Estate Planning - More Than Preparing a Will

Estate planning is more than just preparing a will for disposition of assets on death through the probate process. Effective estate planning consists of the following elements:
  • Putting in place a structure for your healthcare and financial decisions to be made in the event that you become unable to make decisions for yourself (advance directives);
  • Preparing the documentation to put into effect your wishes for the disposition of your assets at death;
  • Titling of assets in a manner to make the transfers at death efficient and to avoid probate where advisable; and
  • Planning to minimize the effect that potential future litigation and creditors may have on your family’s assets.

Advance Directives.

One of the first tasks in developing an effective estate plan is designate the persons who will have the responsibility of taking major healthcare or financial actions for you in the event you become unable to act for yourself. The advance directives consist of the following:

  • Durable Power of Attorney. Many married couples with stable marriages have powers of attorney under which each spouse grants to the other a durable power of attorney to take financial and other actions for the other spouse in the event of unavailability or disability. The durable power of attorney permits the other spouse to enter into contracts, buy or sell assets, and the like for the other spouse in the event of disability.
  • Designation of Healthcare Surrogate. This document designates another individual (typically a spouse and/or adult children) to make healthcare decisions if you are unable to make those decisions for yourself.
  • Living Will. This document memorializes your wishes as to medical intervention if you are unable to communicate your wishes and you are in a vegetative state or have a condition from which there is no likelihood of recovery.
  • Appointment of Pre-Need Guardian. This document memorializes your wishes for the appointment of a guardian, should it become necessary to appoint one.

Disposition of Assets at Death.

First, a note about federal estate taxes (Florida does not currently have a separate state estate tax). If you were to die in 2020, there is an estate tax exclusion of $11.58 million per individual (which, for a married couple, amounts to $23.16 million). That being the case, a married couple can pass more than $23 million in assets before having a federal estate tax liability. Of course, Congress can increase or reduce that amount in the future.

In Florida, most people use a revocable trust to specify how their assets are to be managed during life and distributed following their death, and a will which “pours over” any probate assets to the revocable trust. The documentation for this would consist of the following:

  • Revocable Trust. In Florida, it is customary to use revocable trusts to minimize probate expenses and serve as a repository for your assets during lifetime and provide for the continued management and disposition at death. Typically, while you are living, you are the sole trustee and beneficiary, and assets in the trust are available to you in the same manner as they are without a trust. If you become disabled, a successor trustee can step in to manage those assets. Often, the surviving (or not incapacitated) spouse is designated as the successor trustee, perhaps with one or more children serving as trustees or co-trustees if neither of you are able to do so. At your death, if the your spouse survives, the surviving spouse would typically have a right to income, as well as a right to invade principal for health, support and maintenance. After the death of the surviving spouse, typically your children would be the remaining beneficiaries. Some parents prefer to retain assets in trust until some future date (e.g., the children reach a specified age, such as 50), as a protection against claims to which their children may be subject (such as future ex-spouses).
  • Pour-over will. The pour-over will is a will which serves to appoint a personal representative and transfers any probate assets which to the revocable trust (to the extent that they were not so transferred during your life). Typically, each spouse serves as the primary personal representative for the other, and children may serve as successor personal representatives.
  • Separate writing. Florida law provides that tangible personal property can be disposed of using an informal "separate writing," which does not have to be witnessed or notarized. This informal method of transfer is limited to tangible personal property, such as jewelry or family heirlooms.

Titling Assets.

Comprehensive estate planning also addresses the manner in which assets are titled, and may provide for certain assets to be passed outside of probate. Commonly, such assets include:

  • Individual retirement accounts and employer-based retirement plans. In general, such accounts are transferred using beneficiary designations. The designation may name a surviving spouse, a trust, or others. Since a surviving spouse is the only beneficiary who can "roll over" an IRA or retirement account, in many cases the surviving spouse will be the most advantageous recipient. However, retirement accounts are also excellent candidates for charitable giving, should that be of interest.
  • Life insurance. It makes sense to review your life insurance beneficiary designations. If the estate is subject to estate tax, it may make sense to create a life insurance trust to keep the death proceeds out of the estate for estate tax purposes.

Closely-held businesses.

Dealing with estate planning for a closely held business is more than just stating in a will or trust who owns the business after the owner's death. The family dynamics must be considered in any succession plan. Such a plan should be developed long before the owner's death or disability so that there is continuity in the management of the business, and the younger generation can receive the benefit of growing into responsible roles.

Charitable Planning.

For persons who are charitably inclined, there are many ways to leave a legacy. In addition to direct gifts to charitable organizations, many estate plans include charitable trusts and other planning vehicles.