Knowing the rules of the game makes a difference.
Do you remember playing board games as a child, and having arguments about the rules of the game? I have sometimes joked that lawyers are the ones who took the time to read the rules on the back of the box. Nonetheless, it is certainly true that people expect lawyers to know the rules.
A recent case demonstrates this issue in the context of a probate proceeding. The initial paperwork for the proceeding was filed and the court entered the necessary orders to appoint the Personal Representative (executor). Unfortunately, the rules of procedure had not been followed. Turns out, that the decedent's grandson had filed a document known as a 'Caveat' and had challenged the validity of the Will.
A Caveat tells the court that there is an interested person that wants to be involved in the proceeding, receive notice of various actions, and even have a chance to object before actions are taken. In this case, the court ignored the Caveat and appointed the Personal Representative. The grandson's challenge to the the validity of the Will was not heard. The rules of the game require that these challenges be resolved before the Personal Representative is appointed.
Wednesday, February 29, 2012
Wednesday, February 22, 2012
Homestead and Trusts Revisited
Another recent case points up the often misunderstood rules surrounding homestead issues. In this case, a husband died, leaving his homestead in the name of his trust. He was survived by his wife. His wife never signed a waiver of homestead rights.
Under Florida law, a spouse generally cannot be disinherited from the marital homestead unless the spouse waives homestead protection. Because the wife did not waive homestead protection in this case, ownership of the home therefore passed to the wife when the husband died. In other words, the fact that the trust held deed ownership of the home was irrelevant. (Where kids are involved, as in this case, the surviving spouse receives a life estate in the home, with the kids as ultimate heirs.)
A further observation discussed by the court: because the trust does not own the property, the trust is not liable to pay taxes, insurance or other expenses related to the property.
One lesson from this case is that the words of the documents are not always determinative. The law sometimes trumps what is written!
Under Florida law, a spouse generally cannot be disinherited from the marital homestead unless the spouse waives homestead protection. Because the wife did not waive homestead protection in this case, ownership of the home therefore passed to the wife when the husband died. In other words, the fact that the trust held deed ownership of the home was irrelevant. (Where kids are involved, as in this case, the surviving spouse receives a life estate in the home, with the kids as ultimate heirs.)
A further observation discussed by the court: because the trust does not own the property, the trust is not liable to pay taxes, insurance or other expenses related to the property.
One lesson from this case is that the words of the documents are not always determinative. The law sometimes trumps what is written!
Wednesday, February 15, 2012
Homestead Protection and Trusts
A little attention to detail can make a big difference.
A frequent question estate planners receive is whether to place homestead property into a trust. Logistically, this is accomplished by filing a deed that transfers ownership of the property into the name of the trust. Whether this is a good idea very much depends on the client's circumstances.
For example, if a client places homestead into a trust and later applies for Medicaid benefits, the value of the homestead may 'count' against him. That same property left in the client's name would have been exempt from Medicaid.
On the other hand, if a client dies with the homestead in his name, a probate proceeding is necessary to transfer title to the property to his heirs. That same property held in trust would not have required probate.
As a further wrinkle, there are differences between the 'homestead' protection from creditors granted by the Florida constitution, the 'homestead' tax benefit granted by statute, and the 'homestead' rights granted by statute to certain heirs with respect to a decedent's property. (As a recent case illustrated, these homestead issues apply to even partial interests in property.)
Finally, it is possible to create a 'beneficiary deed' or a 'ladybird deed' for the property. These deeds name a beneficiary to receive the property upon the death of the owner (presuming the beneficiary survives).
For the foregoing reasons, there is no universal approach to dealing with homestead issues, and it makes sense to consider the various circumstances and objectives.
A frequent question estate planners receive is whether to place homestead property into a trust. Logistically, this is accomplished by filing a deed that transfers ownership of the property into the name of the trust. Whether this is a good idea very much depends on the client's circumstances.
For example, if a client places homestead into a trust and later applies for Medicaid benefits, the value of the homestead may 'count' against him. That same property left in the client's name would have been exempt from Medicaid.
On the other hand, if a client dies with the homestead in his name, a probate proceeding is necessary to transfer title to the property to his heirs. That same property held in trust would not have required probate.
As a further wrinkle, there are differences between the 'homestead' protection from creditors granted by the Florida constitution, the 'homestead' tax benefit granted by statute, and the 'homestead' rights granted by statute to certain heirs with respect to a decedent's property. (As a recent case illustrated, these homestead issues apply to even partial interests in property.)
Finally, it is possible to create a 'beneficiary deed' or a 'ladybird deed' for the property. These deeds name a beneficiary to receive the property upon the death of the owner (presuming the beneficiary survives).
For the foregoing reasons, there is no universal approach to dealing with homestead issues, and it makes sense to consider the various circumstances and objectives.
Wednesday, February 8, 2012
Identifying Your Beneficiaries
Take the time to confirm the correct name of your beneficiaries.
A recent case demonstrates the difficulties that may arise when beneficiaries are not correctly identified. The decedent left a Will that included a gift for a particular charity. Unfortunately, the name of the charity identified in the Will did not match any known charitable organization. (Perhaps the individual who made the Will had a nickname for the charity in mind.)
The court was asked to name another charity, with similar purposes, to receive the required distribution. Instead, the court ruled that the charitable gift failed, and that the lapsed gift would pass to the heirs of the decedent. This part of the decision was reversed by an appellate court, with instruction that the court take evidence whether another charitable organization should receive the distribution.
It is not difficult to imagine the many hours of attorney time involved in arguing the issues in this case at trial and on appeal, plus the court time and client time in attending various hearings and meetings. All of which adds up to significant costs (paid by the estate, thereby reducing the assets available for distribution to the designated beneficiaries). These costs could have been easily avoided if the decedent had taken a minute to run an Internet search, or make a phone call, and confirm the name of the organization. It is worth the effort!
A recent case demonstrates the difficulties that may arise when beneficiaries are not correctly identified. The decedent left a Will that included a gift for a particular charity. Unfortunately, the name of the charity identified in the Will did not match any known charitable organization. (Perhaps the individual who made the Will had a nickname for the charity in mind.)
The court was asked to name another charity, with similar purposes, to receive the required distribution. Instead, the court ruled that the charitable gift failed, and that the lapsed gift would pass to the heirs of the decedent. This part of the decision was reversed by an appellate court, with instruction that the court take evidence whether another charitable organization should receive the distribution.
It is not difficult to imagine the many hours of attorney time involved in arguing the issues in this case at trial and on appeal, plus the court time and client time in attending various hearings and meetings. All of which adds up to significant costs (paid by the estate, thereby reducing the assets available for distribution to the designated beneficiaries). These costs could have been easily avoided if the decedent had taken a minute to run an Internet search, or make a phone call, and confirm the name of the organization. It is worth the effort!
Wednesday, February 1, 2012
Understanding Your Estate Planning
Be careful to read and think about your estate planning documents!
I visited with a couple recently who described to me what they understood their estate plan to be. As we reviewed the terms in the documents, we discovered that their understanding of their estate plan was not consistent with what the documents said in substantial respects.
A recent Florida case raises a similar issue. A wife died and her heirs sought to recover her interest in her surviving husband's trust. Although the terms of the trust clearly said that she (and her heirs) would not receive anything if she predeceased her husband, her heirs argued that she became entitled to a share of the trust when it was first created, because she was his wife and a potential heir of the trust. Not so.
Under the trust instrument in question, as is generally the case, heirs are determined upon the death of the individual who created the document. That an individual is a possible heir is irrelevant if they do not survive to inherit. Survival is essentially a condition to receiving the inheritance.
These two examples demonstrate the wisdom of carefully reading your estate planning documents. Certainly there may be 'legalese' and terminology that you do not use everyday. Just as certainly, you may forget a large portion of this terminology days or weeks after you read the documents. Nonetheless, be sure that the basic terms of the documents (who will act on your behalf, who will receive your property and when) are consistent with your intent.
I visited with a couple recently who described to me what they understood their estate plan to be. As we reviewed the terms in the documents, we discovered that their understanding of their estate plan was not consistent with what the documents said in substantial respects.
A recent Florida case raises a similar issue. A wife died and her heirs sought to recover her interest in her surviving husband's trust. Although the terms of the trust clearly said that she (and her heirs) would not receive anything if she predeceased her husband, her heirs argued that she became entitled to a share of the trust when it was first created, because she was his wife and a potential heir of the trust. Not so.
Under the trust instrument in question, as is generally the case, heirs are determined upon the death of the individual who created the document. That an individual is a possible heir is irrelevant if they do not survive to inherit. Survival is essentially a condition to receiving the inheritance.
These two examples demonstrate the wisdom of carefully reading your estate planning documents. Certainly there may be 'legalese' and terminology that you do not use everyday. Just as certainly, you may forget a large portion of this terminology days or weeks after you read the documents. Nonetheless, be sure that the basic terms of the documents (who will act on your behalf, who will receive your property and when) are consistent with your intent.
Wednesday, January 25, 2012
Objecting to the Personal Representative
It is possible to object to the appointment of a Personal Representative, but the rules must be followed.
The person who manages a probate estate in Florida is referred to as the 'Personal Representative' (in many states, the term 'executor' is used). This person has legal authority to administer the estate in accordance with law.
After the court appoints a Personal Representative, the Personal Representative is required to send a Notice of Administration to each of the heirs of the estate (among other people). This Notice lets everyone know that the probate estate has been opened, the identity of the Personal Representative, and other information.
Florida law provides that anyone seeking to object to the qualifications of the Personal Representative must file a formal objection with the probate court. The objection must be filed within three months after the objecting person receives the Notice of Administration. As one recent case emphasized, if you don't get your objection filed within that time frame, you are forever barred from objecting to the appointment of the Personal Representative.
If you do file an objection, you need to explain to the judge why the Personal Representative should not be allowed to serve. For example, the person appointed as Personal Representative may be ineligible to serve because they are not a Florida resident or family member of the decedent. Another reason would be if the decedent had a Will nominating another person to serve.
Once the objection is filed, the judge may conduct a hearing with the appointed Personal Representative and the objecting party. The judge may choose to overrule your objection and retain the Personal Representative, or the judge may sustain your objection and remove the Personal Representative.
The person who manages a probate estate in Florida is referred to as the 'Personal Representative' (in many states, the term 'executor' is used). This person has legal authority to administer the estate in accordance with law.
After the court appoints a Personal Representative, the Personal Representative is required to send a Notice of Administration to each of the heirs of the estate (among other people). This Notice lets everyone know that the probate estate has been opened, the identity of the Personal Representative, and other information.
Florida law provides that anyone seeking to object to the qualifications of the Personal Representative must file a formal objection with the probate court. The objection must be filed within three months after the objecting person receives the Notice of Administration. As one recent case emphasized, if you don't get your objection filed within that time frame, you are forever barred from objecting to the appointment of the Personal Representative.
If you do file an objection, you need to explain to the judge why the Personal Representative should not be allowed to serve. For example, the person appointed as Personal Representative may be ineligible to serve because they are not a Florida resident or family member of the decedent. Another reason would be if the decedent had a Will nominating another person to serve.
Once the objection is filed, the judge may conduct a hearing with the appointed Personal Representative and the objecting party. The judge may choose to overrule your objection and retain the Personal Representative, or the judge may sustain your objection and remove the Personal Representative.
Wednesday, January 11, 2012
Post-Nups
You've heard of a 'Pre-Nup', but how about a 'Post-Nup'?
As you likely know, a pre-nuptial agreement is an agreement between an engaged couple setting forth their understanding of various property matters. In the event of a divorce or death, these agreements are given great weight by courts.
In a similar way, it is possible to execute a post-nuptial agreement between a couple that is already married. In other words, the fact that you are married does not mean you have forever waived the right to have such an agreement!
A common issue addressed in pre-nuptial and post-nuptial agreements is the waiver of spousal rights. As an example, under Florida law, a spouse may not disinherit another spouse as to the married couple's home. However, this rule is subject to the exception that a spouse may waive this protection in writing.
A recent case considered what verbiage was required for a valid waiver. In the case, a wife signed a post-nup including a waiver of 'all rights'. The court held this waiver was legally sufficient, and that the wife could not inherit anything from her deceased husband's probate estate.
As you likely know, a pre-nuptial agreement is an agreement between an engaged couple setting forth their understanding of various property matters. In the event of a divorce or death, these agreements are given great weight by courts.
In a similar way, it is possible to execute a post-nuptial agreement between a couple that is already married. In other words, the fact that you are married does not mean you have forever waived the right to have such an agreement!
A common issue addressed in pre-nuptial and post-nuptial agreements is the waiver of spousal rights. As an example, under Florida law, a spouse may not disinherit another spouse as to the married couple's home. However, this rule is subject to the exception that a spouse may waive this protection in writing.
A recent case considered what verbiage was required for a valid waiver. In the case, a wife signed a post-nup including a waiver of 'all rights'. The court held this waiver was legally sufficient, and that the wife could not inherit anything from her deceased husband's probate estate.
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