At Battaglia, Ross, Dicus & McQuaid, P.A., we’ve helped countless families navigate estate planning with minors in mind. Our Florida estate planning lawyers know how to set up inheritances. They protect children and help assets move smoothly. This guide will walk you through everything you need to know.

Why Minors Can’t Inherit Retirement Accounts Directly

Many parents want their children to inherit their retirement savings. However, minors can’t legally control these funds until they reach adulthood. If a retirement account is left directly to a minor, a court-appointed guardian must manage the money until the child turns 18 (or 21 in some cases).

Without a solid plan, this can lead to:

• Unnecessary legal delays
• Higher legal costs
• Loss of control over how the funds are used

Additionally, once the child reaches the legal age of adulthood, they gain full control over the inherited funds. Without structured guidelines, they could spend the money unwisely or face financial mismanagement. Careful planning ensures that the funds are used responsibly for long-term security.

The SECURE Act and Its Impact on Inherited Retirement Accounts

The Setting Every Community Up for Retirement Enhancement (SECURE) Act significantly changed how inherited retirement accounts are handled. The SECURE Act says that most non-spouse beneficiaries, such as minors, need to withdraw all the money from an inherited IRA or 401(k) within 10 years after the account holder passes away.

Key SECURE Act Changes Affecting Minors:

• No more “Stretch” IRA: Beneficiaries used to take small payments throughout their lives. Now, they must deplete the account within a decade.
• Exception for Minor Children: Minor children can take required minimum distributions (RMDs) based on their life expectancy. However, the 10-year rule starts when they reach the age of majority, which is either 18 or 21, depending on the state. This exception is only applicable to the account owner’s minor child or children, and not just any minor beneficiary.
• Higher Tax Burden: Big payouts quickly might move minors into a higher tax bracket. This can cause large tax bills.

These changes make trust planning more important for families. They want to ensure their children have financial stability.

Best Ways to Plan for a Minor’s Inheritance

1. Establish a Trust for Your Child

One of the best solutions is to create a trust. A trust ensures that the retirement funds are managed according to your wishes until your child reaches an appropriate age.

Benefits of a trust:

• Control: You decide when and how your child receives the money.
• Protection: Funds remain safe from misuse or external threats.
• Tax Efficiency: Properly structured trusts can minimize tax burdens.
• Financial Guidance: A trustee can provide oversight to ensure the funds support the child’s long-term needs.

There are different types of trusts to consider:

• Revocable Trust: You can modify or cancel this trust during your lifetime.
• Irrevocable Trust: This trust can’t be changed after it’s set up, but it offers better asset protection.
• Testamentary Trust: This trust starts after you pass away and is set up in your will.

If you wish to establish a trust, it is important to consult with an estate planning attorney to draft the trust in a way that utilizes strategies to protect your child’s inheritance while also minimizing taxes through careful planning. Not all trusts are structured the same way, so retirement accounts need special considerations.

2. Name the Trust as the Beneficiary

Once you create a trust, you should name it as the beneficiary of your retirement account. This ensures that funds are transferred into the trust rather than directly to the minor.

When doing this, make sure:

• The trust is properly drafted to receive retirement account funds.
• It meets IRS requirements to qualify as a designated beneficiary.
• It includes terms for gradual or conditional distributions.

3. Choose a Responsible Trustee

The trustee will oversee the management and distribution of your child’s inheritance. This should be someone you trust to act in your child’s best interest.

• Have strong financial judgment
• Understand your wishes and goals
• Be willing to manage the trust responsibly

If you’re unsure who to choose, a Florida estate planning attorney can help you select the right trustee. You might think about hiring a professional fiduciary or corporate trustee. They can help with fair and expert financial management.

4. Consider a Custodial Account

Another option is setting up a Uniform Transfers to Minors Act (UTMA) account. This allows a designated custodian to manage the funds until the child reaches the legal age of maturity. While this is simpler than a trust, it offers less control over long-term use.

Understanding the Difference Between Role Names

When planning an inheritance for kids, it’s important to know the key roles in estate planning. A beneficiary gets the assets. A trustee manages those assets in a trust. Additionally, a guardian is appointed to care for the minor in the event of the parent’s passing, whereas a custodian handles financial matters for the child if a custodial account is used. Knowing these differences helps make sure your estate plan matches your wishes. It also ensures that all important roles are assigned correctly.

Additional Considerations When Planning for a Minor’s Inheritance

Understanding Tax Implications

Different inheritance structures have varying tax consequences. A properly structured trust can minimize income tax burdens for your heirs. Distributions from inherited retirement accounts often incur income tax. Still, with smart planning, you can reduce your tax burden.

Consider these tax strategies:

• Stretch IRA Strategies: Allows beneficiaries to take distributions over their lifetime, reducing yearly tax burdens, if they are considered eligible designated beneficiaries. Eligible designated beneficiaries are beneficiaries that, if they are within a special class of individuals, such as a spouse, chronically ill or disabled beneficiaries, or beneficiaries that are no more than 10 years younger than the account owner, can stretch distributions over their life expectancy. Structuring your retirement beneficiaries with this in mind is crucial when preserving the special rules for eligible designated beneficiaries and should be done with the help of legal counsel.
• Roth Conversions: Converting traditional retirement funds to a Roth IRA can allow tax-free distributions for heirs if properly planned for in advance and before death.
• Charitable Trusts: Designating a portion of assets to charity can provide tax advantages while supporting meaningful causes.

Planning for Special Needs Children

If your child has special needs, additional planning is necessary. A Special Needs Trust (SNT) provides financial support. It helps people stay eligible for government benefits like Medicaid and Supplemental Security Income (SSI). It’s important to work with a Florida estate planning attorney who knows special needs planning. This helps create a legally sound plan.

Common Mistakes to Avoid

Naming a Minor as a Direct Beneficiary

Without a trust or custodial arrangement, a court must appoint a financial guardian to manage the funds. This process can be expensive and time-consuming.

Failing to Update Beneficiary Designations

Your estate plan should always reflect your most recent wishes. If you fail to update your beneficiary designations, funds may go to an unintended party.

Not Considering Tax Implications

Different inheritance structures have varying tax consequences. A properly structured trust can minimize income tax burdens for your heirs.

FAQs About Minor Beneficiaries and Retirement Accounts

Planning for minors to inherit retirement accounts can be complex. Below are answers to common questions families often ask:

1. Can I name my minor child as a direct beneficiary of my retirement account? Yes, but it’s not recommended. Minors can’t manage these funds. A court-appointed guardian must oversee them until the child becomes an adult. A trust is often a better solution.

2. What is the best way to leave retirement assets to a minor? Setting up a trust is typically the best way. A properly structured trust ensures funds are distributed according to your wishes and protects the assets from potential mismanagement.

3. What happens if I don’t designate a guardian or trustee? Without a designated trustee or guardian, the court will appoint one, which may lead to delays, added expenses, and less control over how the assets are managed.

4. How does the SECURE Act affect my minor child’s inheritance? The SECURE Act says that most inherited retirement accounts must be emptied within 10 years. However, minor beneficiaries can take smaller amounts until they become adults. After that, the 10-year withdrawal rule applies.

5. Can I change my beneficiary designations after setting up a trust? Yes, you can update your beneficiary designations at any time to ensure they align with your estate plan. Regular updates are recommended to reflect changes in family dynamics or financial goals.

Learning about these common questions can help you make smart choices for your child’s financial future.

Why Expert Guidance from a Florida Estate Planning Attorney Matters

Estate planning is complex, especially when minors are involved. Our experienced Florida estate planning attorneys can help you:

• Select the right trust structure
• Ensure your plan complies with state and federal laws
• Minimize legal and tax complications
• Protect your child’s financial future

Without professional guidance, even small mistakes can lead to major issues. Working with an attorney ensures your plan is legally sound and aligns with your family’s goals.

A Florida estate planning attorney can also help you navigate legislative changes like the SECURE Act, which impacts how inherited retirement accounts are distributed. Understanding these nuances is crucial for optimizing your child’s financial future. Additionally, a knowledgeable attorney can assist in choosing a trustee, structuring trust distributions, and minimizing tax burdens. Proactive estate planning ensures your minor child’s inheritance is secure and used for their best interests.

Contact Us for a Free Consultation

At Battaglia, Ross, Dicus & McQuaid, P.A., we have decades of experience helping families protect their assets. Our Florida estate planning attorneys provide personalized solutions tailored to your unique situation.

For over 60 years, our firm has provided top-tier legal services in Florida. Our estate planning team is known for expertise, attention to detail, and client-focused service. We take pride in helping families create solid, legally sound plans that stand the test of time.

Whether you’re setting up a trust, choosing a guardian, or updating your beneficiary designations, we’re here to help. Contact us today for a free consultation and let us guide you in securing your child’s financial future.

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Understanding Islamic Inheritance Laws

The Key Principles of Islamic Inheritance

• Fixed Shares for Heirs: Islamic law mandates specific portions of the estate for designated heirs, such as spouses, children, and parents. These shares are pre-determined and leave limited flexibility.
• Gender-Based Allocations: Sons typically receive double the share of daughters, reflecting their traditional financial responsibilities over their female relatives.
• Exclusions: Certain family members, such as adopted children or stepchildren, may not automatically inherit under Sharia unless specified in a will.
• Debt Settlement: Before dividing the estate, all debts and obligations, including funeral expenses, must be settled.
• Charitable Giving: Charitable giving (sadaqah or waqf) is highly encouraged in Islam, and up to one-third of an estate can be designated for it without infringing on the rights of mandatory heirs.

The Role of a Will in Islamic Estate Planning

How a Will Helps

• Specify Non-Heirs: A will can direct up to one-third of your estate to individuals or causes outside the fixed shares, such as charitable organizations or adopted children.
• Ensure Legal Compliance: A properly drafted will ensures that your estate is distributed according to both Islamic laws and Florida statutes.
• Reduce Disputes: Clear instructions in your will act to help prevent family disputes and ensure a smoother probate process.

Navigating Florida Laws and Islamic Traditions

Key Considerations

• Avoiding Intestacy: Without a valid will, Florida laws dictate the distribution of assets, which may conflict with Islamic guidelines.
• Marital Inheritance: Spousal rights under Florida law differ from the spousal shares outlined in Sharia, necessitating tailored planning. Relying on the intestate inheritance laws of Florida will surely result in consequences that do not align with Islamic requirements.
• Trusts for Flexibility: Trusts can be used to manage asset distribution while respecting Islamic principles. They also provide tax advantages and protection from probate.

Trusts as a Complementary Tool

Benefits of Trusts

• Avoid Probate: Trusts allow for the direct transfer of assets without the delays and expenses of probate.
• Control Asset Distribution: Trusts can specify the timing and conditions for distributions, which is helpful for minor heirs or long-term financial planning.
• Accommodate Religious Donations: Trusts can include provisions for charitable giving in accordance with Islamic principles.
• Lifetime Giving: For people who want to provide individuals with funds beyond what is prescribed by Islamic Inheritance Laws, irrevocable trusts are a helpful tool to utilize unlimited lifetime gifts to provide for a beneficiary during one’s lifetime and beyond.

Planning for Future Generations

Establishing Endowments (Waqf)

Creating Educational Trusts

Protecting Wealth with Asset Management

Incorporating Family Discussions

Common Challenges and How to Address Them

Common Challenges

• Balancing Shares: Ensuring the estate is distributed according to fixed shares can be complicated, especially with blended families or significant debts.
• Including Non-Heirs: Incorporating individuals not entitled to a fixed share, such as adopted children, requires thoughtful planning.
• Legal Discrepancies: Reconciling Florida laws with Sharia requires meticulous attention to detail.

Why Expert Guidance from an Attorney Matters

• Understanding Your Needs: We take the time to understand your family structure, religious beliefs, and goals.
• Tailored Solutions: Every family is unique. We create personalized plans that reflect the Islamic faith and comply with Florida law.
• Legal Expertise: Our experience with Islamic inheritance laws and Florida estate planning ensures your plan is thorough and enforceable.

Contact Battaglia, Ross, Dicus & McQuaid, P.A. for a Free Consultation

Award-Winning Attorneys at Battaglia, Ross, Dicus & McQuaid, P.A.

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What Defines a “Reporting Company” Under FinCEN’s Final Rule?

• Issuers of securities registered under Section 12 of the Securities Exchange Act of 1934 (1934 Act) or those who must file supplementary and periodic information under Section 15(d) of the 1934 Act.
• Governmental authority that acts on behalf of the U.S. or any such Indian Tribe, State, or political subdivision.
• Banks.
• Credit unions.
• Bank holding companies.
• Money services business registered with FinCEN
• Brokers or dealers registered with the Securities Exchange Commission (SEC) per Section 15 of the 1934 Act.
• Public companies registered with the SEC under the 1934 Act.
• Investment companies or advisors registered under the Investment Advisers Act of 1940.
• Venture capital fund advisor.
• Insurance Companies.
• State-licensed insurance producer.
• Public accounting firms registered under Section 02 of the Sarbanes-Oxley Act of 2002
• Public Utility – providing telecommunication services, electric power, natural gas, or water services within the U.S.
• Large Operating Companies – which have more than 20 full-time employees in the U.S., a federal income tax return filed in the year prior with more than $5 million gross sales or receipts, and an operating presence in the U.S.
• Inactive entities – has not engaged in active business for over one year, not owned by a foreign person, has not changed ownership or received or sent more than $1,000 in the previous 12 months, does not hold any assets including an ownership in any corporation, LLC, or other similar entity.

What is a FinCEN Identifier?

1. The reporting company has been provided with the other entity’s FinCEN Identifier.
2. An individual is or may be a beneficial owner of the reporting company by virtue of an interest in the reporting company that the individual holds through an ownership interest in the other entity; and;
3. The beneficial owners of the other entity and the reporting company are the same individuals.

Who is a Beneficial Owner?

• Full legal name.
• Date of Birth.
• Current residential address.
• An identifying number from a driver’s license, state ID, passport, or FinCEN identifier.
• An image of the identifying number document.

What Constitutes Substantial Control?

• Serve the reporting company as a senior officer such as a CEO, CFO, COO.

• Have the authority over the appointment or removal of any senior officer or a majority of the board of directors of the reporting company.

• Directs, determines, or have substantial influence over important decisions made by the reporting company including: Entry into and termination of contracts; acquisition, sale or lease of the company’s principle assets; Reorganization, dissolution, or merger; selection or termination of business lines or venture; and the amendment of any governance documents of the reporting company.

What is a Company Applicant?

What Information Does a Reporting Company Need to Provide About Itself?

• Their full legal name and any “trading as” (t/a) or “doing business as” (d/b/a) names.
  • The current address of their primary place of business in the United States; or if they are a foreign reporting company, the current address from which they conduct business in the United States.
    • The State, Tribal or foreign jurisdiction of formation or registration of their reporting company.
      • Their Taxpayer Identification Number (TIN) and their Employer Identification Number (EIN).

What are the BOI Reporting Deadlines

What are the Penalties for Failing to Report?

Who Can Access This Information?

Are There Costs for Filing an Initial BOI Report with FinCEN?

Contact a Battaglia, Ross, Dicus & McQuaid Business and Corporate Transaction Attorney

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Put simply, in the five years prior to your application, you cannot ‘give away’ your assets in an illegible manner (such as below fair market value).

The most common ineligible asset transfer is the gifting of an asset or cash to a relative. By being aware of these rules, you can plan carefully with a Florida elder law attorney well in advance

What Is the Medicaid Lookback Penalty Period?

When you apply for Medicaid for long-term care benefits, your recent finances will be reviewed. If prohibited transfers of money or assets are recognized your application will not only be rejected, but you’ll also face a penalty period. A good application will have explanations detailing any unusual or unexpected expenses paid out from a bank account with substantiation to avoid any delays.

How to Calculate the Medicaid Lookback Penalty in Florida

The Medicaid lookback penalty period is calculated from the total amount of ineligible transfers and the average private patient rate (penalty divisor) for nursing home care in Florida.

Number of Months Excluded from Receiving Medicaid Payments = Total ineligible transfers ÷ the penalty divisor

In 2022, the Florida penalty divisor is $9,703 per month.

For example, if you made $115,000 in ineligible transfers over the past 5 years (during the lookback period), which included your home and gifting of money, then you’d be penalized from benefits for 11.85 months. Submitting an application will allow an applicant to trigger the penalty period. After the penalty period ends, he or she will be able to reapply.

$115,000 ÷ $9,703 = 11.85 months ineligibility period.

Note that improperly disposed assets are classified as those that are gifted, transferred or sold for less than their fair market value.

How Do I Get Around Medicaid 5-Year Lookback?

There are still legal ways to reduce your asset and income levels without breaching the five-year lookback for Medicaid in Florida rules. It’s advised that you always consult an elder law attorney before making these actions, but they can include:

• Community Spouse Resource Allowance (CSRA): As of 2023, you can transfer up to $148,620 to your spouse as long as they continue to live independently. This rule prevents the spouse who isn’t going to receive nursing home care from having inadequate funds available.
• Disabled Children: You can also transfer assets to disabled children aged under 21 to pay for their care. The best way to do this is usually by creating a trust in their name.
• Siblings: Siblings that have been living in your home for at least a year and own a portion of it may also receive your share of the home.
• Adult Children Caregivers: Adult children who are primary caregivers and have lived with the applicant for at least the past two years can receive the home without penalty.
• Pay Off Debt: Medicaid rules do not prohibit paying off personal or joint debts, including mortgages or HELOCs or residences you can transfer to others.
• Spending Down: You are also allowed to spend the money as you wish on home improvements.

Read Related: Do I Need an Elder Law Attorney in Florida?

How to Legally Protect Your Assets Before the “Look Back” Period?

If you or a loved one don’t need immediate long-term care, it’s advised that you plan in advance regardless. Planning in advance is one of the wisest things you can do for your long term care. Here’s what you should do:

• Have your estate plan created and updated, including:
  • Updated wills
  • Updated trusts
  • A valid power of attorney and medical power of attorney document
  • Health care directives
• Consider creating an irrevocable trust for Medicaid purposes, which allows you to protect your assets and income while still qualifying for Medicaid long-term care.
• Consider obtaining long-term care insurance coverage.
• Consult an elder law attorney for the best strategies for you and your family.

Read Related: Applying for Florida Medicaid: Long-Term Care Benefits for Your Elderly Parent

How Do I Protect My Home From Medicaid in Florida?

Married Couples

If you’re a married couple, with one spouse applying for Medicaid in Florida, then Medicaid will not come after your home.

The at-home house (known as the ‘community spouse’) is protected and may live there, regardless of the value of the home or the Medicaid status of the applicant spouse.

If the community spouse passes away before the Medicaid spouse, however, there may be room for concern. This is why it can be wise to consider putting the home in a trust at some point to protect it from creditors.

Single People

Medicaid applicants who are single, and will be moving to a nursing home or assisted living facility, are allowed to own a homestead of up to $636,000 (2022).

Even if that applicant never returns home, it is protected and is not a countable asset for Medicaid purposes. It is also protected from creditors if it descends to your heirs.

Issues may arise though, as all your income will be going to the nursing home costs, so your family will likely need to pay for upkeep, mortgage, insurance and taxes.

Renting the home adds further complication and can result in it losing creditor protection.

What Assets Are ‘Countable’ in the Five-Year Lookback for Medicaid in Florida?

The following assets are considered ‘countable’ during the five-year lookback for Medicaid in Florida.

• Cash
• Stocks
• Bonds
• Investments
• Credit Union
• Savings
• Checking Accounts
• Real Estate (not including the applicant’s residence or the value of one income-producing property).

Hire an Elder Law Attorney in Riverview

If you or a loved one needs assistance navigating the five-year lookback for Medicaid in Florida, or has any questions, our Florida Medicaid planning lawyers can help. We advise that you consult with as soon as possible, to avoid making any costly mistakes and to put you and your loved ones at ease. We welcome you for a free assessment today.

Free Assessment

Battaglia, Ross, Dicus & McQuaid, P.A. is U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning, experienced estate planning attorneys, they can help you plan for the future today.

Schedule a free assessment today to get started

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What is Elder Law?

Elder law is an area of estate planning that focuses on helping people adapt and prepare for senior life.

With age, the burdens of estate planning grow. Areas such as long-term care, advance directives and inheritance wishes suddenly zoom into view. These areas involve complex legal matters. A Florida elder law attorney can help you manage these areas, optimizing your finances and assets to bring you the smoothest experience.

When Do I Need an Elder Law Attorney in Florida?

It’s advised that anyone aged 65 or over considers an elder law attorney to manage the changes your family is set to face. However, those considering nursing homes, retirement or end-of-life care should also contact a lawyer regardless of age.

Common examples include planning for incapacity, transferring assets before moving into a nursing home, or planning how your estate will be shared after your death.

Checklist

If you say yes to any of these questions, you should contact a Florida elder law lawyer.

• Do you need to create or edit a will?
• Is your estate complex?
• Would you like to receive expert advice on whether you should use a trust?
• Do you need support with qualifying for Medicaid?
• Have you been told by someone that you do not qualify for Medicaid?
• Would you like to plan for incapacity?
• Would you like to protect your assets?

Determining Medicaid Support

Medicaid is a federal program helping low-income Americans to receive healthcare benefits. Around 63 million Americans currently receive coverage from it. It can help cover nursing home and senior care costs.

However, determining Medicaid care eligibility is complicated and stressful. A Florida elder law attorney can provide assistance to help you through the process and ensure you don’t miss out.

Medicaid planning may require extensive asset structuring, so you can retain enough of your income and assets and still qualify for Medicaid benefits.

Florida has its own strict Medicaid long-term care assistance requirements and there are many ways to qualify an individual even if they do not qualify for Medicaid currently. Working with a local Florida elder law attorney ensures that you have the best plan possible and qualify for Medicaid sooner rather than later.

Planning for Long-Term Care

Long-term care is sadly expensive but critical to the well-being of many seniors. Whether you or your loved one need to move to an assisted living facility or nursing home, planning can make the process much easier.

Long-term care insurance can help you cover the costs. The earlier you start, the better. By using an experienced Florida elder law attorney, you can arrange your finances as best possible to help you afford long-term care.

Incapacity Planning

If you become incapacitated via illness or injury, you will no longer be able to make important financial or health-related decisions. That’s where incapacity planning comes in.

A Florida elder law attorney can help you understand and consider your options, such as by making advance directives that can cover your medical wishes, life-support beliefs and medication or surgical preferences.

You can also name a specific Health Care Surrogate (a person selected to make healthcare decisions on your behalf).

Similarly, a ‘Power of Attorney’ can be appointed to manage your finances and related legal matters should you no longer have the ability yourself.

A living will can also list instructions regarding health care and end-of-life support.

Our lawyers can help you sign the required documents for this, preventing them from being invalid or at risk of misinterpretation.

To Assist with Estate Planning

Basic estate planning, such as creating a will, should start at any age. But as a senior, it becomes even more important. Years of collected wealth, assets and debts need handling. This task can be long, overwhelming and rife with potential mistakes that make documents invalid.

An elder law attorney can help you navigate tough decisions, tax implications and asset structuring to protect your family’s wealth.

This can include:

• Creating a will
• Creating a trust
• Creating trusts for life insurance policies
• Filing out and executing advance directives
• Guardianship decisions
• Management of 401ks and IRAs
• Minimizing tax implications
• Health care directives
• Power of attorney directives
• Pet trusts

Wills and Trusts

A will is a critical part of any estate plan, but it can be complicated to write if you have a complex estate with many children and grandchildren.

Our Florida elder law attorneys can help you through the process, ensuring that you do hit problems due to ex-spouses, children from other marriages, debts, life insurance policies and other assets.

Similarly, you can utilize dozens of different types of trusts to benefit your family. From asset protection to generational wealth protection, you can use trusts to direct your assets in the way you desire.

Our attorneys can analyze your estate to determine what’s best for your family and take care of the complex legal matters required to complete the job.

Read related: Guide to Designating a Trust as a Beneficiary of Retirement Accounts

Hire an Elder Law Attorney in St Petersburg, FL

If you or a loved one needs support with estate planning or long-term care planning, then our Florida estate planning attorneys can help. From structuring your assets to qualify for Medicaid to creating a trust, we’ll make the process smooth and optimized.

Free Assessment

Battaglia, Ross, Dicus & McQuaid, P.A. is U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning, experienced estate planning attorneys, they can help you plan for the future today.

Schedule a free assessment today to get started.

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No estate is too small to prepare an estate plan for. No matter how large or small, almost everyone has an estate. Your estate is anything you own, including:

• Automobiles
• Real estate
• Financial assets
• Investments
• Personal possessions
• Life insurance

When you pass away, you cannot take your estate with you. Thus, estate planning involves determining how to preserve and distribute your assets after death. It also deals with managing your property, if you own any, and how to handle financial obligations if you become incapacitated.

You may wonder why anyone would want to plan for a seemingly remote tragic circumstance. However, planning ahead will save your family members from having to make tough decisions down the line and will ensure a smooth transition for your loved ones.

Estate Planning 101

When estate planning, you’re essentially making a plan for your assets in advance. Your estate plan will name the people or organizations receiving your belongings after you pass away and who you want to help you manage those assets if you become incapacited. It will also include steps to carry out your plan and can be tailored to your specific wishes.

Everyone needs three essential estate planning documents: a living will, durable power of attorney, and a last will and testament. Thorough estate planning should also include the following:

• Instructions for your financial affairs in the event you become incapacitated
• Instructions for your care if you become debilitated before death
• If necessary, arrangements for disability insurance, long-term care insurance, and life insurance
• Specifications for the transfer of your business if you become disabled, incapacitated, or pass away
• Appointment of a guardian to care for your minor children and their inheritance
• Provide for loved ones who need financial aid or may be irresponsible with money
• Provide for family members with special needs
• Minimize taxes, court fees, and legal costs associated with funding assets into a living trust
• Designated beneficiaries

As you can see, estate planning involves a lot of forethought and detail-oriented preparation. It’s not a single event. Instead, it’s an ongoing process you should review and update throughout your lifetime. Most Estate Planning Attorneys will advise you to keep your estate plan up to date in accordance with your family and financial circumstances.

Everyone Should Have an Estate Plan

According to the American Bar Association, only about 36% of American adults have a Last Will and Testament or Trust. So, if you don’t have an estate plan yet, you’re not alone.

A common misconception is that estate planning is only for retirees and older people. However, that is a fallacy. Because tomorrow is not guaranteed, and nobody knows how long they will live, estate planning is a tool that everyone should use to prepare for the end of their lives and the comfort of their loved ones.

Another common misunderstanding is that estate planning is only for wealthy people. However, estate planning can be just as helpful, if not more impactful, for families with modest assets. In addition, it can save your loved ones time, energy, and resources when managing your assets later. The bottom line is that you can never predict illness, injury, or accidents, so it’s always good to have a plan.

If You Don’t Have a Plan, the State Will Have One for You

Many people falsely assume that they don’t need estate planning if they don’t own a lot. What ends up happening is that the families of those without an estate plan are left to pick up the pieces.

The state will have one for you if you do not have an estate plan. So, for example, the state can appoint someone to sign for your business if you become disabled. Or, if you die without an estate plan, the state can make arrangements for your asset distribution that will likely not align with what you would have wanted.

How Do I Start Estate Planning?

Estate planning starts with a will or a living trust. A will only defines how assets in your name will be distributed. However, a will must still go through probate court before your assets get distributed to your intended beneficiaries. The great thing about estate planning is that it gives your family the benefit of handling such matters privately rather than by the courts.

Is Estate Planning the Same as Probate?

While estate planning is a financial plan, probate administration is the court process that will decide how to distribute your property. Probate administration only applies to probate assets. In other words, specific assets bypass the probate process and go directly to your beneficiaries. Examples of assets that don’t need to go through the probate process include the following:

• Assets in a living trust
• If the deceased person has designated beneficiaries of an asset (such as life insurance or a retirement account)
• Any property held in joint tenancy (for example, if you and your spouse own a joint bank account)

If you’re unsure about which assets need to go through the probate process, it’s always best to consult an experienced probate attorney. The titling of assets and beneficiary designations are essential tools that should be strategized in your estate plan, but only after consulting with an Estate Planning Attorney.

Start Estate Planning Today

The best time to start your estate planning is now. Estate planning should be a priority regardless of your age or income status.

We hope Estate Planning Awareness Month will encourage you not to delay any longer. If you already have one, consider reviewing or updating it. Having your estate plan updated will provide you and your family with comfort in knowing that your wishes will be honored and your family will continue to thrive in your legacy.

If you have questions about wills, trusts, estate, or probate or need legal representation, contact our Estate Planning & Probate Attorneys today.

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1. The testator: the individual who creates the will,
2. The executor: the individual responsible for administering the estate after the death of the testator, and
3. The beneficiaries: the people who will receive some asset(s) from the estate.

Advantages of a Will

• Allows the opportunity to name guardians of children under 21.
• The ability to clarify funeral arrangements.
• Wills are easily amenable, as they do not take effect until after death.
• Allows the opportunity to make donations to institutions or charities.
• Easier to execute.

Disadvantages of a Will:

• Subject to probate (court process that includes having a judge distribute assets and follows the specifications outlined in the will)
• Does not maintain privacy after death.
• Can lead to disputes among beneficiaries.

What Is a Trust?

1. The grantor/settler: the person who creates the trust,
2. The trustee: the entity that holds legal title to the estate, and
3. The beneficiary: the individual who will assume control of the trust in the future.

Advantages of a Trust

• Avoidances of the probate process.
• Continuation of management in the event of illness or disability.
• In some cases, trusts can lessen the burden of taxes.
• Maintains privacy after death.
• Protection from court challenges and disputes.

Disadvantages of a Trust:

• A trust is unable to name guardians or caretakers for children.
• The creation of a trust can be complicated and legally complex.

Will vs. Trust: Key Differences

Effective Date

Probate

Public vs. Private

Contact an Experienced Estate Planning Attorney

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Revocable Trusts Avoid Probate

Most of my clients want to avoid probate for the following reasons:

• The Personal Representative (or “PR” for short, also known as the “Executor”) in a probate proceeding must wait for the court to grant “Letters of Administration” in order to access estate assets, whereas the Successor Trustee named in a Revocable Trust can access trust assets immediately without court supervision or interference. Thus there is virtually no time delay in a trust scenario, whereas a probate proceeding typically takes anywhere from nine months to a year or more.

• In probate proceedings, the PR is required to notify “reasonably ascertainable” creditors and publish a legal “Notice to Creditors” in a newspaper, thereby providing an open forum for potential creditors to make claims against the estate. On the other hand, the Trustee of a Revocable Trust has no affirmative duty to notify creditors regarding the nature and value of trust assets. A creditor seeking to access trust assets would need to file a separate lawsuit in order to subpoena this information. In short, the Trustee of a Revocable Trust has much more leverage in dealing and negotiating with potential creditors after the person who created the Revocable Trust dies.

• Both probate and trust administration involve fees and costs. In probate administration, the fees tend to be higher. This is because Florida law provides that certain percentage fees charged by the PR and his or her attorney are presumed to be reasonable. For example, the PR and his or her attorney each can charge a 3% commission on the first $1 million of probate assets, and then 2.5% commission on the next several million, with the percentage fee gradually decreasing as probate asset values increase. For example, a $2 million probate estate would entitle the PR to a $55,000 commission, as well as the attorney for the PR a $55,000 commission = $110,000.00+ in fees, not to mention court costs. This example is illustrated as follows:

Parties to the Trust

A Trust always has at least three parties:

Power to Modify and Revoke

Income Tax Effect of Revocable Trust

Choosing a Successor Trustee

Structuring Your Beneficiaries’ Inheritance

Funding the Trust

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Tenancy by the Entireties

Estate Planning Process

Notes

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Probate Can Take a Long Time

• Complex creditor issues (especially involving the IRS)
• Tenant-occupied real property
• An operating business that is part of the estate
• Beneficiary infighting
• Disputes regarding the validity of the decedent’s Last Will & Testament
• Disputes regarding the interpretation of the decedent’s Last Will & Testament

Probate Is Creditor Friendly

Probate Is Expensive

• $2 Million Probate Example. For a $2 million probate estate, your beneficiaries should expect their inheritance to be reduced by approximately $110,000.00+ in fees and costs. Florida law contains a presumption that it is reasonable for the PR and the PR’s attorney each to be paid $55,000.00 on a $2 million estate, in addition to court costs and related costs of administration. Florida Statutes Section 733.617 (PR Compensation); Florida Statutes Section 733.6171 (Attorney Compensation).

Ideal Clients for Wills

Most (or all) of the client’s assets will pass outside of the Will by virtue of joint ownership.

• For example, Linda owns her primary residence as joint tenants with right of survivorship with her son, Loyd, who lives with her and serves as her caregiver. When Linda dies, Loyd will inherit her primary residence automatically by operation of law by virtue of the joint tenancy. The transition of ownership will happen outside of Linda’s Will and thus avoid probate.

Most (or all) of the client’s assets will pass outside of the Will via beneficiary designation.

• For example, Linda has named Loyd as “pay-on-death” (“POD”) beneficiary on all of her bank accounts. When Linda dies, Loyd will be able to claim the funds in Linda’s accounts as POD beneficiary by presenting Linda’s death certificate at the bank. The transition of ownership will happen by operation of law by virtue of the beneficiary designations, and thus outside of Linda’s Will, thus avoiding probate.

The client would rather save money now and have their beneficiaries pay for the probate later.

• Some clients feel that their beneficiaries should “foot the bill” on the probate so they can spend less on estate planning during their lifetimes. These clients usually have beneficiaries who are either a charitable organization or well-adjusted adults with no addiction or other special issues.

Ideal Clients for Trusts

• Beneficiaries with special needs who receive government benefits such as Medicaid and may require a Supplemental Needs Trust (also known as a Special Needs Trust) to ensure their benefits are not forfeited when they receive an inheritance.
• Minor beneficiaries (under age 18) who otherwise would require guardianship court intervention to inherit assets.
• Beneficiaries who are bad with money management (even if over 18).
• Beneficiaries with addiction issues (e.g., legal and illegal drugs, alcohol, or gambling).
• Beneficiaries in a rocky marriage (and thus prone to divorce).
• Beneficiaries prone to litigation (e.g., high risk professions, including medicine; bankruptcy).
• Running a business, which typically requires immediate access to the company’s operating account, payroll, etc. to avoid a “fire sale” upon the death of the owner.
• Owning real property (real estate) in more than one state may subject you to probate in every state where you own property (not just Florida).
• For rental real estate, delays in dealing with tenants upon the landlord’s death often cause problems with collecting rent and re-negotiating leases, or simply having access to funds to make repairs landlords typically are obligated to make.

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