A Reminder About the Need for Estate Planning

In the linked story from The Tampa Bay Times, we see yet another reason for careful, thoughtful  estate planning.  

https://www.tampabay.com/news/crime/2019/12/23/power-of-attorney-has-the-power-to-be-abused-in-florida/

The person referenced in the story is entitled to due process and may ultimately be found not guilty, or charges might even be dropped, but the story is a reminder about the need to plan before the crisis hits. Without passing judgment on anyone involved, the article shows that something that might seem as simple as a power of attorney could have drastic consequences.  Interestingly, the article points out a benefit of a process that has drawn a lot of criticism  - court supervised guardianship.  

I recently saw an info-mercial for a highly respected celebrity who suggested that attorneys don't want people to know about wills and trusts because the attorneys make money from probate work.  That statement could not be further from the truth.  Because good attorneys meet with clients, discuss their options, and then discuss the details of their plan, it costs money for attorneys to provide those services.  They are not simply filing in blanks on a form that they use for every client. 

The appointment of an agent under a power of attorney is a critical decision.  It is a decision that should be made will in advance.  The agent should be a trusted family member, or a licensed professional.   Florida law does provide criminal sanctions for agents who violate their duties under a power of attorney.  

The Florida legislature has provided an injunction procedure to stop the kinds of exploitation described in the Tampa Bay Times article. 

http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0800-0899/0825/Sections/0825.103.html 

The moral of the story is plan now, plan carefully, and update your plan as needed.  Don't take it for granted. 

The Secure Act is Signed Into Law

What Does the Secure Act Mean for You?

On December 20, 2019, President Trump signed an appropriations bill that (1) prevented a government shutdown, and (2) contained what had previously been tagged as the "Secure Act."

If you need something to read over the Holidays, this would not be recommended reading.  It's 1,773 pages!  If you make it far enough, you'll come to "DIVISION O—SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT" on page 1,532.  If you're still curious, here's a link to the text of the new law:  

https://www.appropriations.senate.gov/imo/media/doc/H1865PLT_44.PDF

Section (a)(2)(E)(ii) contains one of the new provisions.  "Eligible Designated Beneficiaries" get better stretch options: 

(2) DEFINITION OF ELIGIBLE DESIGNATED BENEFICIARY.—Section 401(a)(9)(E) of such Code 16 is amended to read as follows: 

     (E) DEFINITIONS AND RULES RELATING TO DESIGNATED BENEFICIARIES.—For purposes of this paragraph— 

    (i) DESIGNATED BENEFICIARY.—The term ‘designated beneficiary’ means any individual designated as a beneficiary by the employee. 

    (ii) ELIGIBLE DESIGNATED BENEFICIARY.—The term ‘eligible designated beneficiary’ means, with respect to any employee, any designated beneficiary who is— 

        (I) the surviving spouse of the employee, 

       (II) subject to clause (iii), a child of the employee who has not reached majority (within the meaning of subparagraph (F)),  

      (III) disabled (within the meaning of section 72(m)(7)), 

       (IV) a chronically ill individual (within the meaning of section 13 7702B(c)(2), except that the requirements of subparagraph (A)(i) thereof shall only be treated as met if there is a certification that, as of such date, the period of inability described in such subparagraph with respect to the individual is an indefinite one which is reasonably expected to be lengthy in nature), or 

       (V) an individual not described in any of the preceding subclauses who is not more than 10 years younger than the employee. 

     

What does all of this mean? 

• The law does recognize trusts for disabled and chronically ill beneficiaries, but it will be important that the disabled or chronically ill beneficiary have an identifiable share in the trust, with the separate share administered separately from the shares of other beneficiaries. 

• Trusts for other beneficiaries who are not eligible designated beneficiaries will need to be monitored so that the distributions are made within the time required by the new law. 

• Beneficiaries who are not "eligible beneficiaries" will only have ten years to take the distributions.  

• As always, it will be critical to designate beneficiaries on the account beneficiary forms so that individuals, including their separate shares in a trust, can be identified. 

The Florida Supreme Court issued a revised opinion today on the 2019 Regular Cycle Report from the Probate Rules Committee.  The changes will affect procedures, including the content of certain forms, in Probate and Guardianship matters as of January 1, 2020.  Here's the link to the opinion:

https://www.floridasupremecourt.org/content/download/545401/6145348/file/sc19-164.pdf

The volunteers on the Florida Probate Rules Committee put a lot of time into this report, with the goal of improving the court procedures for probate and guardianship cases.

IRS Announces 2020 Inflation Adjustments for Tax Rates, Brackets and Exemptions

The Internal Revenue Service announced the inflation adjustments for tax rates, brackets and exemptions in 2020 in a news release found here:

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2020

A more detailed report can be found here:

https://www.irs.gov/pub/irs-drop/rp-19-44.pdf

Some of the highlights include:

• Trust and estate income tax rates and brackets will continue to require close monitoring of trust and estate income and expenses to make sure deductions and income are coordinated to avoid hitting the highest income tax rates of 37% for income over $12,950.00 in  a year. An individual would have to make over $518,500 in taxable income to be taxed at 37%. 

•  Trusts and estates pay capital gains taxes at a rate of 15% for gains between $2,600 and $13,150, and 20% on capital gains above $13,150.00. It continues to be important to obtain date of death values to support the step up in basis which will reduce the capital gains realized during the trust or estate administration. 

• The standard income tax deduction for 
• married individuals filing joint returns and surviving spouses - $24,800; 
• heads of households - $18,650; and 
• unmarried individuals or married individuals filing separately - $12,400.

• The annual gift and generation skipping transfer tax annual deduction  remains at $15,000 for total gifts to an individual each year. 

• The exemption for estate, gift and generation skipping transfer taxes has increased to $11.58 million per individual.  

• For arrow shafts,  the tax imposed under § 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.52 per shaft. 

For estate planning purposes, it is important to remember that the current estate tax exemptions are set to expire in 2026 and the estate, gift and generation skipping transfer tax exemptions will return to $5.0 million plus inflation. Senator Sanders has filed the "For the 99.8% Act", which would lower exemptions to and substantially raise the rates.

• Estate value between $3.5 million and $10.0 million - 45%
• Estate value between $10.0 million and - 50%
• Estate value between $50.0 million and $1.0 billion - 55%
• Estate value over $1.0 billion - 77% 

This proposal, if passed, would dramatically increase the cost and complexity of estate planning. While the passage of the act seems unlikely under the current political circumstances, it reflects what some Democrats are thinking and might become reality if the political balance shifts as a result of the 2020 elections. 

New Florida Residents Who Don't Update Estate Planning Documents May Leave a Costly Problem When Estate Planning Documents Are Needed

Florida residents must have their planning documents reviewed when they become Florida residents. Even though a new Florida resident may have a long-standing relationship with their attorney in another state, they should never have their documents revised, created or updated by anyone who is not licensed to practice law in Florida.

Florida law requires that certain documents signed by a Florida resident be signed in the presence of two witnesses:   wills, revocable trusts, prenuptial or post nuptial agreements, and powers of attorney (if the power of attorney will be used for the homestead residence.)  This applies even if the original documents were signed by someone when they were not yet a Florida resident.

The test is the state of residence at the time the document is signed.  If you are a Florida resident and sign any of these documents in another state, Florida law still requires two witnesses, even if the state where you sign does not.  It may seem like you're saving money by going back to your out-of-state attorney, but you could be paying for documents that are worthless.  Even worse, the problem may not be discovered until it's too late to correct the problem.

In addition, Florida law has strong protections for a surviving spouse. The test here is whether the first spouse to die was a Florida resident at the time of death.  The place where documents were signed doesn't make the document valid if the person was a Florida resident at the time of signing. The surviving spouse's rights are based upon Florida law even if the marriage occurred outside Florida, or the surviving spouse was not a Florida resident at the time of the first spouse's death.

New Homestead Decision in the Third District

In Walters v. Agency for Health Care Administration, --- So.3d ---- (2019), 2019 WL 4656114, the Third District examined the ongoing saga of Article X, section 4 of the Florida Constitution and its application to homestead. The per curiam opinion cited Wartels and Philips v. Hirshon.  Both cases  involved an invalid devise (Art. X, s. 4(c)). There is a clear conflict with the 2^nd DCA decision in Geraci v. Sunstar EMS.  The Geraci decision involved a creditor claim (Art. X., s. 4(b)) against a cooperative unit that was on land structured as a condominium. The court described it as  a condominium, went on to distinguish the Wartels  decision by saying a cooperative unit is not an interest in real estate.  The ultimate holding in Geraci was that Wartels only applies to cases involving the restrictions on devise that protect surviving spouses and children.  Devise restrictions and creditor protection both involve the same definition of homestead.  The Geraci court specifically declined to follow Wartels and said the protection from creditor claims does not require fee simple ownership. 

In this case, the trial court declined to apply the homestead exemption to the condominium based on its determination that the homestead protection at issue is actually that of descent and devise. The court appeared to recognize that the condominium may qualify as homestead for purposes of the homestead exemption from forced sale but explained that, in the context of descent and devise, the supreme court has held that the property interest must be a fee simple interest in land. See In re Estate of Wartels, 357 So. 2d 708, 710 (Fla. 1978) (holding that a co-op is not a homestead for purposes of descent because it is not "an  [**6] interest in realty").

The Florida Supreme Court accepted jurisdiction for the conflict between Wartels and Geraci, but then dismissed jurisdiction. It will be interesting to see if they do the same thing with this case.  I truly hope that they make a ruling. If accepted, this will be the 4^th time the Florida Supreme Court has been asked to address conflicts between Wartels and the cases involving creditor protection under Article X, s. 4.  There are factual distinctions in every case and that could be the reason that the court has declined to provide further guidance on the status of cooperative units for purposes of the constitutional homestead protections. 

Florida Probate Rules Update

Today the Board of Governors voted on the proposed rule amendments to the Florida Probate Rules.  The rule changes relate to the form for a Petition for Injunction Against Exploitation of a Vulnerable Adults, as well as updates to the rules to accommodate the us electronic wills, which will be permitted in Florida as of January 1, 2020.  I attended as Chair of the Probate Rules Committee and had a chance to observe the Board of Governors. 

The lawyers and judges, as well as public members, who serve on the Board of Governors are true professionals and sacrifice a lot of time to serve the citizens of our state. 

Everyone Should Plan for Digital Assets

Here's a good discussion about digital assets.  Many of my clients tell me that they don't have digital assets, even though they have a cell phone, email account, and online banking.  In 2016, Florida passed the Fiduciary Access to Digital Assets Act, which helps others manage our digital assets when we can't. 

Click here to see ACTEC Digital Asset Management in Life and Death

Wills, Trusts, Estate Planning and Probate Legal Services in Lakewood Ranch, Parrish, Sarasota and Holmes Beach

I meet with estate planning and probate clients by appointment in our firm's offices in Lakewood Ranch, Sarasota, Holmes Beach, and  Parrish, in addition to our main office on Manatee Avenue in Bradenton. 

9020 58th Drive East, #103
Bradenton, FL 34202

2639 Fruitville Rd #102

Sarasota, FL 34237

5914 Marina Drive

Holmes Beach, FL 34217