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Estate Planning
The Law offices of Bernard Einstein for over 30 years has helped and assisted individuals and families plan for the future. Bernard Einstein knows that planning for the future raises complicated worries and even fears about the unknown. Often, emotions run high when people contemplate the distribution of their possessions after death. However, estate planning includes more than deciding "who gets what." A good estate plan provides a sense of security and comfort that one's desires about many future contingencies will be met. Estate planning not only defines a person's wishes to be carried out after death regarding his or her estate (all the property owned), but also sets out the means for personal well being far into the future. To reach this goal, estate planning encompasses several connected legal areas and techniques.
THE LAST WILL AND TESTAMENT
A will is a legal document specifying how a person's property and assets should be handled after death. A testator (the person making the will) can give instructions on how the property should be divided, who should receive what portions or specific items, and even who will take care of any surviving minor children. A will can establish a trust or make gifts to charity. Without a will, the State of Florida determines how property will be distributed, which may not be what the decedent intended and is often times not. Wills must meet state legal requirements to be effective, so professional guidance is important.
TRUSTS
Trusts include a variety of arrangements in which a property owner (the grantor) separates the benefits from the burdens of ownership and gives them to different people. A grantor may choose a trust in order to ensure a continuing benefit to the beneficiary as opposed to making a one-time gift. Additionally, a trust may provide tax benefits to the grantor or to his or her estate.
DURABLE POWER OF ATTORNEY
A power of attorney allow someone to select an individual for responsibilities or benefits. A power of attorney allows a person to appoint another (called the attorney-in-fact, although the person is not required to be an attorney at law) to act as his or her agent in specified situations. For example, an elderly person may delegate all the powers and responsibilities of a guardian to a designated individual, using a power of attorney, so that if the person becomes incapacitated the attorney-in-fact quickly can begin making decisions.
LIVING WILLS AND HEALTH CARE ADVANCE DIRECTIVES
The Florida Legislature has recognized that every competent adult has the fundamental right of self-determination regarding decisions pertaining to his or her own health, including the right to choose or refuse medical treatment or procedures which would only prolong life when a terminal condition exists. This right, however, is subject to certain interests of society, such as the protection of human life and the preservation of ethical standards in the medical profession. To ensure that this right is not lost or diminished by virtue of later physical or mental incapacity, the Legislature has established a procedure within Florida Statutes Chapter 765 allowing a person to plan for incapacity, and if desired, to designate another person to act on his or her behalf and make necessary medical decisions upon such incapacity.
What is a Living Will?
Every competent adult has the right to make a written declaration commonly known as a "Living Will." The purpose of this document is to direct the provision, the withholding or withdrawal of life prolonging procedures in the event one should have a terminal condition. In Florida, the definition of "life prolonging procedures" has been expanded by the Legislature to include the provision of food and water to terminally ill patients.
What is the difference between a Living Will and a legal will?
A Living Will should not be confused with a person's legal will, which disposes of personal property on or after his or her death, and appoints a personal representative or revokes or revises another will.
How do I make my Living Will effective?
Under Florida law, a Living Will must be signed by its maker in the presence of two witnesses, at least one of whom is neither the spouse nor a blood relative of the maker. If the maker is physically unable to sign the Living Will, one of the witnesses can sign in the presence and at the direction of the maker. Florida will recognize a Living Will, which has been signed in another state, if that Living Will was signed in compliance with the laws of that state, or in compliance with the laws of Florida.
After I sign a Living Will, what is next?
Once a Living Will has been signed, it is the maker's responsibility to provide notification to the physician of its existence. It is a good idea to provide a copy of the Living Will to the maker's physician and hospital, to be placed within the medical records.
What is a Health Care Surrogate?
Any competent adult may also designate authority to a Health Care Surrogate to make all health care decisions during any period of incapacity. During the maker's incapacity, the Health Care Surrogate has the duty to consult expeditiously, with appropriate health care providers. The Surrogate also provides informed consent and makes only health care decisions for the maker, which he or she believes the maker would have made under the circumstances if the maker were capable of making such decisions. If there is no indication of what the maker would have chosen, the Surrogate may consider the maker's best interest in deciding on a course of treatment.
How do I designate a Health Care Surrogate?
Under Florida law, designation of a Health Care Surrogate should be made through a written document, and should be signed in the presence of two witnesses, at least one of whom is neither the spouse nor a blood relative of the maker. The person designated as Surrogate cannot act as a witness to the signing of the document.
Can I have more than one Health Care Surrogate?
The maker can also explicitly designate an Alternate Surrogate. The Alternate Surrogate may assume the duties as Surrogate if the original Surrogate is unwilling or unable to perform his or her duties. If the maker is physically unable to sign the designation, he or she may, in the presence of witnesses, direct that another person sign the document. An exact copy of the designation must be provided to the Health Care Surrogate. Unless the designation states a time of termination, the designation will remain in effect until revoked by its maker.
Can the Living Will and the Health Care Surrogate designation be revoked?
Both the Living Will and the Designation of Health Care Surrogate may be revoked by the maker at any time by a signed and dated letter of revocation; by physically canceling or destroying the original document; by an oral expression of one's intent to revoke; or by means of a later executed document which is materially different from the former document. It is very important to tell the attending physician that the Living Will and Designation of Health Care Surrogate has been revoked.
GUARDIANSHIPS
Guardianships are established for people who need representatives to oversee their own personal affairs or finances. A child or a person incapacitated by health problems may come under the care of a legal guardian. This relationship is often established by court order when a child loses a caregiver or an adult becomes unable to deal with personal affairs, but in some instances a guardian may be elected in a will or by the individual directly concerned. Often an individual has both a guardian of the person and a guardian over the property, and the two must coordinate their efforts to give the protected person the best result.
Elder law is defined by the client rather than by specific legal distinctions. Elder law attorneys specialize in the legal issues facing older people, which may include issues almost as diverse as the entire legal spectrum. The main issues addressed, however, involve advance planning. As they age, many people become concerned about distributing their estates, establishing alternative decision makers in case of mental or physical incapacity, investigating possible long-term care needs (including the type of care and how to finance it), and otherwise ensuring a comfortable retirement. Often, people seek legal techniques for achieving these goals.
What are the advantages and disadvantages of having a trust instead of a will?
Trusts enable the grantor (the person creating and funding the trust) to determine who receives the money, when they receive it, and what conditions must be met. The pros and cons of trusts depend on whether it is a living trust or a testamentary trust. A living trust is set up during the grantor's life, while a testamentary trust takes effect upon the grantor's death. A living trust can be either revocable (grantor has power to revest title in himself/herself) or irrevocable (grantor did not reserve the power to revoke the trust). Note that a revocable trust generally becomes irrevocable upon the death of the grantor.
The most-touted advantage of a living trust is a substantial tax benefit to the grantor. Assets placed in an irrevocable living trust are not attributable to the grantor, although the trust itself may be taxed. Estate taxes also may be avoided. Other advantages cover both revocable and irrevocable living trusts. If a living trust covers all of the grantor's assets, then he or she may not even need a will however one is highly recommended. Many people wish to spare their relatives from going through probate, and living trust assets are not subject to probate. Because there is no probate, survivors do not have to reveal the extent of the living trust's assets through a public filing as happens with probate. If the grantor holds real estate in more than one state, a living trust covering that property may allow survivors to avoid probate in those states depending on those states laws. Aside from the advantages for the survivors, a living trust can help a grantor manage his or her financial affairs because a trustee takes over the administration of the trust's assets. Some people are particularly concerned about how their finances will be managed if they should fall ill. A living trust may provide peace of mind because a trustee can continue to manage the trust's funds in the event the grantor becomes mentally or physically incapacitated.
In some cases, a disadvantage of a living trust is that this trust becomes effective upon creation instead of at the grantor's death. Although a revocable living trust remains terminable at the will of the grantor, while the trust is in effect, the terms of the trust control.
The major advantage of a testamentary trust is that the grantor retains control over his or her assets. Because a testamentary trust becomes effective only upon the grantor's death, the grantor may make changes to its terms any time before death. For many people, retaining control of their property is an important goal that testamentary trusts help them achieve. Retaining control can have its disadvantages, though. If the grantor becomes incapacitated prior to death, the trustee cannot take charge of the trust assets in order to manage the grantor's finances during that time. A guardianship may be required for such incapacitated grantors. Another drawback is that survivors must probate the testamentary trust.
How does a grantor choose a trustee?
The choice of a trustee is extremely important. The trustee owes beneficiaries a fiduciary duty to act in their best interests and usually receives compensation for trust management activities, so the grantor usually wants to make this decision personally. Many grantors choose family members or close friends due to personal confidence in those individuals, but others prefer professional trustee institutions because of staff expertise. A grantor should consider the burden posed by the trust's administration, the compensation required by a trustee, and the particular needs of the trust. If a trustee is not specified in the trust document, then a court will appoint one, possibly choosing a trustee the grantor would not have chosen freely.
A trustee can be any person or institution capable of taking legal title to property. In order to make the trustee fully effective, however, the trustee also should be able to convey property. For example, minors and certain corporate entities can receive ownership but may not pass it on. Conveying ownership is necessary when distributing the trust property.
Legally, it is not necessary to notify the trustee prior to creating a trust, but a trustee may decline his or her appointment. Therefore, the grantor should choose someone who is willing to take on the required responsibilities. It is advisable to choose an alternate trustee in the event the original choice is unable or unwilling to accept the trust obligations when the trust commences. Successor trustees are also a good idea in case a trustee resigns or is removed by court action.
Grantors may choose multiple trustees to act together in managing trusts. Co-trustees must act unanimously unless the trust expressly allows division of responsibilities. Even when responsibilities are divided, each trustee retains complete individual legal liability for the entire trust.
A grantor should avoid possible conflicts of interest when choosing a trustee. The trustee's fiduciary responsibilities prohibit actions not in the beneficiary's best interests under the terms of the trust. A conflict of interests may raise a concern over whether the trustee is performing up to this standard, or may make a breach of fiduciary duties more likely.
A grantor may name himself or herself as trustee during his or her life. Additionally, a grantor may name one of the trust's beneficiaries as a trustee.
What are some of the fiduciary responsibilities owed by a trustee to the beneficiaries?
The trustee has several major duties:
- Loyalty: The greatest duty is for the trustee to be loyal to the beneficiaries. The trustee must administer the trust solely for the benefit of the beneficiaries, and provide full disclosure of his or her dealings. The trustee must deal fairly with the beneficiaries, and not manage the trust to profit his or her own financial interests (i.e., by buying stock in a company the trustee owns).
- Administration: The trustee has a positive obligation to do what is necessary for the good of the trust.
- Productivity: If the purpose of the trust is to maximize assets over time, the trustee owes a duty to make productive investments.
- Earmark: The trustee must keep trust assets separate from all other assets, including those of the trustee, and must clearly identify those assets belonging to the trust in all dealings.
- Account: The trustee must provide financial statements regarding the state of the trust.
- Nondelegation: Because the trustee holds legal title, only the trustee may manage the trust.
- Diversification: If the trust involves investment of assets, the trustee must diversify the trust's holdings as a prudent investor would do with his or her own money.
- Impartiality: The trustee must act for the benefit of the trust as a whole, and not favor one beneficiary's interests over another's.
If a trustee breaches his or her duties under the trust, the beneficiaries may sue him or her for any damages to their interests.
How can a person change a will?
If a will is valid, it is effective until it is changed, revoked, destroyed, or invalidated by the writing of a new will. Changes or additions to an otherwise acceptable will can be most easily accomplished by adding a codicil. A codicil is a document amending the original will, with equally binding effect. Therefore, a codicil must be executed in compliance with applicable law, using the same formality as the original will. Wills cannot be changed by simply crossing out existing language or adding new provisions, because those changes do not comply with the formal requirements of will execution.
Changes to an individual's personal property may prompt a change to an existing will. To avoid frequent changes as property is acquired, a will can specify that personal property (property other than money and real estate) is to be distributed in accordance with instructions provided in a separate document. The state of Florida provides for such a document, which can be updated as often as needed without requiring a formal codicil or revised will. A personal property instruction should be kept with the will to which it relates, and should describe each item in detail to avoid later confusion or hard feelings.
Wills should be reviewed at least every two years, as well as upon major life changes such as births, deaths, marriages or divorces, and major shifts in a testator's property. An outdated will may not achieve its original goals because its underlying assumptions have changed. Additionally, changes in probate and tax law may change the effectiveness of certain provisions. Because state law governs wills, if a testator moves to another state, the will should be reviewed for compliance with the new state's laws.
As long as the testator is mentally competent, his or her will can be revoked entirely without replacement by a new document. A testator can revoke a will by intentionally destroying, obliterating, burning, or tearing the will. If the will was executed in multiple originals, or if additional copies exist, those should be treated in the same fashion. If a testator wants to minimize estate taxes and probate, he or she should make validly executed changes to a will or replace the will with a subsequent will, rather than completely revoking the will. If undertaken, however, the testator should have the revocation witnessed and recorded to avoid future contentions that the will is still valid, but has been lost.
Is there any way a will would not be given effect after the testator's death?
First, a testator should make certain his or her family and friends know that there is a will, and that it is kept in a safe, secure location known to the personal representative and other people close to the testator. If a will is not presented for probate, the estate will be distributed as intestate. There is no need to file a will with a governmental agency as long as these steps are taken (although some states allow for this procedure).
Assuming that a will is presented for probate, the testator's survivors still may challenge it in court. Challenges cannot be founded on the will being unfair, or because a devisee did not get what he or she wanted; there must be a legal basis for the claim. Sometimes, a will challenge is based on the testator's mental competence at the time he or she made the will. Generally, however, all the estate must show is that the testator was of sound mind and memory when the will was made, which often can be supported by testimony from the will's witnesses. The will's challenger bears the burden to prove otherwise. Another possible challenge asserts that the testator was subjected to fraud, coercion, or undue influence when he or she made the will.
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