Estate Planning Insights from Florida

Take-Away: Given the size of its population and the number of its senior citizens, Florida’ relatively progressive legislature  often provides some helpful guidance on probate and estate planning laws that are designed to better protect its citizens. Unlike some states that aspire to be trust ‘havens’ to attract trust assets, Florida’s probate laws seem to be focused more on protection of its citizens, rather than on attracting trust business. The Michigan State Bar’s Probate and Estate Planning Council likewise studies probate and estate planning laws and it makes recommendations with the goal to update Michigan’s laws to better protect the public and to make the probate process more efficient.

Background: Florida’s Legislature just passed a series of laws that are intended to address potential abuses and also streamline, or completely avoid, some legal proceedings. Michigan might consider some of these changes.

• Precious Metals and Coins: Almost every Will or Trust contains a general tangible personal property bequest. Precious metals, bullion and coins are tangible personal property, albeit of substantial value. Florida’s statute expressly confirms that these valuable items will be transferred by a generic, general tangible personal property clause in a Will or Trust.  Thus, care should be taken in drafting a Will or Trust with the understanding that a general bequest of tangible personal property will carry out these valuable items to all of the recipients of a class bequest, e.g. “I leave all of my tangible personal property to my children in shares of equal value.” [HB 505.}
• Causes of Action: Property is defined under the Florida Probate Code to include a cause of action, i.e. a right to sue or a claim against another. This property concept is now expanded to address issues of legal standing and ‘indispensable parties’ with regard to the litigation of the decedent’s cause of action after his/her death. This expands the group of persons who are entitled to participate in the post-death litigation beyond just the personal representative of the decedent’s probate estate. [HB 505.]
• Waiver of a Right to Contest: We often see a ‘pour-over’ Will used in conjunction with a Trust. We also see lists of items specifically bequeathed which are attached to a Will.  A challenge to one instrument may not, however, automatically lead to a challenge to the other. A new Florida law requires, as a part of its Notice of Administration, a warning to interested persons that under certain circumstances, and by failing to contest a Will, the recipient of the Notice may be waiving his/her right to contest the validity of the Trust, or any other writing that is incorporated by reference in the Will. Similarly, a challenge to a Trust or ‘other writing’, e.g. a list of items bequeath to several individuals, that is incorporated by reference into a Will, is not sufficient to act as a challenge to the Will itself in which it is incorporated by reference. [HB 505.]
• Attorneys Serving as Personal Representatives: A testator must now sign a written statement that certain representations were made to the testator as a prerequisite to an attorney serving as personal representative of the testator’s estate, or a person related to the attorney receiving compensation for serving as personal representative, if the attorney either prepared or supervised the execution of the Will that nominates such person. An attorney who does not provide the required notice is not barred from serving as personal representative, but the attorney cannot receive compensation for his/her services in that capacity.  A similar provision also applies for an attorney (or a person related to the attorney) who is to be compensated for serving as trustee of a trust when the attorney either prepares the Trust or supervises its execution. [HB 505.]
• Corrections to Deed Legal Descriptions:  This statute will allow for the filing of a curative notice filed in the public records as a method to correct a single error in the legal description of real property in a deed, and to give legal effect to such notice. This will allow for much  easier corrective filings to ‘fix’ mistakes in deed legal descriptions. However, this statute will only be available if there is a single error, and it only applies to errors in the legal description of the real property, and not to any other errors appearing in the deed. [HB 886.]
• Financial Account Disclosures: Financial institutions will be able to make disclosures of a decedent’s account to certain identified ‘interested persons.’ This statute will facilitate information sharing to those defined ‘interested persons’ without the involvement of the estate’s personal representative. [HB 1439.]
• Decedent’s Low Account Balance: A financial institution will be authorized to pay the balance of a decedent’s account to family members without a probate court order when the combined funds in such accounts are $1,000 or less. This statute obviates the need to open a probate for the sole purpose of disposing of the balance of the decedent’s account. [HB 1439.]
• Grantor Trust Limitations: A trustee of a grantor trust for income tax purposes is given the discretion to make payments to the taxable grantor of the federal income tax liability attributable to the grantor’s taxability on trust income and gains (unless the trust instrument expressly provides otherwise.) The grantor trust’s assets are not included in the grantor’s taxable estate, even though the grantor is taxed on the trust’s income. This statute would prohibit that reimbursement of the grantor’s income tax liability from the use of a cash surrender value of a trust-owned life insurance policy, or the proceeds of any loan secured by such a policy, if the taxable grantor is the insured. This statute is intended to shield the trust’s assets from the IRS’ estate tax inclusion claims that the grantor-insured retained an indirect incident of ownership in the trust-owned life insurance policy. [HB 1089.]

Conclusion: It is always interesting what other states are doing to update their laws. If for no other reasons, we can learn what problems or issues arise in other states that we need to be aware of.