Florida Probate Attorney and Florida Inheritance Lawyer Florida Probate Attorney Blog

US Senate working on Estate Tax compromise

At the end of last year a tax agreement was reached that allowed for an estate tax exemption to rise to $5 million from $3.5m  it had been in 2009. It also raised the gift tax exemption to $5m and lowered the tax rate to just 35% as well as allowed portability of the estate tax exemption for those who died in 2011 or 2012 and were married but did not use up their exemption or provide for tax planning. If no further action were taken in 2013 the tax rate would revert back to just $1m and and 55% rate. 

See my My Fox Boston

 

TV Plot explained inheritance law incorrectly Sunday. Pretermitted Spouse law.

On Sunday night flipping channels to see a few minutes of tv I happened to see part of the show Desperate Housewives. The interesting thing to me and this blog is that one character who was the mom of a woman who had just killed themself told her husband that he had effectively bought her a home since he had bought several pieces of real estate and one he had put into her daughters sole name. He said that she did not have a will and he was her spouse so he would receive her property anyway which would be correct. She then said that she had found an old will from prior to they were married and that all the property in the will went to her as a result. 

That would not be accurate in Florida or most if not all jurisdictions in the US since even if the will had the required 2 witnesses and even if it were self proved with a notary as it should be the will would not validly pass the property given the concept of a pre termitted spouse. That means that they were married after a will was executed and it was not in contemplation of marriage or having mentioned him. Since they got married after the will was executed the spouse gets their intestate share and since they had no children together that would be everything. While they live on a fictional lane in Florida the law for pre termitted spouses can be found by clicking here. It may not have advanced the plot they wanted to show although having the discussion and making the point that the will was prior to the marriage and there was no pre nuptial agreement just showed they were operating in a fictional tv environment as far as wills and inheritance law are concerned. People should be aware though that if there is no pre nuptial agreement and there are no children but there is a will prior to their marriage unless the slayer statute applies or the marriage is properly challenged the spouse will receive all the property passing through the probate estate of the decedent. 

Are you saving enough for retirement?

It is important that people save and invest whenever they are able to do so and that they work with financial professionals to achieve a plan for a comfortable retirement. To give a quick general snapshot though regarding ones retirement MSN.com has a retirement calculator which may be of interest. 

To use the retirement calculator click here.

Florida Homestead Law

Florida law provides a number of benefits to a Florida resident’s primary residence, also known as their homestead. This includes protection from all creditors with a couple exceptions, reduction of the tax base of the property by $50,000 and more for the blind or widows, and limitation to property taxes increasing more than 3% annually even if the value rises more rapidly.

Florida homestead law also provides some transfer restrictions though. A surviving spouse (assuming they have not validly waived their rights in a pre or post marital agreement) has rights to the property that cannot be taken from them involuntarily and minor children have an interest in parents homestead that they owned at their death. 

The Florida Constitution article X section IV and Florida Statute Section 732.4015 prohibit a Florida resident who is married or the parent of a minor child from devising his or her homestead, except that a married Florida resident with no minor child may devise his or her homestead only outright to their spouse in fee simple. If not lawfully devised (if married and not devised to the spouse), or if there is a minor child, it then descends as provided by Florida law with the surviving spouse (if any) receiving a life estate and the remainder interest passes to the decedants descendants per stirpes. (Equally to the deceased owners surviving children with the share of a predeceased child passing to his or her descendants). The life tenant had been responsible for all taxes, insurance and interest on the home and could not force a sale. 

Florida statute Section 732.401(2) now allows an option instead of a life estate, a surviving spouse may elect to take a 50% tenant in common interest in the homestead with the decedent's descendants taking the remaining 50% interest. This election must be made within six month and once made it is irrevocable.  A life tenant has all the responsbility for annual taxes, insurance and year to year basic living expenses so to reduce some of the expenses of being a life estate tenant, to simplify estate and gift tax issues (as a life tenant it is their actuarial value instead of just 50% of the sale price which is far easier to calculate) of the life interest or to own an interest in the homestead which may be disposed of by the spouse as the spouse determines. If a spouse chooses they can force a sale of a tennant in common homestead interest while they cannot do so with a life estate interest. The new statute was created in part because spouses were unable to afford to maintain their homestead in some situations but yet were unable to sell them without the consent of the remainder beneficiaries who did not always allow them to do so. This allowed further protections to the surviving spouse.  

Florida homestead devise restrictions can often complicate or even prevent the owner’s desire for how they would otherwise transfer the property. The owner may be married and have one child they do not want to receive an interest in the property or not want a minor to receive the property. They may want to put the property into a revocable trust with it then passing to a trustee on behalf of the minor children and It could also prevent a couple from devising to a credit shelter trust to help utilize the exemption from estate tax on the first spouses death to minimize estate taxes on the second death. 

A validly executed waiver of homestead rights through a pre or post marital agreement by a surviving spouse prior to the owner’s death is allowed pursuant to Florida Statute Section 732.702. Full disclosure of financial information is required for a post nuptial agreement but not a pre marital agreement. The spouse may also sign a deed devising away their rights. This allows the owner to devise the homestead in any manner they would like provided they have no minor child. 

Additionally tenants by the entirties avoids the homestead restrictions and Florida Statute Section 739.203(4) says that the disclaimer of the tenants by the entirety interest by the surviving spouse. Estate Tax planning and seeking to pass the homestead to a tax exmpt trust may be among the reasons to do that. It would not cause the disclaimed interest to become subject to the devise restrictions applicable to Florida homestead. 

Florida Statute Section 732.4017, now allows the owner to transfer the homestead to an irrevocable trust during the owner’s life. If the owner is married, the owner’s spouse will be required to join in this conveyance, but once devised, the spouse will only have those rights granted by the trust to the spouse. When the owner subsequently dies, the trust provides how the homestead descends without any hassles of the owner’s intent by Florida’s devise restrictions, even if the owner is survived by a minor child. Another example in which this may be useful is if the owner is not married but has a serious illness and a minor child and they are seeking to avoid any probate or guardianship issues with the property given the minor child. They may also want the other parent who likely would be the child's guardian of the person not to have anything to do with the property.

Florida law does not allow the owner to pass their property in a revocable trust without further court proceedings if they have a minor child at their death even if the property is for the benefit of the minor child. There would be a number of issues to consider and this is an isolated situation but for example a terminally ill parent of an 11 year old with short life expectancy who owns a home worth no more than they paid for it and wants to avoid probate and guardianship as well as directing what will happen with the property may direct it be held for the child but without giving the parents any right to manage or sell it or they could have it pass to whomever they wish if properly and irrevocably devised out of their name / control prior to their death.  There are some title insurance notes which discuss this and the reasoning behind. 

Homestead is a confusing area and it is important to consult with an experienced attorney prior to transfer property which is or may be homestead in order to have it actually pass as desired. 

What is Common Law Marriage? What states allow it?

A common law marriage is one in which the couple who hold themselves out as a husband and wife can be considered married despite lacking the marriage license or ceremony. 

Florida stopped allowing common law marriages for actions after January 1 1968. The Florida statute concerning common law marriage is 741.211 and can be seen by clicking here

Florida does recognize common law marriages that validly occured in other states however just as it is a separate property jurisdiction but will recognize community property aquired in the 9 states that follow community property. 

marriage. More particularly, a common law marriage can occur only when:

• a couple lives together in a state that recognizes common law marriages
• intending to be married.
• for a significant period of time (not defined in any state)
• holding themselves out as a married couple -- typically this means using the same last name, referring to the other as "my wife" or "my husband" and filing a joint tax return, and
• Unless all four are true, there is no common law marriage. When a common law marriage exists, the couple must go through a formal divorce to end the relationship.

Common law marriage is recognized only by the 13 states mentioned below 

• Alabama
• Colorado
• District of Columbia
• Iowa
• Kansas
• Montana
• New Hampshire (for inheritance purposes only)
• Oklahoma
• Pennsylvania
• Rhode Island
• South Carolina
• Texas
• Utah

       The most recent publicized case of common law marriage is in the probate of Gary Coleman in Utah where his ex wife who divorced him but remained living in his home with him claimed they were common law spouses and that the will was done prior to them getting essentially remarried as a result in which case she would be a pre termitted spouse and entitled to the entire estate since he had no children. 

Estate Tax Preferences of Obama Administration for 2013 and beyond.

February 14 of last month the Treasury Department released its explanations for the 2012 fiscal year revenue proposals. This also provided the President and his administrations thinking regarding estate tax laws and potential changes they anticipate or what will remain status quo. What they propose is: 

• Returning the estate, gift, and generation skipping taxes to 2009 levels.
• Making portability permanent.
• Limiting the use of valuation discounts.
• Requiring estate tax value to be used as basis.
• Limiting GST exemption to 90 years.
• Imposing a minimum ten-year term on GRATs.
• Increasing Income Tax Rates

For 2011 and 2012, the estate and gift tax exemption is $5 million, and the estate and gift tax rate is 35 percent.  The proposal is for 2013 exemption to return to $3.5 million for the estate tax, $1 million for the gift tax, and just over $1 million (inflation adjustments over the past dozen years) for the generation skipping tax.

However, this would essentially be an increase in estate and gift tax and the GOP who are more friendly to the idea of lower taxes have significant congressional weight following the 2010 elections. Many analysts question whether the President who would have liked those prosals for 2010 or 2011 will be able to make those changes. 

Portability of the estate and gift tax exemption allows surviving spouses to use their predeceased spouse’s unused exemption, in addition to their own exemption, for gift and estate tax purposes.  For example, if wife's estate only uses $1 million of her $5 million exemption in 2011, then her $4 million unused exemption may be used by her husband under the current portability provision so he could have $9 million estate tax exemption.  The current portability provision is set to expire Dec 31 2012 but the administration seeks to make this permanent. While this has a decent chance of eventually being law, it cannot be relied on until it is a done deal and signed into law. 

The Budget proposals also seek to have the individual income tax rates increase back to the pre-Bush 2001 tax cuts.  The highest federal individual tax rate would increase to 39.6% and the 33% federal rate would increase to 36%.  The federal long-term capital gain rate would increase from 15% to 20%. 

 

Facebook CEO Mark Zuckerberg agreed to give half his wealth to charity

Mark Zuckerberg the 26 year old Chief Executive Officer of Facebook has signed the Charitable Giving Pledge proposed by Bill Gates and Warren Buffet for multi millionaires and billionaires to give away half or more of their wealth to charity. He is estimated to be worth $7 Billion dollars although the vast majority of that is in Facebook.com stock which is not publicly traded. Mark said that "People typically wait until late  in their career to give back but why wait when there is so much to be done".

As the San Jose Business Journal reported December 9 2010 he joined other very wealthy people who have recently joined in the Charitable Pledge. Some of these people include former AOL chair Steven Case, Junk Bond investor Michael Milken, Mayor Michael Bloomberg, movie producer George Lucas, Oracle Co Founder and CEO Larry Ellison worth $27B as of 2010 and private equity investor and corporate raider Carl Icahn. 

Virginia Lottery Winner waited 5 months to come forward to meet with attorney and financial advisor

As AOL News reports Virginia man working as a carpenter who never had a lot of money but won a lottery jackpot worth up to $200 million decided to keep his winning a secret and did not come forward for 5 months until he was able to be advised by an estate planning attorney and financial advisor.

The winner, Steve Williams, announced that he will continue at his same job as a carpenter after winning the 2nd largest lottery amount in Virginia history.

Based on the time value of money he decided to accept $125 million dollar cash payout now instead of having taken $200 million spread out over 26 years. After taxes his payout will be around $88.9.

To avoid will disputes & achieve intent intestate succession law revised

In the article Spouses automatically inherit under new law it was mentioned that New South Whales Australia changed their intestate succession laws. While it will not impact my clients the article was of interest to compare how things are there versus Florida and the US and the reason for acting.

The state attorney General John Hatzistergos said "When people die without leaving a will, there is the potential for legal dispute as relatives fight over the estate". In Florida and most US states while there is typically the chance for a dispute whether or not there is a will or trust it cannot be solely because there was no will in the sense that the intestate succession law is clear it would either go one half to the children and one half to the spouse or if they were the children of both parents the first $60,000 goes to the spouse and then half and half. I do not see where it would cut down any disputes as reasons to dispute of lack of capacity, or undue influence, fraud or issues that may be asserted in a will are no present and with the change they proposed it would still not change the most likely disputed situations when there are spouses who are not the surving childrens parents.

It is interesting to note however that they had a poll which showed that 75% of the time people who had a first marriage situation wanted there property to go to the spouse then to the children. When estate tax is not an issue I have found that to be typically the case as well that the parent wants it to go first to the spouse then to her kids and which is why Florida makes the distinction in the amount that the spouse gets depending on whether there are kids from someone other than the surviving spouse or not.  

Likewise their poll showed just 30% percent want all to spouse if there are kids from a prior marriage. Those numbers sound consistent with numbers I have dealt with practicing in both Florida and Illinois.

It is a good idea to have the Intestate succession laws reflect the likely intent of the testator.

An additional issue mentioned in the article was that 45% of people in the survey did not have wills. For clients that I deal with as an estate planning attorney will all have documents in place and almost always avoid probate although from clients in general throughout the US it would be interesting to hear the latest stats the last I had read the ABA at one point had done a survey which showed nationally well above half of adults did not have a will.

Estate Tax Law Revision

Estate Tax Repeal or Revision has been scheduled to be discussed by the US Senate on May 4, 2006.

The Current exemption amount is $2 million per taxpayer until 2009 when it will become $3.5 million and then be repealed for one year in 2010 prior to returning to the 2001 level of $1 million per tax payer under current law.

The House has already approved permanent repeal. It is doubtful with all the hurricane and war expenses that the tax will be repealed but will likely be amended to provide for a higher exemption amount and possibly a lower rate of tax.

Since Florida has no state estate or inheritance tax this could allow more residents to avoid paying any estate taxes and allow the beneficiaries to receive their full inheritance without losing large portions to the government.

Florida-Probate.blogs.com estimates there will not be repeal but there will be modification and it will be in the range of $3.5 million to $4 million adjusted for inflation and possibly a lower tax rate in the range of 30%.  The debate in the senate will begin May 4.

2006 Estate Tax Exemption

The Estate Tax Exemption for 2006 is $2 million dollars. The Gift Tax exemption remains $1 million. The annual exclusion is now $12,000.

Happy New year.

Estate Planning for Alternative Lifestyle Couples

The Issue of Estate Planning for Alternative Lifestyle Couples has been in the news and a recent article can be read by clicking on the link above. 

"There are very few attorneys who specialize in these issues, and the law is very unsettled," Attorney Brian Rice said. "If you're moving from state to state, or traveling, protections you had in one state may not be available in another."

Outside of Massachusets which now allows same sex unions there are issues that life partners would experience different from a husband and wife such as no marital deduction for estate or gift tax, no treatment as a spouse for inheritance rights or priority to serve as a personal representative, no right to file joint income taxes among other distinction although some states now provide for health insurance and some benefits when they are in civil unions.

In Florida marriage is defined as the union of a man and a woman. Marriage in Massachusets or any other jurisdictions which allow same sex marriage will not be reconized in Florida. The state also does not allow people living an alternative lifestyle to adopt. The statute which provides this can be found here.