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Will My Step-Children Inherit My Assets if I Die Without a Will?

The flip-side of this question is: Will My Children Inherit from My Spouse if I Die First, and My Spouse Does Not Have a Will?

These are common questions these days, with blended families becoming more and more the norm. Many times, parents become as close to their step-children as they are to their biological children, or closer.

There is a common misconception that an individual’s step-children, along with their own children, will inherit their assets if they die without a Will and their spouse has predeceased them. This is not necessarily the case.

Under Florida Law, if a person dies intestate (without a Will), their assets will go to their spouse and [biological] children. In most cases, spouses hold all of their assets jointly, so no assets pass to the children until the last spouse passes. The effect of this is that whichever spouse dies last, that individual’s biological children end up with the assets that belonged to both spouses.  This means that if you have children who are not also the biological children of your spouse, and you die first, your children will get nothing upon their step-parent’s death, in the absence of a Will or Trust.

Likewise, if you WANT your step-children to inherit your assets, but don’t have a Will or Trust in place, your assets could end up going to unintended beneficiaries upon your death if your spouse has predeceased you and you have no children of your own. I will illustrate this with a real-life example of a probate matter I handled several years ago: The widow who had passed, we will call her Mrs. Smith, left behind a step-son with whom she was very close. She did not have children of her own, and she had not executed a Will or Trust. The step-son, “John,” compassionately took care of Mrs. Smith until her passing. Mrs. Smith owned a home, which she had owned jointly with John’s father until his passing. John contacted me regarding the disposition of the home. I had to inform John that, under the Florida Statutes, step-children are listed as heirs-at-law only after all “blood relatives.” In other words, if there were any living blood relatives of Mrs. Smith, they would inherit Mrs. Smith’s assets. Sure enough, several distant cousins came forth from all over the country and claimed an interest in the estate. John received nothing. I am certain that Mrs. Smith would not have wanted these cousins, whom she had not even kept in contact with, to receive the home that she had shared with John’s father. But without a Will, our hands were tied – we were bound by the Florida Statutes regarding intestate succession.

This is why it is important to have your wishes memorialized in writing in the form of a Will or a Trust. However, even if you execute a Will, chances are you will leave everything to your spouse, and your children will be named as contingent beneficiaries, in the event your spouse has predeceased you. Or, as stated above, all of your assets are held jointly with your spouse, and they all pass automatically to him/her upon your death, and nothing passes through the Will. Then you are left with the situation mentioned above – all assets pass to your spouse’s beneficiaries or heirs-at-law upon his/her death, and nothing goes to your children.

How do you make sure your assets will pass to your children? The best way to resolve this is to create a trust. There are (at least) two options:

  • You can create a joint trust with your spouse, in which you leave everything to each other first, and then to your collective children upon the death of the surviving spouse. It is important to note, however, that special language must be added making the trust irrevocable upon the first spouse to die. Otherwise, the surviving spouse can change the trust after the death of the first spouse, potentially in a way that only that spouse’s children receive the assets, and the first spouse’s children are left out entirely. This may not seem like something that could happen, but I have personally seen it in my practice often, many times due to pressure put on the surviving spouse by their own children.
  • You and your spouse can create two separate trusts. This is not usually the preferred route, as it requires that you and your spouse divide up your assets and put your separate assets into your separate trusts. Then, upon your passing, you have language in your trust specifying which of your assets go to your spouse, and which of your assets go to your children (or are held in trust for your children until your spouse passes). These types of trusts work best for couples who already have separate assets from each other, that they wish to safeguard for their children.

Many people are hesitant to create an estate plan. No one likes to think about their own mortality, so it is common for people to put it out of their mind and adopt the “whatever happens, happens” mentality. As explained above, this could result in an individual’s true intentions not being followed.

I highly recommend you contact an estate-planning attorney sooner, rather than later, and get your wishes memorialized in a Will or a Trust. You may be surprised at how quick (and painless) the process is. And once it’s done, it’s done, and you can move on with your life with a sense of relief that your true intentions will be followed.

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What is Guardianship?

A guardian is a surrogate decision-maker appointed by the court to make either personal and/or financial decisions for a minor or for an adult with mental or physical disabilities. After adjudication, the subject of the guardianship is termed a “ward.”

Florida law requires the court to appoint a guardian for minors in circumstances where the parents die or become incapacitated, or if a child receives an inheritance or proceeds of a lawsuit or insurance policy exceeding the amount allowed by statute.

Adult guardianship is the process by which the court finds an individual’s ability to make decisions so impaired that the court gives the right to make decisions to another person. Guardianship is only warranted when no less restrictive alternative—such as durable power of attorney, trust, health care surrogate or proxy, or other form of pre-need directive—is found by the court to be appropriate and available.

Florida law allows both voluntary and involuntary guardianships. A voluntary guardianship may be established for an adult who, though mentally competent, is incapable of managing his or her own estate and who voluntarily petitions for the appointment.

Legislative intent establishes that the least restrictive form of guardianship is desirable

Accordingly, Florida law provides for limited as well as plenary adult guardianship. A limited guardianship is appropriate if the court finds the ward lacks the capacity to do some, but not all, of the tasks necessary to care for his or her person or property; and if the individual does not have pre-planned, written instructions for all aspects of his or her life. A plenary guardian is a person appointed by the court to exercise all delegable legal rights and powers of the adult ward after the court makes a finding of incapacity. Wards in plenary guardianships are, by definition, unable to care for themselves.

Whether one is dealing with a minor whose assets must be managed by another or an adult with a disability who is not capable of making decisions for him/herself, when the court removes an individual’s rights to order his or her own affairs there is an accompanying duty to protect the individual. One of the court’s duties is to appoint a guardian. All adult and minor guardianships are subject to court oversight.

The legal authority for guardianship in Florida is found in Chapter 744, Florida Statutes. The court rules that control the relationships among the court, the ward, the guardian, and the attorney are found in Part III, Probate Rules, Florida Rules of Court. Together, these statutes and rules describe the duties and obligations of guardians and attorneys, as well as the court, to ensure that they act in the best interests of the ward, minor, or person who is alleged incapacitated.

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What is a Living Trust?

What is a living trust and how is it different from a last will?

A living trust (sometimes called an “inter vivos” or “revocable” trust) is a written legal document through which your assets are placed into a trust for your benefit during your lifetime and then transferred to designated beneficiaries at your death by your chosen representative, called a “successor trustee.”

On the other hand, a will is a written legal document with a plan of distribution of your assets upon your death. Your executor, as named in the will, oversees this process, and notably, nothing in your will takes effect until after you die.

 

1. A Living Trust Avoids Probate

One of the first benefits of a living trust is that it avoids probate. With a valid will, your estate will go through probate, the court proceedings through which your assets are distributed according to your wishes by the executor.

A living trust, on the other hand, does not go through probate, which often means a faster distribution of assets to your heirs—from months or years with a will down to weeks with a living trust. Your successor trustee will pay your debts and distribute your assets according to your instructions.

Notably, both documents allow you to choose a guardian for your children in the event of your death.

2. A Living Trust May Save You Money

Remember this really all depends on your financial situation. At first, drafting a living trust will likely cost more than drafting a will as it is a more complex legal document. Moreover, you must also transfer your assets such as bank accounts, stocks, and bond accounts and certificates to the trust through separate paperwork; simply writing up a living trust does not actually “fund the trust.”

Other procedures involved in an estate plan with a living trust could also include changing the beneficiary on your life insurance policy to the trust, appropriately dealing with your IRA or 401(k) plan, and also creating a “pour-over will” that will provide for the distribution of any assets acquired after the creation of the living trust but before your death or any assets inadvertently excluded.

Note that the pour-over will, just like any will, will have to go through probate.

While a will costs less to draft, a living trust can save your estate money at the time of your death as the distribution of assets in the trust will not go through probate; court costs for probating your will are taken from estate, although note that for a simple, uncontested will, costs are often nominal.

Regarding contests, living trusts will likely hold up better in the event that someone comes forward contesting the distribution of your assets; accordingly, court costs to cover any will contests may also need to be considered.

As far as savings of income and estate taxes, there is often no substantial difference between living trusts and wills, although living trusts may provide savings for married couples in the form of joint living trusts.

Note that for people with simple estate plans and for young married couples with no children or significant assets, a living trust is probably not financially beneficial.

3. A Living Trust Provides Privacy

One big difference between the two legal documents is the level of privacy offered with a living trust. As a living trust is not made public, upon your death, your estate will be distributed in private. A will, on the hand, is public record and so all transactions will be public as well.

Another difference is the handling of out-of-state property you own upon your death. With a will, that property will have to go through probate in its own state; a living trust can help you avoid probate.

What other benefits does a living trust provide?

Beyond the top three main benefits, another benefit is that a living trust is written so that your trustee can automatically jump into the driver’s seat if you become ill or incapacitated.

On the other hand, if you simply have a will without a durable power of attorney, the court will appoint someone to oversee your financial affairs who will have to report to the court for approval of expenses, sales of property, etc. One widely reported public example of this is the conservatorship of Britney Spears’ father over his daughter’s financial affairs.

Note that if you draw up a durable power of attorney, including one for health care decisions, you can avoid a court-appointed conservator for your affairs.

With a living trust, however, your handpicked successor trustee can manage your affairs without court intervention, and since the trust is revocable, if you dispute your incapacity, you can retain control yourself.

While a living trust makes sense for some people, wills are just fine for others. A general rule among tax planners is that the larger the value of the estate, the greater need there is for a living trust—although even this is not foolproof.

 

Contact us to learn more about a living trust and how it may benefit you!

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What is Florida Homestead Exemption?

The homestead exemption in Florida may refer to three different types of homestead exemptions under Florida law:

  1. exemption from forced sale before and at death per Art. X, Section 4(a)-(b) of the Florida Constitution[1];
  2. restrictions on devise and alienation, Art. X, Section 4(c) of the Florida Constitution;
  3. and exemption from taxation per Art. VII, Section 6 of the Florida Constitution.

Florida’s homestead exemption that provides an exemption from forced sale before and at death are among the most protective in the United States as it provides no limit to the value of certain real property that can be protected from creditors. The property tax exemption clause of Article VI renders property tax-free to the extent of certain dollar amounts in the value of the homestead.

The definition of a homestead is not necessarily co-extensive for Article X, Section 4(a)-(c) exemption purposes (exemption from creditors and restrictions on descent and distribution) and Article VI purposes (exemption from taxation). Both provisions apply automatically upon the establishment of a primary residence in Florida, but to reap the tax assessment benefits, the homestead exemption must be claimed by a filing with the local county property appraiser’s office. Homestead can be lost if the homeowner abandons use of the real property as a homestead.

A fourth benefit, while not as clearly an exemption as the above three, is also accorded to one’s homestead in Florida per Art. VII, Section 7 of the Florida Constitution. For tax purposes the year-to-year increase in assessed value of the homestead is limited to the lesser of 3% or the percentage change in the Consumer Price Index.

 

To learn more about how you can use the Florida Homestead exemption to protect your home contact our office for a free consultation.

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What is a Will?

A will is a writing, signed by the decedent and witnesses, that meets the requirements of Florida law. In a will, the decedent can name the beneficiaries whom the decedent wants to receive the decedent’s probate assets. The decedent also can designate a personal representative (Florida’s term for an executor) to administer the probate estate.

If the decedent’s will disposes of all of the decedent’s probate assets and designates a personal representative, the will controls over the default provisions of Florida law. If the decedent did not have a valid will, or if the will fails in some respect, the identities of the persons who will receive the decedent’s probate assets, and who will be selected as the personal representative of the decedent’s probate estate, will be as provided by Florida law.

WHAT HAPPENS IF THERE IS NO WILL?

Someone who dies without a valid will is “intestate.” Even if the decedent dies intestate, the probate assets are almost never turned over to the state of Florida. The state will take the decedent’s assets only if the decedent had no heirs. The decedent’s “heirs” are the persons who are related to the decedent and described in the Florida statute governing distribution of the probate assets of a decedent who died intestate.

If the decedent died intestate, the decedent’s probate assets will be distributed to the decedent’s heirs in the following order of priority (found in Part I, Chapter 732 of Florida Statutes):

· If the decedent was survived by a spouse but left no living descendants, the surviving spouse receives all of the decedent’s probate estate. A “descendant” is a person in any generational level down the descending line from the decedent and includes children, grandchildren, parents and more remote descendants.

· If the decedent was survived by a spouse and left one or more living descendants (all of whom are the descendants of both the decedent and the spouse), and the surviving spouse has no additional living descendants (who are not a descendant of the decedent), the surviving spouse receives all of the decedent’s probate estate.

· If the decedent was survived by a spouse and left one or more living descendants (all of whom are the descendants of both the decedent and the spouse), but the surviving spouse has additional living descendants (at least one of whom is not also a descendant of the decedent), the surviving spouse receives one-half of the probate estate, and the decedent’s descendants share the remaining half.

· If the decedent was not married at the time of death but was survived by one or more descendants, those descendants will receive all of the decedent’s probate estate. If there is more than one descendant, the decedent’s probate estate will be divided among them in the manner prescribed by Florida law. The division will occur at the generational level of the decedent’s children. So, for example, if one of the decedent’s children did not survive the decedent, and if the deceased child was survived by that child’s own descendants, the share of the decedent’s estate that would have been distributed to the deceased child will instead be distributed among the descendants of the decedent’s deceased child.

· If the decedent was not married at the time of death and had no living descendants, the decedent’s probate estate will pass to the decedent’s surviving parents, if they are living, otherwise to the decedent’s brothers and sisters.

· Florida’s intestate laws will pass the decedent’s probate estate to other, more remote heirs if the decedent is not survived by any of the close relatives described above.

The distribution of the decedent’s probate estate under Florida’s intestate laws, as discussed above, is subject to certain exceptions for homestead property, exempt personal property, and a statutory allowance to the surviving spouse and any descendants or ascendants whom the decedent supported. Assets subject to these exceptions will pass in a manner different from that described in the intestate laws. For example, if the decedent’s homestead property was titled in the decedent’s name alone, and if the decedent was survived by a spouse and descendants, the surviving spouse will have the use of the homestead property for his or her lifetime only (or a life estate), with the decedent’s descendants to receive the decedents’ homestead property only after the surviving spouse dies. The surviving spouse also, however, has the right to make a special election within 6 months of the decedent’s death to receive an undivided one-half interest in the homestead property in lieu of the life estate provided certain procedures are timely followed. The spouse’s right to homestead property does not take into consideration whether the surviving spouse has one or more living descendants who are not also a descendant of the decedent.

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What is Probate?

https://youtu.be/xG-vfK59QDE

Probate is a court-supervised process for identifying and gathering the assets of a deceased person (decedent), paying the decedent’s debts and distributing the decedent’s assets to his or her beneficiaries. In general, the decedent’s assets are used first to pay the cost of the probate proceeding, then are used to pay the decedent’s outstanding debts, and the remainder is distributed to the decedent’s beneficiaries. The Florida Probate Code is found in Chapters 731 through 735 of the Florida Statutes, and the rules governing Florida probate proceedings are found in the Florida Probate Rules, Part I and Part II (Rules 5.010-5.530).

There are two types of probate administration under Florida law: formal administration and summary administration. This pamphlet will primarily discuss formal administration.

There is also a non-court supervised administration proceeding called ‘Disposition of Personal Property Without Administration.’ This type of administration applies only in limited circumstances.

WHAT ARE PROBATE ASSETS?

Probate administration applies only to probate assets. Probate assets are those assets that were owned in the decedent’s sole name at death, or that were owned by the decedent and one or more co-owners and lacked a provision for automatic succession of ownership at death.

For example:

· A bank account or investment account in the sole name of a decedent is a probate asset, but a bank account or investment account owned by the decedent and payable on death or transferable on death to another, or held jointly with rights of survivorship with another, is not a probate asset.

· A life insurance policy, annuity contract or individual retirement account that is payable to a specific beneficiary is not a probate asset, but a life insurance policy, annuity contract or individual retirement account payable to the decedent’s estate is a probate asset.

· Real estate titled in the sole name of the decedent, or in the name of the decedent and another person as tenants in common, is a probate asset (unless it is homestead property), but real estate titled in the name of the decedent and one or more other persons as joint tenants with rights of survivorship is not a probate asset.

· Property owned by husband and wife as tenants by the entirety is not a probate asset on the death of the first spouse to die, but goes automatically to the surviving spouse.

This list is not exclusive, but is intended to be illustrative.

WHY IS PROBATE NECESSARY?

Probate is necessary to pass ownership of the decedent’s probate assets to the decedent’s beneficiaries. If the decedent left a valid will, unless the will is admitted to probate in the court, it will be ineffective to pass ownership of probate assets to the decedent’s beneficiaries. If the decedent had no will, probate is necessary to pass ownership of the decedent’s probate assets to those persons who are to receive them under Florida law.

Probate is also necessary to wind up the decedent’s financial affairs. Administration of the decedent’s estate ensures that the decedent’s creditors are paid if certain procedures are correctly followed.