WHAT IS PROBATE?
Probate is the legal process where the Probate Court takes assets that are titled in your name alone at the time of your death and legally transfers the title to the beneficiaries designated in your will after all creditors and other expenses have been paid. If you die without a will then the Court transfers the title the beneficiaries specified by Florida law after all creditors and other expenses have been paid. The entire process takes over a year and is expensive and time consuming.
WHAT IS THE DIFFERENCE BETWEEN ESTATE AND ASSET PROTECTION PLANNING
Estate Planning is a form of asset protection. It is planning for the passing of wealth to loved ones at death with the least possible taxes, costs and expenses. Asset Protection Planning protects your assets while you are alive as well as after death. Asset Protection Planning is sometimes referred to as advanced estate planning because it takes into account your need to protect your assets during your life, pass your assets in such a fashion as to minimize taxes, costs and expenses and protect those assets from your children’s creditors.
Upon their death, many people simply pass assets to their children not thinking about who gets those assets if their children are sued. If you want to protect your children’s inheritance, attention must be paid to strategically positioning wealth and embodying that strategy in well drafted documents.
LIVING TRUSTS: WHAT DO THEY DO? HOW ARE THEY USED?
A living trust can be used to avoid probate provided that at the time of your death all of your assets are titled in the name of the trust. They afford a person privacy in that people dealing with the trust may know the name of the trust and the trustee but provide confidentiality to the beneficiaries in that they will not know the beneficiaries’ names. In addition, estate, gift, and sometimes income tax can be deferred, or minimized or transferred to a lower tax bracket family member
Unlike a will where your beneficiaries get all of your assets upon your death, with a trust, distributions can take place over many years and provide protection to many generations of your family.
SHOULD A LIVING TRUST ALWAYS BE USED?
Estate Planning is not one size fits all. They type of planning that a person needs depends on the types of property that is owned, intended beneficiaries and the needs of those beneficiaries. If avoiding probate is your only concern, there are other tools that can be used to achieve this goal besides using a living trust
WHAT ARE SOME OTHER TOOLS AVAILABLE TO AVOID PROBATE?
Title to assets can be transferred to your beneficiaries outside of probate based on contracts. Life insurance policies have a contractual duty to pass the proceeds to the named beneficiary. IRA’s have a contractual duty to pass the proceeds to the primary beneficiaries and/or contingent beneficiaries Mutual Funds can be transferred outside of probate if a transfer on death contract is executed prior to the death of the owner Real property can be transferred outside of probate by the use of an enhanced life estate deed. Money market, checking and savings accounts can be transferred outside of probate by the use of a payable on death designation executed prior to the death of the owner.
WHAT IS AN ENHANCED LIFE ESTATE DEED?
An Enhanced Life Estate Deed (also known as a Lady Bird Deed) is another tool available for asset protection planning for Florida residents. The use of this type of deed provides a mechanism to bypass the probate process and protect the asset from creditors. You give up no rights to the property. The heirs named in the deed to receive the property after your death have no interest in the property until your death. You retain the right to sell, mortgage, convey, gift or cancel the remainder interest to your heirs at any time during your lifetime.
WHAT IS A GUARDIANSHIP?
A guardianship is the legal process where the Probate Court appoints a Guardian to exercise the legal rights of an incapacitated person. The Court appoints a committee of three members, usually two physicians and a social worker or other professional to report on whether or not a person is incapacitated. Upon determination of incapacity, the Court appoints a Guardian. The guardian is required to inventory the property, invest it prudently, use it for the ward’s support, and account for it by filing detailed annual reports with the court. In addition, the guardian must obtain court approval for certain financial transactions.
CAN GUARDIANSHIP BE AVOIDED?
Yes, a Durable Power of Attorney allows you to appoint a person to handle your financial affairs if you become disabled, ill, or incapacitated. The document must be executed while you are still healthy. A Durable Power of Attorney survives any subsequent incapacity and the expensive and time consuming process of Guardianship is avoided.
WHAT IS A HEALTHCARE SURROGATE POWER OF ATTORNEY?
A Healthcare Surrogate Power of Attorney allows you to appoint a person to healthcare decisions if you become disabled, ill or incapacitated. Like the Durable Power of Attorney, this document must be executed while you are still healthy.