Florida Estate Planning and Probate Law Blog focused on recent case law and planning ideas.

FLORIDA ESTATE PLANNING FOR SINGLE PARENTS

Single parents are a growing population in the State of Florida. While creation of an estate plan is important for everyone, it is even more important for single parents.  As a single parent you need to plan for: (i) who will raise your children (make medical decisions for them) in the event of death or disability (grandparent, other parent, family member, etc.); (ii) who can be trusted to manage their children's assets; and (iii) at what ages will your children need financial support to maintain their lifestyle and pay for college. 
 
It is important to have answers to these questions spelled out in your Florida estate planning documents. The last thing you want is for family members to be fighting over these issues and a Florida Probate Judge making the ultimate decision for you.

2015 RETIREMENT ACCOUNT CONTRIBUTION LIMITS

♠ Posted by Marc Soss
Taxpayers can now put aside a little more toward their retirement in 2015, according to the Internal Revenue Service.

The agency has adjusted the maximum contribution allowed for pension plans and other retirement funds for tax year 2015, it announced today, a change reflecting cost-of-living increases.

Taxpayers 50 years old and over can contribute up to $24,000 in retirement funds for 2015, an increase of $1,000 from 2014.

Though some limits remain unchanged from last year, several ceilings have increased. Some of the changes include:

• The elective deferral (contribution) limit for employees who participate in 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan has been increased from $17,500 to $18,000.

• The catch-up contribution limit for employees aged 50 and over who participate in those same plans has been increased from $5,500 to $6,000.

• The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

• The deduction for taxpayers making contributions to a traditional IRA has been phased out for singles and heads of households who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. 

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

• Low and moderate income savers who receive a credit for their AGI (also known as the retirement savings contribution credit) will see the credit rise. It will be $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

INHERITED IRAS ARE NO LONGER PROTECTED FROM CREDITORS

♠ Posted by Marc Soss
In the case of Clark v. Rameker, the Supreme Court ruled that an inherited IRA was not considered a protected retirement funds and was subject to creditors’ claims if the beneficiary filed for bankruptcy. The case originated from a dispute in Bankruptcy Court over whether an inherited $300,000 IRA qualified as a protected retirement account. The Supreme Court, in reliance on the U.S. Tax Code, determined that since the beneficiary was required to withdraw a minimum amount of money from the account each year, even though they had not reached the age of retirement, the account was not a protected retirement fund.

Why is this important?

The ruling means that an inherited IRAs will now longer be considered a protected asset and will be available to satisfy a beneficiaries creditor claims.

What can I do?


Account owners should consider naming a standalone Trust as the beneficiary of the IRA. The Trust will restrict the beneficiary’s access to the funds and keep them protected from their creditor claims.


How can I do it?

Upon the retirement account owner’s death the remaining assets will pass into a third-party trust and not directly to the beneficiary. Since the third-party trust was not created by the beneficiary, is not funded with their own money, and cannot be modified by them, it will enjoy protection from the claims of the beneficiary’s creditors.

CAN I AMEND MY REVOCABLE TRUST WITH A NON-TESTAMENTARY DIRECTIVE

♠ Posted by Marc Soss
The recent 3rd District Court of Appeals case of Kritchman v. Wolk, Nos. 3D12-2977, 3D12-2457, has reinforced, under Florida law, a cause of action against the trustee(s) of a Revocable Trust for breach of Trust and the potential for the settlor to amend their trust without compliance with Section 736.0405(2)(b) of the Florida Statutes. The case evolved from a correspondence (the “Note”) the Settlor of a Revocable Trust’s had written to the co-trustee during her lifetime. The Note did not comply with the requirements of Section 736.0405(2)(b) of the Florida Statutes (which requires that all testamentary directives in wills and trusts be in writing and witnessed) but advised the co-trustee that the Settlor had been paying for her first cousin’s grandson’s (the “grandson”) private school and college education expenses for seven years and that she wanted her Trust to continue to pay for his remaining college education expenses.
 
Shortly thereafter, the Settlor passed away. Upon her death, the Settlor’s son became a successor individual co-trustee of the Trust. Consistent with the terms of the Note, the successor corporate co-trustee paid the grandson’s educational expenses for the fall semester, but thereafter refused to make any educational payments on his behalf.  The grandson then sued the successor co-trustees for breach of written and oral contracts, promissory estoppel, and breach of trust. On appeal, the 3rd DCA affirmed the trial court order which found that the failure of the successor co-trustees to carry out the terms of the Note violated multiple sections of the Florida Statutes and these breaches of duty establish the liability of the successor co-trustees for a breach of trust.

WHEN A LIFE ESTATE INTEREST IN FLORIDA HOMESTEAD REAL PROPERTY IS NOT REALLY A LIFE ESTATE INTEREST

♠ Posted by Marc Soss

The recent 2nd District Court of Appeals ruling in the case of Friscia v. Friscia, No. 2D13–412 (August 27, 2014), provides a new twist on the value of a “life estate” interest in Florida Homestead real property. Friscia involved a surviving second spouse’s challenge to the determination that her deceased spouse’s interest in his former marital residence constituted “homestead” real property, protected from the possession and control of the Personal Representative of his estate, that the former spouses marital settlement agreement granted temporary exclusive use and possession of the residence to the former spouse and precluded the surviving spouse from utilizing the “life estate” interest in the residence that she had inherited.  The 2nd DCA affirmed the Probate Court ruling that held the former marital home to be entitled to the homestead exemption and that the terms of the MSA did not waive the decedent's right to the constitutional protection from claims of his creditors.

“Roughly 70% of families lose a chunk of their inherited wealth, mostly due to estate battles.” How to manage estate litigation risk?

♠ Posted by Marc Soss
Accenture estimates that $30 trillion will pass from Boomers to Millennials over the next 30 years. Will this intergenerational wealth transfer actually happen? Who knows? At one time Boomers were expected to benefit from a similar windfall of equally gargantuan proportions — some $41 trillion at the time of this study (2003). Then reality stepped in, the “great recession” hit (likely the worst global recession since World War II), incomes stagnated, people lost their jobs. More recent estimates now put the expected Boomer inheritance at $8.4 trillion. While uncertainty is unavoidable, the best we can do is manage it. And good estate planning is all about managing uncertainty. The trick is knowing which uncertainties or “risks” to focus on. Traditionally, the risk factor most estate planners and their clients spent most of their time fretting about was taxes. In reality, estate litigation poses a much greater risk for most people. According to this study fewer than 2 out of every 1,000 Americans who die — 0.14% — owe any estate tax whatsoever because of the high exemption amount (which has more than quadrupled since 2001). By contrast, the potential wealth-destroying risk posed by estate litigation is exponentially greater. In fact, according to a study cited this weekend in a WSJ piece entitled When Heirs Collide, it’s a risk that actually impacts around 70% of all families. Roughly 70% of families lose a chunk of their inherited wealth, mostly due to estate battles, according to research conducted over two decades by the Williams Group, a San Clemente, Calif., firm that helps families avoid such conflicts. ”

CAN I AMEND MY REVOCABLE TRUST WITH A NON-TESTAMENTARY DIRECTIVE

♠ Posted by Marc Soss

The recent 3rd District Court of Appeals case of Kritchman v. Wolk, Nos. 3D12-2977, 3D12-2457, has reinforced, under Florida law, a cause of action against the trustee(s) of a Revocable Trust for breach of Trust and the potential for the settlor to amend their trust without compliance with Section 736.0405(2)(b) of the Florida Statutes. The case evolved from a correspondence (the “Note”) the Settlor of a Revocable Trust’s had written to the co-trustee during her lifetime. The Note did not comply with the requirements of Section 736.0405(2)(b) of the Florida Statutes (which requires that all testamentary directives in wills and trusts be in writing and witnessed) but advised the co-trustee that the Settlor had been paying for her first cousin’s grandson’s (the “grandson”) private school and college education expenses for seven years and that she wanted her Trust to continue to pay for his remaining college education expenses. Shortly thereafter, the Settlor passed away. Upon her death, the Settlor’s son became a successor individual co-trustee of the Trust. Consistent with the terms of the Note, the successor corporate co-trustee paid the grandson’s educational expenses for the fall semester, but thereafter refused to make any educational payments on his behalf.  The grandson then sued the successor co-trustees for breach of written and oral contracts, promissory estoppel, and breach of trust. On appeal, the 3rd DCA affirmed the trial court order which found that the failure of the successor co-trustees to carry out the terms of the Note violated multiple sections of the Florida Statutes and these breaches of duty establish the liability of the successor co-trustees for a breach of trust.