FLORIDA ESTATE PLANNING AND PROBATE LAW BLOG

The Florida Estate Planning and Probate Law Blog is focused on recent federal and state case law and planning ideas.

I AM A RESIDENT OF WHAT STATE?

♠ Posted by Marc J. Soss in ,,,,,,,,
The criteria for determining whether a deceased individual's estate is subject to probate or estate taxes in a state is based upon their state of domicile at death. Reaching that determination can be complex.

For income tax purposes, the residency requirement is based on the number of days you reside in a particular state in a given year. If an individual does not spend more than 183 days in any one state during the year, more than one state may claim that individual as a resident, causing them to potentially owe tax in two or more states. However, for purposes of determining whether an individual is subject to probate or to estate or inheritance tax in a state the individual’s domicile will be scrutinized at the time of their  death. A domicile is where one intends to make his or her home for a permanent or indefinite period. A taxpayer can have only one domicile. Once domicile is established, it continues until it is established elsewhere.


Many factors can be utilized to determine an individual's domicile: the location of your principal residence; mailing address; where you applied for a homestead or veterans property tax exemption or other comparable benefit; whether you can be claimed as a dependent on another person’s federal income tax return and where that person is domiciled; where your spouse or close family members reside; where you are registered to vote; the state which issued your driver’s license; vehicle registration; professional licenses; location of active bank accounts; unemployment insurance; resident tax returns; the state where you earn your wages; address recorded for insurance policies, deeds, mortgages or other legal documents; state in which you hold fraternal, social or athletic memberships; location of house of worship; etc...

Add to this equation the fact that states are looking for tax revenues and may attempt to claim you as a resident based upon past behavior. This can result in multiple states claiming a decedent as a resident. In addition, even if an individual is domiciled in one state, his or her heirs may still need to pay estate or inheritance taxes or probate a will in another state if they owned real property in a state that is not his or her state of domicile. Proper planning may avoid the need for a separate probate in those other jurisdictions.
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UPDATE YOUR FLORIDA POWER OF ATTORNEY AND HEALTH CARE DESIGNATIONS REGULARLY

♠ Posted by Marc J. Soss in ,,,,,,,

Most individuals have their estate planning documents prepared and then put them away on a shelf. During that time period the laws pertaining to them can change many times. As a result, it is very important to review your Florida Health Care Surrogate and Powers of Attorney at least every three (3) years. 
Your Health Care Surrogate appoints a trusted person to make medical decisions on your behalf in the event an illness or injury renders you unconscious or otherwise incapacitated. Your Power of Attorney appoints an individual to make financial decisions or execute transactions on your behalf. It is important to review these documents to make sure that the individual you previously entrusted to handle affairs on your behalf can still be trusted, they are still around and involved in your life, or they may be deceased. 

Even if nothing has changed since you signed your Florida Health Care Surrogate and Powers of Attorney, it’s a good idea to sign new documents every few years. Because of liability concerns, some financial institutions and health care providers may be reluctant to honor powers of attorney that are more than a few years old.
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SARASOTA GUARDIANSHIP JUDGE APPOINTS COURT MONITOR

♠ Posted by Marc J. Soss
SARASOTA – A circuit judge appointed an independent court monitor on Friday to investigate the case of a Siesta Key resident and former art gallery owner who has spent the last two and a half years under the control of a professional guardianship, after attorneys for her daughter argued that the hasty procedure making her a ward of the court was a violation of due process.
In January 2013, the 12th Judicial Circuit Court named the nonprofit agency ...... as the guardian of Marise London, at the request of the Department of Children and Families’ Adult Protective Services division. The agency was paid from London’s assets to make decisions about her finances and health, at the rate of $85 an hour — while her daughter, Julie Ferguson, maintained she could provide better care for free, and had a right to do so under a Power of Attorney document her mother signed before suffering from cognitive impairment.
This week’s hearing hinged on an esoteric point of law. But after an hour of debate, Chief Judge Charles E. Williams caught Ferguson’s attorneys off-guard by asking them what outcome they really wanted for London. “Let’s not lose sight of the big picture,” Williams said. “I don’t want people to think the court gets caught up in the minutiae of the law and doesn’t care about the best interests of the ward.” If London does not need a guardian, or if her daughter would be a more suitable guardian than her current one, Williams added, “we can address those issues.”
In December, the Herald-Tribune published a series of articles — “The Kindness of Strangers: Inside Elder Guardianship in Florida” — examining the experiences of people who believe they were denied due process when elders were found to be lacking capacity to make important decisions, stripped of their civil rights and placed under a court-appointed guardianship. The series highlighted the potential for conflicts of interest among professionals who work closely together within the system. Because wards’ cases are confidential, there is often little opportunity for oversight.
Ferguson, whose story was part of the series, said she first called the state for help more than four years ago, on the advice of an attorney. She had become alarmed that her mother’s progressive dementia was leading her to give away assets she could not afford to lose. But when authorities finally asked the court for an emergency temporary guardianship for London, the petition listed Ferguson’s address as “unknown” — “despite knowing her address,” Ferguson’s attorneys claimed in court filings. This led to insufficient notice about her mother’s initial hearing, they argued, and left her no time to obtain an attorney.
“The record would reflect that she was never served with a copy of that petition,” a .... attorney Ferguson hired to reopen her mother’s case, noted at a hearing in Williams’ courtroom Thursday. “She tried to get a lawyer, and couldn’t get a lawyer.”
Ferguson has become an advocate for guardianship reform, testifying on behalf of bills in Tallahassee this year and using social media to connect with others in the cause. Dozens of her supporters attended the hearing Thursday, crowding into one side of the courtroom like guests at a wedding. The attorney for ......., asked Williams to dismiss Ferguson’s motion to vacate the guardianship. Because of complex legal rules, ..... said, the only way a judge can nullify a guardianship based on a denial of due process is if the case had been declared adversarial from the outset. “The guardianship rules and statute are set up to be non-adversarial.” “The enduring arguments as to whether or not due process was violated, whether or not there was fraud, are irrelevant.”
On Friday, Williams agreed with ....  point, and granted his request to strike the motion. Ferguson’s case could have ended there, but the judge chose to take the extra step of appointing an attorney to investigate further. As the circuit’s new chief judge, Williams asked the Sarasota County Commission in June to fund an extra court monitor position for the sole purpose of handling complaints about guardianships.
“The Court needs to have a better understanding of the dynamics of this case,” Williams said in his order, “and be certain of the motives of the various parties to make certain that the needs of the ward are being met and the current situation is in the best interests of the ward.” Absorbing this new development on Friday, Ferguson said she would consult with her attorneys — including the director of litigation for Disability Rights Florida, who recently joined her team — and take a wait-and-see approach. But her mother’s guardianship experience has made her wary. “Having all these strangers involved in making these decisions has been so terrible,” Ferguson said. “How would anyone feel about that kind of power being wielded by one person over a loved one?”
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NEW STATUTE PROTECTS AGAINST ELDER ABUSE BY CAREGIVERS

♠ Posted by Marc J. Soss in ,,,,,,,
The newspapers, especially in Florida, are filled with stories about family members and guardians taking advantage of the elderly. While that may receive all of the press, financial elder abuse by caregivers remains a major problem. To combat this problem, several states (most recently, Illinois) have enacted statutes appropriately making it more difficult for unscrupulous caregivers to extract gifts. These statutes create a presumption of fraud or undue influence for such gifts. They also create the  possibility of liability and professional discipline for attorneys effectuating gifts that run afoul of these statutes.
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CHEAP WILLS CAUSE MAJOR HEADACHES

♠ Posted by Marc J. Soss in ,,,,,,,,
Ever wonder why you can purchase a computer program, for under $40, and be able to create an entire estate plan? The answers is that most individuals are looking for bargains. However, being cheap when it comes to your estate planning may cause huge problems when you die.  Modern family structures (second and third marriages, children with multiple spouses, etc..) have also added complexity to the drafting of estate plans.   A person should seek out the advice of a competent Florida Estate Planning attorney when having their estate plan drafted. 
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A FLORIDA TRUSTEES OBLIGATIONS TO TRUST BENEFICIARIES

♠ Posted by Marc J. Soss in ,,,,,,,,,
In the case of Bain v. McIntosh (U.S. Ct. App., 11th Cir., No. 14-13836, March 2, 2015) the U.S. Court of Appeals held that a Florida attorney, hired to represent a trustee does not owe a fiduciary duty to the trust beneficiaries. The beneficiaries of the Florida Trust sued the attorney for breach of fiduciary duty. The attorney argued he did not owe a duty to the beneficiaries because he was hired to represent the Florida Trustee. The trial court granted summary judgment to the attorney and the beneficiaries appealed.
The U.S. Court of Appeals for the Eleventh Circuit affirmed, holding that an attorney retained to represent a trustee does not owe a fiduciary duty to the trust beneficiaries. According to the court, Florida regulations and case law have not expanded a lawyer's fiduciaries duties to anyone other than the trustee.
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THE REASONABLENESS OF FLORIDA PROBATE LEGAL FEES

♠ Posted by Marc J. Soss in ,,,,,,
The Florida 2nd District Court of Appeals, in Faulkner v. Woodruff (Fla. Ct. App., 2nd Dist., No. 2D13-2165, March 6, 2015) recently held that a Florida Personal Representative may petition a probate court to review the reasonableness of attorneys' fees, and that the burden of proving attorneys' fees are reasonable is on the attorneys.
 
As personal representative of an estate, Gary Faulkner hired the Woodruff Law Firm to assist in administration. The estate was uncontested and consisted of $4,594.02 in personal property and a house that sold for $150,000. The attorneys charged $39,869.24 for work in the administrative proceeding. Mr. Faulkner filed a petition with the probate court to review the reasonableness of the attorneys' fees. The probate court dismissed the petition, holding that Mr. Faulkner was required to interplead himself because the burden of proving reasonableness of attorneys' fees was on him. Mr. Faulkner appealed.
 
The 2nd DCA reversed the Florida Probate Court and held that a Florida Personal Representative may petition the probate court to review the reasonableness of attorneys' fees. According to the court, as "the party seeking fees, [the attorneys] have the burden of proof to establish that their fees are reasonable."
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STEP-CHILDREN'S RIGHTS IN FLORIDA PROBATE PROCEEDINGS

♠ Posted by Marc J. Soss in ,,,,,,,,,
One of the most common scenarios, when dealing with Florida probate matters in the second marriage situation, is that upon the death of the first spouse his or her children claim that the surviving spouse is taking their parent's assets and not communicating with them. Surviving spouse typically respond with claims that all of the marital and household assets passed to them, as the surviving spouse and the step-children are interfering. To avoid this problem the following steps should be followed:

 

Step One: Make a List How the Deceased Person’s Assets are Titled

Start with a list of each spouse's assets and how they are titled.  That will determine the need for probate and the rights of the various parties.

 

Step Two: Remove All Non-Probate Assets From the List

Not all assets are Florida probate assets. Many assets pass automatically to a survivor based on how the asset is titled. Common examples of “non-probate” assets include:
  • Real estate that is owned jointly with rights of survivorship will pass to the surviving owner(s).
  • Bank accounts that are jointly owned will pass to the surviving owners.
  • Life insurance and financial accounts (bank accounts, brokerage accounts, CDs) that have valid beneficiary designations will pass to the surviving beneficiaries.
  • Assets that are titled in a living trust will pass in accordance with the terms of the trust.
 
It is important to understand that it doesn’t matter if the deceased person had a will or what the will says. If the asset isn’t a probate asset, it never gets to probate and what the will states.  The way the asset is titled will trump whatever the will says about it. 

 

Step Three: Be Sure that You can Prove Ownership of Whatever is Left

Subtracted from the list the non-probate assets and the assets that remain are assets of the estate.  These are the “probate assets” that are governed by the deceased person’s will (if he or she had one) or the intestacy laws (if he or she died without a will). If the decedent had a bank account or parcel of real estate in his or her name alone, that property will pass under the Will or through the intestacy laws to his or her heirs are beneficiaries. 

But many times, all that is left after subtracting out the non-probate assets is miscellaneous personal property (household furnishings, etc.).  You then need to be able to prove who owns that property.  If the remaining items were purchased by both spouses then it will be very difficult to prove in court who owned it. This kind of factual difficulty makes it almost impossible to claim an interest in most personal property.

 

Step Four: Decide Whether it’s Worth It

After reviewing steps 1-3, you should have a list of assets and know their value.  You then need to compare the value of the assets with the cost of probate (or an alternative to probate) to determine whether it is worthwhile to deal with the estate in court. For small estates, there may be an alternative to full estate administration that will make financial sense.  If a full administration is required, you will want to be sure that the net value of the assets (after subtracting out the debts) involved exceed the value of the decedent’s property.
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LLC CASE OF INTEREST IN THE BANKRUPTCY REALM

♠ Posted by Marc J. Soss in ,,,,,,
Walro v. The Lee Group Holding Co., LLC (In re Lee), 524 B.R. 798 (Bankr. S.D. Ind. 2014) –

A chapter 7 trustee sought a court determination that (1) a debtor’s voting rights in a limited liability company (LLC) were property of the bankruptcy estate, and (2) other members of the LLC violated the automatic stay by taking action to remove the debtor as a member and terminating his voting rights. The operating agreement for the limited liability company (Lee Group) provided that the debtor had a 0% economic interest, but held 51 out of 101 votes.  The agreement further provided that his voting rights would expire upon his death or withdrawal from the LLC.

The debtor signed the operating agreement as a member.  The debtor was also designated as the manager of the LLC, which meant that he was in control of the company’s business and affairs.  The members were entitled to vote on certain matters, including “alienation of interest of individual members.” After the bankruptcy was filed, the trustee’s counsel wrote a letter to the LLC’s counsel contending that the debtor’s non-economic voting right interests became property of the bankruptcy estate subject to the trustee’s control. After receipt of this letter, the members adopted a resolution accepting withdrawal of the debtor from the LLC as of December 31 of the prior year.  The resolution acknowledged termination of the debtor’s voting rights and his resignation as a manager.  The remaining members subsequently designated the debtor’s son as the new manager and reallocated voting rights based on economic interests.  They also agreed that the debtor would continue to work for the LLC as a “consultant.”


The trustee argued that the voting rights were property of the estate, and that the postpetition action taken by the other members to terminate the debtor’s membership violated the automatic stay.  The defendants responded that (1) the debtor’s voting rights were derivative of his role as a manager, (2) he had no other property interest in the LLC, and that (3) their actions did not violate the automatic stay. The court began by noting that “property of the estate” has been “construed most generously” so that it includes “[e]very conceivable” interest of the debtor.  While determination of whether an interest is part of the bankruptcy estate is a federal question, courts look to state law to define the debtor’s interests. Reviewing the operating agreement and applicable state law, the court concluded that the debtor was a member of the LLC and that his voting rights were incident to that membership.  In response to the defendants’ contention that the debtor was not a member because he did not have a right to any distributions, the court concluded that “interest” was broadly defined so that the debtor did have a qualifying economic right.

As the holder of a majority of the votes, he could ensure that he was not removed as a manager, and as a manager and majority member, he had “unfettered control,” including the right to award incentives and bonuses and to provide for indemnification of expenses and liability in any proceeding.  Further, under the operating agreement, if his wife divorced him he could purchase her interest for a substantial discount. And regardless, the debtor was not required to have any economic rights in order to be a member.  The court then reviewed a series of cases in which courts held that both economic and non-economic rights in an LLC are property of the bankruptcy estate.
 
Once the court concluded that the debtor’s voting rights were property of the estate, it turned to whether the defendants had violated the automatic stay.  The court held that when the other LLC members voted postpetition to remove the debtor as manager and to appoint a new manager they were exercising control over property of the estate in violation of the stay. The defendants next tried to argue that the debtor’s 51% voting rights applied only to routine management of the LLC and not actions that require a vote by a majority in interest of the members.  However, the court did not find this argument to be supported by the operating agreement.  In addition, it was irrelevant whether the debtor was entitled to a vote on his own removal. Thus, the court granted the trustee’s motion for summary judgment and held that the debtor was a member as of the petition date, he had voting rights pursuant to the operating agreement, and actions of the other members in terminating his membership and voting rights violated the automatic stay so that those actions were invalid.

On a positive note, the court did not go on to hold that the trustee was entitled to step into the debtor’s shoes as manager or to compel the debtor to remain as manager.  However, this does not provide a lot of comfort since this was because that the trustee did not request this type of relief and does not indicate how the court would have ruled if it had been asked to address these issues.
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COMMON FLORIDA ESTATE PLANNING MISTAKES

♠ Posted by Marc J. Soss in ,,,,,,,,,

Most individuals, despite the best of intentions, fail to put their Florida estate affairs in order prior to death or incapacity. Without proper planning a Florida residents best intentions will not be enough to accomplish their Florida estate planning objectives. As a result, the ultimate distribution of their Florida probate assets will be pursuant to the Florida Statutes. The following list is the most common Florida estate planning mistakes made by Florida residents: 

Failing to plan. The biggest mistake is failing to create a Florida estate plan. Without a Florida estate plan, the Florida Statutes will determine where your assets will be distributed at death. This is probably not what you want to happen to your assets. In addition, without a Florida estate plan, you have no method to name a guardian for minor children or who will act for you if you become incapacitated.

Doing it yourself.  You will be disappointed if you believe that you will save money by using a do-it-yourself online estate planning preparation service or by writing your own documents. Poorly drafted Florida estate planning documents documents will only cost you or your heirs additional money when they are needed most. The problems created by not getting competent Florida legal advice will not be borne by the person creating the Florida estate planning documents but their children and grandchildren. 

Not planning for disability. A properly drafted Florida estate plan will specify what will happen to your assets when you become incapacitated. It is important to have documents, such as a power of attorney and health care proxy, that appoint someone you trust to act on your behalf if you can't act for yourself.  

Not checking your beneficiary designations. You should periodically review your insurance policy and retirement plan beneficiary designations to make sure they correct. Insurance and retirement accounts do not follow your Will or Revocable Trust and are distributed according to the forms you fill out with creating the account. You need to make sure you have named a beneficiary and the beneficiary is who you want it to be.

Not reviewing the plan. Once you have created a Florida estate plan it is important to keep it up to date. Circumstances change over time and your estate plan needs to keep up with these changes. Major changes that may affect your plan include getting married or divorced, having children, or experiencing an increase or decrease in assets. Even if you don't have any major changes, you should review your plan periodically to make sure it still expresses your wishes.

For more information on updating your plan,
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