacitated, a successor or co-trustee can take over managing the account for the benefit of the creator.  With a POD or TOD account, a durable power of attorney would be needed to have another person handle the account. Many times, financial institutions can be reluctant to accept powers of attorney, for example, if the documents are old or do not have the appropriate language.

A trust allows you to plan for your beneficiaries. If your beneficiaries are minors, have special needs, have creditor issues, or have mental health or substance abuse issues, trusts can hold and manage assets over a period of time and protect those assets for the beneficiary’s use.  Inheritances can also be managed over long periods of time with a trust. You can also name individuals to receive any remaining assets when the original beneficiary passes.
Revocable trusts hold the assets after the death of the creator of the trust and use those assets to first pay any debts, expenses, or taxes, thereby negating the need to ask for contribution from direct beneficiaries.

While in some cases POD and TOD accounts can be appropriate for probate avoidance, their limitations at addressing other issues can cause many individuals to opt for a revocable trust. Speak with an estate planner to determine what is best for you and your family.

Read more realted articles here:

THE DIFFERENCES BETWEEN A TRANSFER ON DEATH ACCOUNT & A LIVING TRUST

Pros and Cons of Using TOD Accounts to Avoid Probate

Also, read one of our previous Blogs at:

Does Transfer-on-Death Become Fraudulent Transfer?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

end of life planning

What to know about end-of-life planning

What to know about end-of-life planning.

What to know about end-of-life planning. End-of-life planning refers to the steps a person takes to get their affairs in order and determine how they want to spend their last days. Also known as advance care planning, it typically involves a person completing a living will, a healthcare proxy, and a last will and testament.

Whether a person is well or facing a terminal illness, end-of-life planning helps ensure that those who care for them can carry out their last wishes. While it may be a difficult subject to consider and discuss, it is important for a person to have their affairs in order to help facilitate a smooth process after their passing.

In this article, we will discuss what people can expect with end-of-life planning.

End-of-life planningTrusted Source provides people with tools to control their financial and healthcare decisions while they can still take part in the decision-making process. A person usually starts advance care planningTrusted Source steps with a healthcare professional. They can involve conversations with caregivers about what they would want in the event of a life threatening illness or injury.

This type of planning may helpTrusted Source alleviate unnecessary pain and discomfort, improve quality of life, and provide a better understanding of decision-making challenges for a person and their caregivers.

Individuals do not need a lawyer for an advance directive, living will, or healthcare proxy. But a person may need legal help for special circumstances and power of attorney. The National Institute on Aging has an easy-to-follow checklistTrusted Source to help a person make legal and financial plans now for their healthcare in the future.

End-of-life planning involves forethought to ensure that a person receives healthcare treatment consistent with their wishes and preferences, should they be unable to make their own decisions or speak for themselves. It can require people to answer specific and difficult questions about death and dying. Questions a person may want to consider include:

  • Do I need or have a will?
  • Does my family know where I keep my important papers?
  • Do I have life insurance or money set aside for burial, cremation, or funeral expenses?
  • How and where do I wish to die if I have a choice?
  • Do I want lifesaving measuresTrusted Source if or when they become necessary?
  • Is palliative care right for me?
  • How do I want my body handled after my death?
  • Do I have social media accounts that need closure?
  • Do I want to donate my organs or my body?
  • Do I want a death announcement or an obituary? What do I want in it?
  • What sort of memorial do I want, if any?
Read more relkated articles at:

One Woman Helps Others Make Sure End-Of-Life Planning Is ‘Good To Go’

Getting Your Affairs in Order

Also, read one of our previous Blogs here:

End-Of-Life Planning Is A ‘Lifetime Gift’ To Your Loved Ones

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

 

end of life planning

End-Of-Life Planning Is A ‘Lifetime Gift’ To Your Loved Ones

End-Of-Life Planning Is A ‘Lifetime Gift’ To Your Loved Ones

Talking about death makes most of us uncomfortable, so we don’t plan for it.

That’s a big mistake, because if you don’t have an end-of-life plan, your state’s laws decide who gets everything you own. A doctor you’ve never met could decide how you spend your last moments, and your loved ones could be saddled with untangling an expensive legal mess after you die.

Betsy Simmons Hannibal, a senior legal editor , puts it this way: Planning for the end of life isn’t about you. “You’re never going to really get the benefit of it. So you might as well think about how it’s going to be a lifetime gift that you’re giving now to your parents or your partner or your children. It really is for the people you love.”

Here are some simple, practical steps to planning for the end of life. These tips aren’t meant to be legal or medical advice, but rather a guide to ease you into getting started.

1. Name an executor.

If you’re an adult, you should have a will, says Hannibal. Estate planning is not just for the rich. “It’s not just about the value of what you own. It’s also the feelings that you and your loved ones have about what you own.” If you own lots of valuable stuff — real estate, trust funds, yachts — you probably need a lawyer.

She says the first thing you do is name (in writing) a person whom you trust to take care of everything when you die. In most states that person is called an executor; in some they’re called a personal representative.

Hannibal says it’s a good idea to choose someone from your family. “The most important thing is that you have a good relationship with them — and also that they have a good attention to detail, because it’s a lot of work to be someone’s executor.”

An executor would have to, for example, find all your financial assets and communicate with everyone you’ve named in your will. It’s a big ask, so Hannibal says just be upfront. She suggests asking the person directly, “Would you be comfortable wrapping up my estate when I die?”

2. Take an inventory.

List everything you own, not just things that are financially valuable — such as your bank accounts, retirement savings or car — but also those things that have sentimental value: a music or book collection, jewelry, furniture. Then list whom you want to leave what to.

If you have young children, name a guardian for them. Choose carefully, because that person will be responsible for your child’s schooling, health care decisions and value system.

Hannibal says pets are considered property under the law, so she suggests naming a new owner so that the state doesn’t do it for you.

Digital accounts are also part of your property. This includes social media accounts, online photos, everything in, say, your Google Drive or iCloud, online subscriptions, dating site profiles, credit card rewards, a business on Etsy or Amazon. Hannibal suggests keeping a secure list of all those accounts and the login and password details. Let your executor know where the list is.

Just as you write out specific instructions about your physical belongings, be clear about what you’d like to happen with your online information.

She says it’s better not to have a handwritten will, because proving you wrote it will require a handwriting expert. So keep it simple. Just type out your wishes and have two witnesses watch you sign and date it. Then have them do the same. Hannibal says by signing it, “they believe that the person who made the will is of sound mind, and that’s a pretty low bar.”

You don’t need to file your will anywhere; neither do you need to get it notarized for it to be legally binding. And don’t hide it. Hannibal says just tell your executor where you’ve kept a copy.

Remember that your decisions will change over time. So if you have a child, buy a house or fall out with a family member, update your will.

3. Think about health care decisions.

Your will takes care of what happens after you die. An advance directive is a legal document that covers health care and protects your wishes at the end of your life.

There are two parts to an advance directive. The first is giving someone your medical power of attorney so the person can make decisions for you if you can’t. The other part is called a living will. That’s a document where you can put in writing how you should be cared for by health professionals.

She has seen thousands of situations of loved ones making difficult and emotional decisions around a hospital bed. It’s worse when family members disagree about a course of action.

You know the saying “The best time to plant a tree was 20 years ago. The second best time is now”? Zitter says with the coronavirus in the news every day, more people are realizing that these end-of-life conversations are important. “That tree was always important to plant. But now we really have a reason to really, really plant it. … That time is now.”

4. Name a medical proxy.

Pallavi Kumar is a medical oncologist and palliative care physician at the University of Pennsylvania. Kumar says the most important medical decision you can make is to choose a person who can legally make health care decisions for you if you can’t. This person is sometimes called a medical proxy or a health care agent. Naming the person is the first part of the advance directive.

“Think about the person in your life who understands you, your goals, your values, your priorities and then is able to set aside their own wishes and be a voice for you,” she says. You want someone you trust who can handle stress, in case your loved ones disagree on what to do.

5. Fill out a living will.

After you’ve chosen your medical proxy (and named a backup), you need to think about what kind of care you want to receive. There’s no right or wrong; it’s very personal. The document that helps you do that is called a living will. It’s part two of the advance directive.

A living will addresses questions such as “Would you want pain medication?”; “Do you want to be resuscitated?”; and “Would you be OK being hooked up to a ventilator?”

Kumar says she asks her patients what’s important to them and what their goals are. For some with young children, it means trying every treatment possible for as long as possible, no matter how grueling.

Other patients might want the exact opposite. “They would say, ‘I’ve gone through a lot of treatments and I … feel I’m not having as many good days with my kids. So if the disease gets worse, I want to spend that time at home.’ ”

Kumar says even among patients who are very sick with cancer, fewer than half have had conversations about how they want to die. So talk about your wishes. Once you’ve filled out the advance directive forms, share your decisions with your medical proxy, your loved ones and your doctor.

6. Don’t forget the emotional and spiritual aspects of death.

How you want to die is personal and about much more than just the medical aspect. For some, it’s about being at peace with God; for others, it’s being kept clean. Still others don’t want to be left alone, or they want their pets close by.

Angel Grant and Michael Hebb founded the project Death Over Dinner to make it easier for people to talk about different aspects of death as they eat. “The dinner table is a very forgiving place for conversation. You’re breaking bread together. And there’s this warmth and connection,” says Grant.

Grant says reflecting on death automatically forces you to think about your life. “That’s the magic of it,” she says.

“We think it’s going to be morbid and heavy. But what these conversations do is they narrow down our understanding of what matters most to us in this life, which then gives us actionable steps to go forward living.”

Grant doesn’t believe a “good death” is an oxymoron. “A good death is subjective, but there are some things that I have heard over and over again for many years at death dinners. … A good death is being surrounded by love, knowing you have no emotional or spiritual unfinished business.”

Read more related articles at:

Hard Conversations About End Of Life Wishes: Should Young Adults Be Included?

Getting Your Affairs in Order

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

intestate

Your Parent Didn’t Have A Will: What Should You Do Now?

Your Parent Didn’t Have A Will: What Should You Do Now?

  • Make a diligent search for a will. Look through your parent’s records and file cabinets, talk to their close friends and other relatives, ask their accountant and any lawyer they worked with in the past. Look around the house for business cards of lawyers, accountants or financial advisors. They may have gone to a lawyer and not told you about the appointment. I cannot tell you how many times a client has told me, “I have a will, but it’s old.” Wills are not like cartons of milk; they don’t have expiration dates. If you have found an “old will” – and it was not revoked by your parent – it is the will that will be probated.
  • Check to see if mom or dad had a safe deposit box. The will may be in the safe deposit box. This poses a particular challenge because the authority to get into the safe deposit box may be in the box. If you are fortunate, mom or dad will have named you as a signatory on the box and you will be able to access it. If not, you will have to adhere to your state’s laws in order to gain access to the box. Some states allow you to bring a special petition to gain access to the box. Other states will require a full probate petition in order to gain access.
  • Gather a list of your parent’s assets, financial statements and tax returns. It is particularly helpful to have financial statements covering the date of death. If mom died on March 19, you should gather up all of the financial statements that cover the entire month of March. Date of death values of assets will be needed for probate and estate tax returns. Financial statements will often indicate ownership of the account. If there was a joint owner of the account, the ownership will most likely pass to the surviving joint owner and probate of that asset may not be needed. The same is true if the account had a “POD” – Payable on Death – listed. The asset gets paid on death to that named person listed and avoids probate.
  • Make an appointment with a lawyer. This can be your parent’s lawyer, your lawyer or a new lawyer you have been referred to by a trusted advisor. Just because dad used his old college buddy for his legal needs does not mean that you have to use that same lawyer to administer his estate. If you are the person in charge of dealing with the estate, you can hire whatever attorney you like to advise you. I caution you not to use the lawyer who helped with the purchase of your home or handled your best friend’s divorce to assist with the estate. Hire someone who has experience with trusts and estates law. You wouldn’t go to a dermatologist to perform your heart surgery. Likewise, you should not hire a real estate lawyer to administer your mother’s estate.

The lawyer will review the information you have gathered and will advise you what next steps are needed. At this stage, a lawyer is generally looking to see if probate will be necessary. If all of the assets were owned jointly with a surviving joint owner or had a named beneficiary, there may be no need to probate. In most states, the ownership passes by operation of law to the surviving joint owner or the named beneficiary. This is often the case with life insurance, IRA’s and 401K’s. If, however, there is an asset in mom’s name alone, such as a home or a bank account, probate will be needed for that asset. Since there is no will, you will need to bring a petition under the laws of the state where mom died (or where she owned assets) asking the court to appoint you as Personal Representative (or Administrator) of the estate. This is called an intestate estate, which means mom or dad died without a will. The beneficiaries will then be determined by state law, which dictates who inherits the money.

Of course, most of this can be avoided if your parent creates an estate plan, including a will, before they die. Unfortunately, just like we didn’t always listen to their advice when we were growing up, they often do not listen to ours.
Read more related articles here:

WHAT HAPPENS WHEN SOMEONE DIES WITHOUT A WILL?

Also, read one of our previous Blogs at:

What Does it Mean to Die Intestate?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

Executor

You’re An Executor…Now What?

You’re an executor…now what?

By MassMutual Staff

You’re An Executor, Now What? Being trusted with handling a loved one’s estate is an honor. It’s also a taxing job at the best of times, mentally and, often, emotionally as well.

Those in the role of executor should focus on staying organized and should not shy away from reaching out for help to ease the process as much as possible. And if you have not yet created your estate plan, or even just drafted a will, it’s never too soon to make sure your survivors will have what they need to get your estate taken care of according to your wishes.

The first thing an executor of will duties should keep in mind is this: It takes time.

“Handling an estate is very slow,” said Paul Viren, president of the National Association of Estate Planners and Councils, in an interview. “People’s lives can be complicated, even in the simplest of situations. It’s first gear the whole way.”

What does an executor do?

At the core of an executor’s role is figuring out what the decedent’s assets are, and then what to do with them.

Some of the most common duties include:

  • Finding the deceased person’s assets and manage them until they are distributed to inheritors.
  • Deciding whether or not probate proceedings are needed.
  • Figuring out who inherits property.
  • Filing the will (if any) in the local probate court.
  • Handling day-to-day details.
  • Setting up an estate bank account.
  • Using estate funds to pay continuing expenses.
  • Paying debts and taxes.
  • Supervising the distribution of the deceased person’s property.

This process can be more or less complex, depending on the decedent’s family and financial circumstances.

Figuring out who gets what

The first step, Viren said, is to “take a deep breath. There’s no proverbial clock ticking. It’s not a race. Better to be organized and disciplined than to try to rush through to the end.”

Organization is key when dealing with an estate, and an inventory is an executor’s best friend. Start by taking stock of the assets you’re dealing with.

Assets generally fall into two categories: those that go through probate, and those that don’t.

Things like IRAs, retirement savings plans, and life insurance policies go directly to the beneficiary, as do Payable- or Transferable-on-Death accounts, and most trusts. Naming a beneficiary generally allows an asset to bypass probate, which makes the transfer easier, although challenges can happen if a beneficiary designation doesn’t look right.

“Take for example having an ex-wife listed as the beneficiary on a life insurance policy,” Viren said. “Was it a court order as part of the divorce settlement that the ex-spouse stay listed on life insurance? Or was the beneficiary designation just never updated after the split?”

To determine the fate of probatable assets, start by looking at the will, if there is one. Probatable assets tend to be less cut-and-dry than those with a named beneficiary, and each unique situation must be handled appropriately depending on what’s on the table.

Titled assets, like a car or a house, would have to transfer or be sold. Non-titled assets (which are pretty much everything else) need to be re-homed or disposed of. Heirlooms or other precious items should be dealt with according to the decedent’s wishes, and a will can help to settle disputes that might crop up in the absence of clear direction on who should receive them.

“If the decedent owned a business,” asked Viren, “how do we deal with management of that business? Who runs it until it can be sold or shut down or whatever’s going to happen? If the person had non-business responsibilities, like liability for children from a prior marriage, how is that handled?”

Dealing with claims on the estate

But even when a will exists, it often doesn’t capture the full picture. While the will states the decedent’s intent for the distribution of his or her property, claims on the estate must also be dealt with.

The executor must determine and pay debts from the estate and file the decedent’s final taxes before any remainder can be distributed to heirs. Depending on the situation in the decedent’s final days, especially if the death was sudden or unexpected, this may include sorting through medical insurance and bills.

“Figuring out who’s responsible can sometimes be tough,” Viren said. “Dealing with people saying ‘I’m owed money from the estate’ can be challenging,” especially if unexpected claims arise.

And that’s not just because of the stress of keeping everything in the estate accounted for. Underneath the logistical tangle lies the emotional component. Dealing with an estate may benefit from organization, but in many cases the executor is also family or otherwise close to the deceased, and it can be difficult to stay organized in the wake of losing a loved one.

“They’re in a stressful situation, their world has been turned upside-down, and they have to deal with managing what’s left behind. It can be a lot,” said Viren.

But if it all seems overwhelming, remember that handling an estate is generally not something the executor does alone.

Help for estate executors

There are a number of people who generally need to be involved when deciding where the decedent’s money goes, and a key component to successful estate management is the step that Viren refers to as assembling the team.

“Generally, the core team consists of the CPA, the attorney, and any family members key to the situation,” Viren said. It can also include insurance, medical or HR professionals, depending on the circumstances around the death and claims surrounding the estate.

This team can help the executor stay on track and make good decisions. Communication is key, Viren cautions, both among the team members and also between the team and the family to make sure there are no hidden agendas or underlying suspicions.

“Most people named executor aren’t trained to deal with this sort of thing,” said Viren. “That’s where the team can help.”

In addition to having a team for support, executors are generallyentitled to some type of compensation, which may also help to ease the burden of taking on the management of an estate. But if the prospect is still too overwhelming, executors do have the option to resign from administering the estate, after which the probate court will assign someone else to step in.

Make it easier on your executor

Processing an estate tends to be easier when everything is in order, so creating an estate plan can go a long way toward helping your executor handle your final affairs after you’re gone.

“An estate plan doesn’t have to be complex,” said Pete Lang, founder and president of Lang Capital in South Carolina. “However, everyone should take the time to help ensure that their financial and personal affairs are in order prior to their death.”

Creating a will is an excellent first step, and it’s important to keep it — and beneficiary designations on any eligible accounts — updated as time goes on. Viren also recommends creating a password list to streamline the handling of your digital presence, as well as an emergency document with everything from your blood type to emergency contacts and doctor information: whatever would help your family handle an emergency of any size. (RelatedWhat my loved ones need to know)

The most important documents you leave behind, though, may not be the legal ones.

Viren tells his clients to create handwritten love letters to family and leave those sealed envelopes with the legal documents so your family will have something from you that’s not an asset assignment. He highlights this as a chance to remember happy things, express your love, or even to ask for forgiveness, because families aren’t perfect. This is the personal, human side of a legacy and shouldn’t be overlooked in the process of estate planning.

“No matter where the journey takes us, it all starts with a love letter,” Viren said. “It should end with love letters too.”

Read more related articles at:

What to Do When You’re the Executor

How to Prepare to Be an Executor of an Estate

Executor of a Will Checklist: Your Step-by-Step Guide

Also, read one of our previous Blogs at:

Choosing the Right Executor

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Probate in FL

Is An Attorney Required For Probate In Florida?

Is An Attorney Required For Probate In Florida?   Yes, in almost all cases you will need a Florida Probate Lawyer. For all but the simplest estates, Florida law requires that the personal representative of an estate hire a probate attorney to guide him or her through the process. While hiring an attorney might seem like an unnecessary burden, an attorney should help make the probate process as efficient as possible. Except for “disposition without administration” (very small estates) and those estates in which the executor (personal representative) is the sole beneficiary, Florida law requires the assistance of an attorney. Even when an estate lawyer is not required, formal administration has so many technical rules and pitfalls that it can be very frustrating for the non-lawyer. Florida’s system is too complex for most personal representatives to follow without guidance, and the courts are not set up or staffed to provide probate legal assistance. In addition, judges in the state require probate documents to meet certain specifications and wording, the forms for which are not available online or even in most libraries. In other words, executors in Florida cannot count on the court clerk’s office to guide them through, as they might in some other states.

Why Can’t I Just Record The Will To Change The Title To My Parent’s Property In Florida?

Title insurance underwriters in Florida generally do not recognize a recorded will as sufficient to convey title, and for good reasons.   First, there is no way for those title insurers to know that the recorded will was valid and was the final will of the deceased. Second, there are situations in which the property cannot pass according to the Will due to the nature of the property, estate creditors, or other reasons.

Can An Estate Be Administered With A Missing Heir?

In many cases, yes, the estate could be administered. A missing heir is one who, although not shown on the title, has inherited a portion of the title due to the death of an owner, but who cannot now be located. Florida law has a useful provision under a formal probate administration which allows the personal representative to deposit the share of a missing heir into the registry of the court after the property has been sold.

A missing heir is much different from a missing owner of record. If the missing person is an owner of record and has not died or been declared dead by a court, the probate code does not apply and the situation is more complicated. A conservator may be needed.

Do All Estates In Florida Have To Go Through “Full” Probate?

No, very small estates without real property may qualify for “disposition without administration” and some estates may qualify for summary administration, which is a faster and cheaper form of probate administration. Because Florida’s homestead definition allows unlimited value (but not unlimited acreage), some estates with very expensive homestead property (principal residence), but little else, can qualify for summary administration. Also, if the deceased has been dead for more than two years, the estate can be handled in summary administration.

After A Property Owner Dies, Can His Or Her Power Of Attorney (POA) Be Used?

No. It has no “power” after the maker (the property owner) dies. Without meaning any disrespect, a good way to remember this is to recall that death turns a POA into a “DOA.”

Is Summary Administration Always The Better Way When Available?

Sometimes it is not practical to use a summary administration even if it is an option. Examples:

  • The Will leaves the property to a large number of beneficiaries, each of whom would have to sign the contract to sell as well as the deed and other closing papers.
  • If some of the beneficiaries are minors, guardianships may have to be set up and maintained until the minor reaches adulthood, but in a formal estate, the personal representative may be able to avoid that through the Florida Uniform Transfers to Minors Act.
  • Sometimes, the whereabouts of one or more of the beneficiaries are unknown. Formal probate administration can accommodate a missing heir. Summary administration cannot.
  • If one of the beneficiaries refuses to cooperate with the other owners, formal administration may be needed in order to sell the property. The alternative is a “partition” lawsuit by one or more owners, the costs of which are likely to exceed formal probate costs.

If a formal administration is needed after the second anniversary of death, certain steps related to creditors are no longer required and for that reason, the fees and costs may not be that much more expensive than a summary administration.

Is It Ever “Too Late” To Start Probate?

No, there is no deadline to open a probate in Florida, and we have handled estates 50 years after a person’s death. If family members have paid the property taxes so that no tax deeds are granted, probate is often feasible for decades. However, there is a practical limit in some family situations, because over enough time there may be several probate administrations needed due to the deaths of the initial heirs and even children of the heirs. Also, sometimes family members lose track of each other so that the current generation does not know enough about the estate of a deceased heir to know who the heirs may be. Probate can be started with minimal information, but it must be through a more expensive formal administration.

Do I Need To Personally Appear In Florida To Probate An Estate?

No, not usually for probate. Unless a dispute requires a hearing, neither the personal representative nor the estate attorney will actually go to court in Florida. There is no “reading of the will” like you see in old movies. Everything is done by mail, email, phone, and internet.

Read more related articles at:

Florida Bar: Consumer Pamphlet: Probate in Florida

The Problem With Probate In America And Ways To Fix It

Also, read one of our previous Blogs at:

Estate Planning Secrets: How To Avoid Probate

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Trustee compensation

How Much Should A Trustee Be Compensated?

How much should a trustee be compensated?

By
Elissa Suh

How much should a trustee be compensated? Trustee fees vary based on who the trustee is and the complexity of administering the trust. Trustees are an integral part of estate planning — they have a fiduciary duty to distribute assets to the rightful beneficiaries of the trust and also manage the trust’s day to day activities more generally. A trustee’s duties can include filing the trust’s tax return and managing its assets in the least, and for more complex trusts a trustee may even be tasked with making investments or selling real estate. Serving as trustee is a time commitment and carries a lot of responsibility, so it makes sense that a trustee gets paid for their work  — similar to how the executor receives compensation handling the deceased’s estate. (Read about the difference between executor and trustee.) Trustee fees can be calculated a few different ways, depending largely on who the trustee is — friend or family, a lawyer, or even a corporation — and what they do as part of managing the trust.

Key Takeaways

  • A trustee is paid for their services and reimbursed for any out-of-pocket expenses related to trust management

  • Trustee fees may be a fixed amount, an hourly rate, or a percentage of the trust assets

  • The court can help determine trustee fees, including what counts as “reasonable compensation,” if the grantor didn’t specify in the trust agreement

  • A trustee who fails to perform fiduciary duties may not receive their fees

How much are trustee fees?

Trustee compensation is usually determined by the trustee’s level of experience and the size and complexity of the trust.

Trustee fees Type of trustee
Percentage of trust assets Corporate – trust company
Hourly rate Professional – lawyer
Fixed amount Private – friend or family

With a high-value trust or a complex trust with a variety of assets, the grantor may appoint an institution or company to manage it. These corporate trustees can charge an annual fee of 0.5% to 2% of the trust’s assets, in addition to requiring a minimum. For example, if the trust is worth $2 million, the trustee would receive $20,000 compensation that year.

Fees for managing smaller trusts aren’t calculated by percentage because it could eat up a lot of the trust funds. For example, a 1% fee for a trust that holds $100,000 would be $1,000 annually, and if the trust isn’t producing income then paying the trustee that much a year could make operating the trust unfeasible.

For a smaller trust, you can hire a professional like a lawyer who may charge an hourly rate. Many people opt for a non-professional trustee (like an adult child who isn’t an attorney) if they have a simple trust only meant to pass along an inheritance. Since they may not have many duties beyond distributing assets to beneficiaries, a non-professional trustee may receive a smaller fixed fee, but it is ultimately up to the discretion of the grantor.

What are the trustee’s expenses?

Before the trustee is officially recognized as such and has access to the trust funds, the trustee may end up covering some of the trust’s expenses — like property management fees or insurance with their own money. The trustee will be reimbursed for these out-of-pocket expenses, which can also extend to other costs related to managing the trust, like travel expenses or office supplies.

When and how is the trustee paid?

The trustee receives compensation from the trust assets, and not the grantor directly. Trustees might be paid on an annual, biannual, or even quarterly basis, and it could depend on the accounting schedule. It’s part of the trustee’s job to keep a log of their hours managing the trust and a thorough accounting of the trust’s activities.

Learn more about when the trustee can withdraw money from the trust.

When the court determines trustee fees

The trustor, or person who creates the trust, should specify the fees in the terms of trust agreement. However, it’s possible that the trustor forgets to designate the fee, or they indicate that the trustee should receive “reasonable compensation.” In this case, the court can step in to determine the trustee fees, including what’s considered reasonable, which may be based on the following:

  • The gross value of trust’s assets

  • Transactions associated with moving funds in and out of the trust

  • How much time was devoted to performing trust duties

  • Whether the trustee met the goals of the trust (like distributing assets or growing investments as specified by the trust document)

  • State and local law

 Here are a few other instances when the court can get involved:

There is a dispute

Beneficiaries can petition the court if they are dissatisfied with the trustee’s job and believe that the trustee has failed to follow its terms. The court may reassess and reduce the trustee’s compensation, and if the trustee misused or even stole the funds the beneficiary has the right to sue for losses.

Learn more about the rights of a trust beneficiary.

The trustee does extra work

Trustees can petition the court if they feel that they have performed difficult work beyond routine management or what’s laid out in the trust. They may be able to receive greater compensation (“extraordinary fees”) for handling “extraordinary work,” which includes handling litigation or business transactions, and they must provide records for the court.

Trustee compensation and taxes

If you’re a trustee, you will have to pay income tax on any fees you are paid for your services. Trustees that are beneficiaries can choose to waive their compensation. A parent may open a revocable living trust to pass along an inheritance to their child and name the child as the successor trustee to take over managing the trust when they die. Receiving assets as an inheritance may not require any taxes to be paid, depending on the structure of the trust.

Read more related articles here:

 Trustee Compensation

The 2021 Florida Statutes-Trustee Compensation

Also, read one of our previous Blogs at:

Successor Trustee: Duties, Powers and More

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

Sweetheart Wills

Estate Planning: What’s Love Got To Do With It?

Estate Planning: What’s Love Got To Do With It?

Ron Carson

From Valentine’s Day to American Heart Month, February has long been associated with love. That makes this month a great time to demonstrate how much you care about the people you love by putting an estate plan in place. If you already have one, now may be a good time to update your plan if it’s been a while since you reviewed it with your professional advisors.

Why now?

While the pandemic has spurred increased interest in estate planning, according to a 2021 Gallup poll, fewer than 46% of U.S. adults have a will, which governs the disposition of your financial assets and property following your death. Based on the survey, Americans aged 65 and older are the most likely to have a will, with just over three-quarters saying they have one. Without a will, you are leaving important decisions about the disposition of your assets and the guardianship of your minor children to a court to decide.

In a separate survey, Gallup found that roughly the same percentage of U.S. adults have a living will. Living wills specify people’s preferences for medical treatment in the event they are unable to communicate those in the future. The same survey asked respondents about their own experience with end-of-life issues, with 25% of U.S. adults saying they have been in a situation in which they had to make a decision about whether to remove life support for a family member. Those who found themselves in a position to decide on end-of-life care for a loved one were significantly more likely to have a living will themselves.

What’s love got to do with it?

Think of your estate plan as a love letter to those you care about most. It provides a road map so loved ones aren’t left guessing what you would want during your lifetime if you became incapacitated, and after you’re gone. Without a plan in place, relatives can be left scrambling during a highly stressful and emotional time, trying to determine your intentions. That can prove costly, time consuming and chaotic for everyone involved. Thoughtful estate planning can alleviate much of this stress by helping to:

  • Protect your legacy
  • Provide for your dependents and heirs
  • Shape the future of the organizations, causes and communities you care about
  • Avoid costly mistakes
  • Allow loved ones to focus on grieving and healing
  • Replace uncertainty with confidence

Where do you begin?

The foundation of your estate plan is a Last Will and Testament. A will is a legal document that directs what happens to your stuff, who will handle your property (your executor) and what happens to your minor children by naming a guardian to take care of them. You also need a durable power of attorney (POA), which allows you to appoint someone to act on your behalf in the event you are unable to make important legal, financial or healthcare decisions on your own during your lifetime.

A trust is a separate document that can play an important role in helping to fulfill your family’s financial goals. There are specific advantages associated with a trust, including continuity of asset management, privacy and tax savings, among others. A living or revocable trust provides for the organization and management of your assets during your lifetime, including any periods of disability. In addition, having your assets in a trust during your lifetime will prevent your estate from having to pass through the court-supervised probate process if you only have a will (or no will) at the time of your death.
Creating a trust also provides an incredible amount of flexibility after your death. For example, you could have your trust divide up your assets after you are no longer living and create new trusts for your children to protect them against creditors and divorce. Keep in mind, compared to creating a will, additional work is involved in creating a trust and making sure the appropriate assets are in the trust. Your estate planning attorney can discuss the options for creating and funding a trust with you.
Create a letter of instruction

Your legacy is much more than your assets. Your personal values, life experiences, impact on others and belief system are all important components of your legacy. As a result, your estate plan should be a reflection of the legacy you want to leave. That involves communicating important information and details that may not be included in your will or trust through a letter of instruction to those you love. While this is not a legal document, it helps to outline your wishes and provide clarity, saving your heirs time, effort, and expense as they administer your estate.

A letter of instruction can be used to help document:

 

  • Your preferences should you require long-term care, such as a desire to remain in your home with qualified nursing care.
  • End-of-life or palliative care preferences that are not already outlined in your living will.
  • Celebration of life preferences (funeral, burial and/or memorial services), including the type and location of services (religious, nonreligious), music, etc.
  • Your digital presence, including online financial, ecommerce, and social media accounts that a trusted loved one or your executor may need to close on your behalf.
  • Items with sentimental value to you or a loved one. Maybe you have property that is not specifically documented in your will that has greater sentimental than monetary value that you want distributed to certain family members or friends, such as photo albums, family recipes, books, trophies or awards.
  • Certain high-value items. Don’t assume family members are aware of the value of property you may own, such as certain jewelry, collectibles or antiques. Take photos and provide any relevant information regarding the origin and recent appraised or estimated value of items, if known. Also note if items such as jewelry, artwork, coins or other valuables are insured under separate policies, outside of your current homeowners’ or renters’ insurance policy.
  • The location of important estate, legal and financial planning documents, including your will, POA and trust documents; life insurance policies; deeds to real estate; information on any safe deposit boxes; and financial accounts, including retirement plans, credit cards, mortgages, loans, etc.

 

While crafting a clear and detailed “love” letter of instruction may seem a little daunting at first, remember, you don’t have to complete it all in one sitting. However, the more information you gather now, the easier it will be for loved ones to carry out your wishes later.

Whether you’ve been waiting to put an estate plan in place or have one but haven‘t formally reviewed it with your advisors for several years, our estate planning checklist can help you start the process and tick those important boxes along the way.

Read more related articles at:

Sweetheart Wills Aren’t Sweet

All You Need To Know About Creating A Will

Also, read one of our previous Blogs at:

Why and When a Sweetheart Will (Or No Will at All) Is Not Enough

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

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