James A. Schorner, P.A., Vero Beach Florida
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Wednesday, May 22nd, 2024

When You Should Have a Living Trust

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1.                  [2] Much talk about living trusts and avoiding probate but, one question remains, “should everyone have a living trust?”

2.                  [3] Who should not have a living trust:

1.                  Those who have little or no assets.  They will be well served by a Durable Power of Attorney, instead.

2.                  Those who have everything held in joint name with a spouse.  All will go to the spouse automatically upon death.  The spouse can deal with the assets while an incapacitated spouse is living by using the Durable Power of Attorney.

3.                  [4] Those who have problems with creditors that will be resolved upon death through the probate process.  They should hold most of their assets in joint name, payable on death accounts, in trust for accounts, insurance and annuities all of which pass to the beneficiary upon death without administration and which are not subject to creditor claims.

3.                  [5] Who should have a living trust:

1.                  Those who have real estate in a state other than the state in which they reside.

2.                  Those who have a business that they own that would be better managed without court supervision.

3.                  Those who by virtue of their age or medical condition have the possibility of incapacity such that they will be unable to manage their own financial affairs.  Most people over 70 would be in this category.

4.                  [6] Those who have large estates and live in states where probate fees are set by law and which are not subject to negotiation.  Large depends on how high the probate fees are, in Florida $100,000 would be a $3,000 fee.  If the estate were much larger than this, a living trust would be more economical.  Nevertheless in Florida, the statutes provide a rebuttable presumption of a reasonable fee and attorneys frequently discount the fee when a surviving spouse is involved or when the assets consist of a few items of large value.

5.                  Those who seek the comfort and convenience of a professional trustee to manage their financial affairs and who have estates including more than $600,000 in investable assets.

1.                  [7] Why have a living trust:

1.                  Avoid ancillary probate administration.  The probate process in a distant state is expensive and does nothing in your benefit.

2.                  [8] Avoid probate administration.  Probate in your own state has the benefit of quickly resolving creditor claims and providing a personal representative or executor with the authority to transfer and sell your property.  Nevertheless, the process requires the assistance of an attorney and is known to be expensive and cumbersome in some cases.

3.                  [9] Provide for asset management while you are living but incapacitated and unable to manage for yourself.  Your trustee, whom you have chosen, takes care of your property on your behalf without having to report to the courts or seek court permission as is required in guardianship.

4.                  [10] Sometimes, a living trust will avoid others knowing the content of your dispositive plans.   However some states require the trust to be recorded to transfer real estate defeating the privacy aspect.  Additionally, you may have to give copies of your trust to your banker, broker and others who are to deal with it.


2.                  [11] Why not have a living trust:

1.                  They are more expensive to establish than a will.

2.                  They are more expensive and involved to revise because they need amendments and the various originals and amendments are cumulative and must be maintained.  On the other hand to revise a will, you replace it and discard the old one.

3.                  [12] For the trust to avoid probate and guardianship, you must transfer your assets to the trust by making deeds, new accounts or other types of transfers.  This is time consuming, annoying and incurs costs for drafting deeds and recording them.

4.                  [13] With a will, no one needs to know your death plans except you and your attorney, until your death.  With a will, the document is inactive until your death and no one need know its contents, in fact I recommend that you NOT give a copy of your will to your children or beneficiaries.  Instead advise them of the person to contact in case of your death, your attorney who should have the original.  If you decide to change the will, no one will be disappointed this way.  Furthermore, obsolete, superceded  copies will not be floating around.  Finally, your attorney should hold the original documents for you so that upon your death, a disgruntled heir does not destroy the will causing intestacy.  Your attorney will deposit the will with the court to assure its safety.

3.                  [Ask] Questions & answer period.

4.                  [14] What is Probate?  How does probate work?  What does it do?

1.                  Probate is technically the proving of the will, that is the witnesses acknowledged that they saw you sign it and the court determines that it is the most recent will.  Today the term is broadened to include the entire estate administration process including the identification of the assets, the settlement of creditor claims, the determination and resolution of estate and inheritance taxes and the ultimate distribution of your property.

2.                  [15] In Florida, the next of kin or the appointed personal representative or executor engages an attorney to prepare the necessary petitions and applications and to shepherd the process efficiently through the steps. 

1.                  [16] A petition for administration is filed with the court including the original will and the oath of the proposed personal representative which states that he promises to administer the estate in accordance with the laws and the documents. 

2.                  The judge determines if a bond is required and when it is provided, issues letters of administration.  These letters allow the personal representative to act in the decedent's place, that is to sign for him.

3.                  [17] The personal representative then gathers the decedents assets:  real estate deeds, bank accounts, brokerage accounts, vehicles, etc. and lists them and values them. He sells those assets needed to pay creditors and taxes and those that the beneficiaries do not wish to receive in kind.

4.                  The personal representative advises creditors to file claims with the court.

5.                  The personal representative gives a copy of the inventory to the beneficiaries of the estate, the Department of Revenue and the court.

6.                  The personal representative objects to claims that are unwarranted or are excessive and negotiates with the creditors or defends the lawsuit that follows the objection to a claim. 

7.                  The personal representative pays the valid claims.

8.                  [18] The personal representative files the estate tax return within nine months of the date of death, if required, pays the tax due and then waits for the IRS to review the return and send a closing letter.  This takes about one year.

9.                  [19] A preliminary distribution can be made to the beneficiaries but the personal representative should reserve enough for an adjustment in the estate tax, for his fees and the attorney fees.

10.              [20] After the estate tax return is settled, the plan of final distribution is made according to the will.  A copy of the plan is given to the beneficiaries.  If there are no objections, the final distributions are made.

11.              The personal representative collects receipts from the beneficiaries which generally waive an accounting and authorize the discharge of the personal representative from further responsibility.

12.              The final fee payment for the attorney and personal representative is made.

13.              The receipts are filed with the court and the discharge is received from the court.

14.              [21] The accountant prepares the income tax return for the estate reporting the income earned during administration, the expenses paid and issues K-1s to the beneficiaries so that they can report the net income or loss on their personal returns.

3.                  [22] What probate does:

1.                  It=s the process for changing names.  The letters of administration give the personal representative the authority to sell or collect the assets and to transfer them to the beneficiaries.  It is necessary whenever the decedent leaves property in his own name such as a home, bank account or securities.  (Cars are done without probate in Florida because they are exempt from creditor claims.)

2.                  It=s a means for resolving creditor claims quickly, efficiently and finally.  Creditors who are notified yet fail to file claims are barred from collecting against the estate and the beneficiaries.  If the claims exceed the assets, probate provides an equitable means for apportioning the assets among the creditors and assuring that the heirs receive their share of the exempt assets.

3.                  It's a means for settling disputes between the beneficiaries over the meaning of the provisions in the decedent's will.  The court will provide its interpretation upon the request of a beneficiary or the personal representative.

4.                  [23] How does a Living Trust avoid probate?

1.                  While the person who makes the trust is living, he transfers all of his assets that would otherwise be subject to probate to the trustee, which may be himself.

2.                  Upon his death, the ownership does not change, only the trustee changes.  The successor trustee is named in the trust.  The banks and brokers need a copy of the trust and a death certificate to change the name of the trustee on their records.

3.                  The trustee then follows all of the steps listed for probate above except 1, 2, 4 and 13.  He still must gather the assets, pay the creditors, file the taxes, account to the beneficiaries and distribute the estate but he does so under the supervision of the beneficiaries rather than the court.

5.                  [24] A wise trustee:

1.                  engages an attorney and an accountant to assure that the steps are followed properly.

2.                  keeps the beneficiaries informed

3.                  makes the beneficiaries part of the decision making process.

6.                  [25] Why use an attorney?  In most cases where I have said that the personal representative does something, actually, the attorney does it for him as his agent.

1.                  Good attorneys perform these procedures quickly, efficiently and fairly to all of the parties. 

2.                  A good attorney keeps the beneficiaries informed as to what they can expect and what is happening so that they feel a part of the process, rather than just recipients.

3.                  A good attorney minimizes the expenses and taxes by suggesting the best tax elections and by avoiding controversies.

4.                  Bad attorneys allow matters to drag on and handle the procedures on an emergency basis just before (or after) a deadline expires.

7.                  [26] What other legal instruments are suggested?

1.                  A durable power of attorney allows the appointed agent to manage the financial and personal affairs of the maker.

1.                  This is such a powerful document that the choice of agent is very important.  Pick only someone that you would entrust with your keys, your safe deposit box, and your life.  That person will be able to sell your house, sign your checks and sell your securities without your knowledge or consent.

2.                  This is such a powerful document that I recommend that the attorney hold the original and give only, unsigned photocopies to the maker and the agent.  Upon incapacity, the agent would contact the attorney for the original.  After discussion and assuring that the maker is, in fact, incapacitated, then the attorney would release the original or issue a copy of it.

3.                  Nursing homes and other care agencies like to have a durable power of attorney because it indicates the person who has the authority to make decisions.

4.                  Only one person should be appointed so that there is a clear indication of who is in charge.  Nevertheless, the appointed agent should be comfortable in communicating with the other family members, developing a consensus and being the liaison between the institutions and the family.

2.                  Living Will and Designation of Health Care Surrogate

1.                  The living will is a declaration that you do not wish to be kept alive when you are in a terminal condition, your death is imminent, and continuing or administering artificial life support systems will only prolong the process of dying.

2.                  The Health Care Surrogate appointment is a limited, durable power of attorney.  Your agent works with the doctors to determine that you are in a terminal condition and takes the actions that you would have taken were you able to make decisions for yourself.  Again, only one person should be appointed but that person should be comfortable in communicating with the other family members, developing a consensus and being the liaison between the institutions and the family.

3.                  There is a difference between a living will and a ADo Not Resuscitate Order (DNR).@   The living will does not prevent resuscitation because one must determine whether the patient is in a terminal condition before the living will becomes effective.  On the other hand, a DNR is an advance determination made by a doctor in consultation with the family and the patient that further medical trauma would so debilitate the person that his quality of life would be so diminished that resuscitation would not be in the patient=s best interest and that such person should die by natural means.  In most cases you want to be resuscitated because your life will be restored.

8.                  [27] Questions

Not to be distributed

9.                  Euthanasia and the Right to Die

1.                  Only Oregon now provides for a person to elect to end his life with physician assistance.  Bills are being considered in Maine and Hawaii.

2.                  Those living in other states may take their own life but a physician is prohibited from assisting by prescribing lethal drugs.  Others are also prohibited from assisting or participating in the suicide.

3.                  The Hemlock Society can provide information on how to take one's own life.  Their book, Final Exit, has been a best seller.  For those who need this information, http://www.hemlock.org or call 1-877-HEMLOCK


James A. Schorner, P.A.

Attorney: 772-231-5300
CPA:       772-231-2100

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