Sep 14

Plan Your Affairs While the Sun is Shining


President John F. Kennedy said, “The time to repair the roof is when the sun is shining.” The same philosophy should be applied to planning your legal and financial affairs. Don’t wait until you face a crisis to think about your estate plan. Over the years, our firm has assisted many families who encountered situations which could have been avoided or simplified with proper professional advice. The recent storms affecting Florida are a reminder that planning must be done before the storm hits. There are many tools that minimize the inconvenience to those who will step up to help in the event you become incapacitated and handle your assets after you pass away.

  • Review and update your last will and testament. A last will and testament expresses your desires for the distribution of your assets after final debts and expenses have been paid. It is crucial to designate a personal representative who will manage your estate according to the law and treat all parties objectively. A properly planned will can avoid the nightmare that many families face as they fight over estates in court. You should review your planning documents annually and consider changes whenever:
    • There has been a change in the lives of family members (birth, death, divorce, marriage, age, incapacity or health issues, change of residence);
    • There has been a change in the lives of persons included in your plans;
    • A change in your financial circumstances;
    • A change in your place of residence or citizenship status;
    • A change in the laws that affect your plans.
  • Consider a revocable trust. A revocable trust does not eliminate all of the work connected to the probate of a will, but may have advantages over a will in some cases. It usually reduces the legal fees and avoids some court costs. The probate process does provide for court supervision and the handling of creditor claims, which, in some cases, might be an advantage over a will. Because a revocable trust can provide for the management of your assets during your lifetime and upon your death, it is important to remember that it could ultimately express your final wishes.
  • Have a durable power of attorney. A durable power of attorney designates someone to manage your legal and financial affairs in the event of your incapacity, avoiding costly and time-consuming guardianship proceedings. In some situations, a revocable trust may be a more effective and comprehensive tool to manage your assets during your incapacity.
  • Get written confirmation of beneficiary designations. We have worked with many families who faced unnecessary difficulties because their loved one failed to designate beneficiaries on life insurance policies, retirement accounts, or annuities. In some cases, the beneficiary designations were not updated as needed. This can result in unnecessary probate proceedings and, in some cases, income taxes for the beneficiaries that could have been significantly reduced with proper planning. It is important to obtain a copy of the beneficiary designation for every life insurance policy, retirement account, or other asset with a beneficiary designation. Keep these copies with your will.
  • Update your health care surrogate designation. Recent laws that protect the privacy of health information come with a price. You have to plan by designating someone to make medical decisions when you are unable to, and authorize that person to have access to your health records.
  • Make a living will. A living will expresses your choices for end of life care. This saves your family from making heartbreaking end-of-life decisions without knowing what you truly want.
  • Keep your documents in a secure, but accessible location. Many families face unnecessary complications because they could not locate a loved one’s original power of attorney, will, certificate of deposit, life insurance policy, or other important document.
    • Organize your important documents and keep them in a safe, but accessible place.
    • Consider preparing a “hurricane kit” so you can quickly gather your important documents and take them with you.
    • Scan the documents onto a compact disc or flash drive as a backup, allowing access by computer. “Cloud” storage is an option, but insure the privacy of your documents by reviewing the terms of service.
    • A safe deposit box provides secure storage, but usually involves a fee. The security procedures for a safe deposit box also add additional steps before someone else can access the box.
  • Talk with your spouse about a prenuptial or postnuptial agreement if you are in a second marriage. Florida has many protections for a surviving spouse that may not be consistent with your wishes. We have seen families surprised when Florida law trumps provisions in a will or trust, sometimes leaving out intended beneficiaries and causing unnecessary delay and legal expenses.
  • Plan for a solvent estate. Imagine what your heirs would face if you died today. Would there be sufficient liquid funds to manage your assets while your estate is being settled? Would your heirs be forced to sell assets to raise cash to pay debts and expenses? Managing debt and life insurance can be key components of an estate plan.
  • Get advice on forms of ownership. The laws governing the ownership of assets can be very confusing. Often, the laws that apply to real estate ownership are not the same as the ownership of tangible personal property or bank accounts. It is important to review the way that your assets are owned and titled, including real estate, financial accounts, annuities, motor vehicles, and personal property. Many of the questions, especially with regard to real estate, should be directed to an attorney.
  • Seek legal advice on Florida’s homestead protections. Florida’s Constitution not only gives its citizens a break on the property taxes for their homestead residence, but it offers other valuable protections.
    • The widow and/or minor child of a Florida homeowner is protected because the Constitution says the home cannot be devised to anyone else.
    • Creditors (except for mortgage-holders, construction lien-holders, and government entities who collect property taxes) cannot force the sale of a Florida resident’s primary residence. The protection carries over to the homeowner’s heirs.
    • A married person cannot transfer ownership or mortgage the home without the other spouse’s consent, even if the home is in one spouse’s name alone. Both spouses will be required to sign deeds and mortgages.
    • Many Florida attorneys advise against ownership of a homestead residence through a trust for married persons, or persons with minor children. Even a joint trust created by a married couple can cause problems after one spouse dies.

    The rules relating to homestead protections can be complex and difficult to plan for. Over the past year, we have seen many instances where Florida’s homestead laws were not fully understood, or a single fact resulted in an unexpected outcome. In some cases, probate proceedings were required and in other cases, the homestead laws superseded the decedent’s express wishes in their will or trust. The result was an unexpected transfer in ownership upon the owner’s death, or unnecessary exposure to probate and creditor claims.

  • Remember that trusts, like wills, must be administered. Due to misleading marketing, many believe that a trust avoids probate. While a trust may not need to be the subject of court proceedings, there are still legal, tax, and administrative procedures that must be followed. This is especially true for trusts that are drafted to minimize estate taxes. When the person who establishes a trust dies or becomes incapacitated, the trustee has a duty to seek competent legal and tax advice. Often, it is very difficult for a trustee to correct problems that should have been resolved many years before. The cost of seeking professional advice protects the trustee, as well as the trust beneficiaries. The trust can pay the cost of this advice.
  • Seek tax advice. We have seen several cases where a deceased loved one did not file income tax returns as required, leaving the surviving family members to deal with the IRS. Not only will filing returns help you, but it will help your loved ones. A professional tax advisor can not only minimize your personal tax liability, but can assist your loved ones in filing a final tax return after you pass.
  • Nonresident Aliens Beware. For permanent residents and U.S. Citizens, the estate tax exemption for 2017 is $5.49 million. If you are not a U.S. citizen or a permanent resident, the estate tax exemption for your U.S. property is only $60,000. If your spouse is not a U.S. Citizen, there is not an unlimited marital deduction which excludes gifts to your spouse from gift and estate tax.
  • Get investment advice. A financial advisor can not only help you meet your financial goals, but can help insure that your accounts are titled properly and that beneficiary designations are utilized. This can often avoid the need to probate those accounts.
  • Talk to your banker. Everyone should speak with their banker about the way their accounts are titled. We rarely recommend adding someone other than a spouse to the account as an owner, but there are usually options to keep the account out of probate, such as transfer-on-death registration. The use of a power of attorney allows a trusted friend or family member access the account in the case of disability, but does not help after the account owner dies.
  • Talk to your insurance advisor. Planning to have enough cash to manage your estate can include life insurance. Health insurance, liability coverage, homeowner’s cover, and auto insurance are all parts of your financial planning. Consult with your insurance processional to review your levels of coverage, exclusions, and whether another insurance product might better fit your needs. Don’t forget that automobile insurance often includes death benefits or medical coverage.
  • Consider long-term care insurance and Medicaid planning. Many families came to us after a loved one suffered a serious health problem which required hospitalization, followed by skilled nursing care. They are very surprised to learn that Medicaid assistance for nursing home care is available only to those with very limited income and assets. Disposing of assets by making gifts usually does not help. Other families are surprised to learn that the State of Florida will seek the repayment of the Medicaid benefits from the patient’s estate after they pass away. The best plan for long-term care is prudent financial planning, which may include the purchase of long-term care insurance and proper Medicaid planning.
  • Sharing Information. Care should be taken in sharing information with family members. Each document is slightly different.
    • Your Last Will and Testament is not effective until your death. It really is not helpful for anyone to have a copy. If you change it later, someone may not be happy with the changes.
    • The Power of Attorney is effective immediately under current Florida law. The law also permits the use of a copy if so stated in the document. It is better to let your family know you have one, and where they can find it when the time comes.
    • Health Care Directives can be shared with your family and the persons designated in the document. Copies are almost always accepted and you should not need to carry the original with you or provide it to anyone.
  • Think about funeral arrangements. Families facing the loss of a loved one may have never needed to make funeral arrangements. They may have very busy lives, full of obligations and may have a very difficult time arranging your funeral. Funeral directors can help you pre-plan and even prepay the costs of the funeral. You should also think about your wishes for the services and the burial. Write down your special wishes so your family knows what is important to you.
  • Make a password list. As more and more of us manage our finances electronically, a list of accounts, websites, and passwords is important. Keep this in a secure place with your other estate planning documents. The use of these passwords cannot be a shortcut to avoid probate, but will make it easier for your loved ones to gather information. The passwords should be kept in a secure place, accessible only by someone you trust completely. Electronic information can include:
    • Social media accounts (Facebook, Twitter);
    • Financial account access;
    • Digital property, such as music, movies, photographs, and books;
    • Email correspondence;
    • Websites and Domain Names;
    • Frequent flyer miles, hotel points, and credit card cash rewards;
    • Avatars.
  • Government or Group Benefits. Veterans and members of fraternal organizations may have access to benefits such as long-term care assistance, burial benefits, or other assistance, including benefits or assistance for the family. Include membership cards or benefits statements with your important papers.
  • Don’t let the cost deter you. The advice given by professional advisors is based upon their training, experience, education, and the authority represented by their licenses to give such advice. We have seen countless examples of situations where a few hundred dollars for competent legal advice could have saved thousands of dollars in the long-term. The cost of legal advice to avoid the problems caused by a lack of planning is a small fraction of the cost to fix those problems.

Before a crisis comes, now is the time to plan. Your attorney, tax professional, insurance professional, financial advisor, and banker are all members of your planning team. If asked, each of them would undoubtedly prefer to help you plan “while the sun shines” instead of waiting for the storm. If you have already started the planning process, remember that plans need to be reviewed and updated from time to time, especially if there have been significant changes in your family situation or your financial situation. President Dwight D. Eisenhower, a great military leader once said, “Plans are nothing. Planning is everything.” Planning is an ongoing process and is best done “when the sun is shining.”