In Florida estate planning, a commonly used instrument is a "Living Trust" (also called a "Revocable Trust" or a "Revocable Living Trust"). In this blog, we will simply call it a "Trust." There are multiple benefits accomplished by establishing a Trust, including avoiding probate and controlling distribution--particularly to minors or financially irresponsible adult beneficiaries.
If you own an IRA account, you will usually name a person as beneficiary to receive the IRA at the time of your death. In most instances, the beneficiary can roll the IRA over into an IRA in the beneficiary's name and also defer taxes by withdrawing the funds over time. When a beneficiary is a responsible adult and when you want that person to be able to access the full IRA account, this is a good plan. The IRA can be rolled over into an inherited IRA and the beneficiary can withdraw the funds over time, thereby reducing taxes. The person can also name a beneficiary for the IRA to go to upon his or her death. In a situation where spouses have been married for a long time and have responsible adult children together, this works well.
In our estate planning practice, clients often ask whether their adult children have a "right" to inherit in Florida. [this discussion is not addressing minor children--their rights can be different]. While the question is a simple one, the answer is somewhat of a "mixed bag." As with many legal questions, the answer is "it depends."
One of the most common misconceptions I run into as an estate planning lawyer is that many people think that if they have a Last Will and Testament in Florida, probate will not be necessary. The reality is that a Will sets forth the deceased person's wishes--such as designating the beneficiaries and the Personal Representative to oversee the estate. In essence, the Will acts as the "roadmap" for the probate court to follow. But the important thing to understand is that the Will is not self-implementing--it is the power given by the probate court that implements the wishes set forth in the Will.
Most well-drafted Trusts contain a spendthrift provision-also sometimes called a restraint on alienation provision. Such a provision sets forth special language preventing creditors from attaching or "taking away" the interest of a beneficiary named in a Trust. Florida law enforces spendthrift provisions so long as they apply to both voluntary and involuntary transfers.
As an estate planning lawyer, one of my principal objectives in drafting a client's Will or Trust is to name the beneficiaries which the client wants to receive their estate. Often this will be a spouse or children and in some cases, other family members. What happens if the person named dies before the person who established the Will or Trust? Does the intended devise (gift) go to the deceased beneficiary's children or to someone else? The answer is, "it depends."
As a probate and estate attorney, I'm often asked whether life insurance goes through or is subject to probate. The answer is usually "no." Life insurance is one of those assets that does not normally go through probate. This is due to the fact that the policy names a beneficiary. As a result, at the death of the insured, the death benefits are paid to the beneficiary directly, not to the estate.
As an estate attorney, I sometimes have clients who want to name multiple beneficiaries but do not want each beneficiary to know what the other is to receive. These clients will often ask, is this possible?
As discussed in a previous blog, incentive trust provisions are designed by estate planning attorneys for clients who wish to promote or discourage specific behaviors or lifestyles by their beneficiaries. These provisions make or withhold Trust distributions to accomplish certain intended results. In essence, the provisions act as a "carrot or a stick." They either reward certain behaviors or accomplishments or they punish or seek to deter them.
When someone dies in Florida, assets or property they own can be transferred in several different ways and via several different means, only one of which involves a Will or Trust. This blog will consider several of these different means and how they relate in priority.