Four Important Changes That Could Affect Your Estate Plan
1. The New Elective Share. A surviving spouse of a person who dies domiciled in Florida has the right to 30% of the decedent spouse’s elective estate.
The elective estate includes: the decedent’s probate estate, revocable trust estate, ownership interest in accounts or securities registered in “Pay On Death (POD)” “Transfer On Death (TOD),” “In Trust For (ITF),” joint accounts with right of survivorship, and more. The old elective share law only applied to the decedent’s probate estate.
Typically in second marriages, spouses want to pass their assets to the children of the first marriage. Prior to the “New Elective Share” if a spouse was successful in avoiding a probate administration at his or her death, the spouse was also successful in protecting his or her estate from the elective share. Holding assets in a Revocable Trusts, joint accounts with children, POD, TOD and/or ITF accounts, IRAs, life insurance would avoid probate and would ensure assets passing to children of the first marriage rather than to a surviving spouse.
Now a surviving spouse can elect an elective share right against probate assets and probate avoiding assets (Revocable Trusts, joint accounts with children, POD, TOD and/or ITF accounts, IRAs, life insurance, etc.)
What to do? If spouses of a second marriage agree to pass their respective assets to the children of the first marriage, they can enter into a postnuptial agreement giving up their elective share right. If spouses want to provide for a surviving spouse but at the death of the surviving spouse direct the remaining assets pass to the children of the first marriage, a special kind of marital trust (elective share trust) can be created that will satisfy the surviving spouse’s elective share right. If you are not yet remarried but plan to marry in the future, and both parties agree to preserve their assets for the children of the first marriage, consider a prenuptial agreement to bypass spouses’ elective share rights.
2. Increases in the Estate Tax Exemption. From 1987 through 1997 the gift and estate tax exemption was $600,000. This exemption was the amount you could pass gift and estate tax free to whomever you wished during life or at your death. Often in a taxable estate an attorney would prepare in your Will or in most cases in your Revocable Trust two trusts that would come into existence at your death, a Family Trust and a Marital Trust. The Family Trust would hold the exemption amount ($600,000) and the Marital Trust would hold the remainder of your estate. If your estate in 1997 was $1,000,000, $600,000 would fund the Family Trust, $400,000 would fund the Marital Trust. The Family Trust often granted the surviving spouse limited access to the Family Trust funds because the growth in this trust would eventually pass gift and estate tax free to the children. The Marital Trust would provide the necessary support for the surviving spouse.
Since 1998, the gift and estate exemption has increased. Now, in 2003 the exemption amount is $1,000,000. Therefore, in 2003, if you were to pass away and your estate is $1,000,000, then $1,000,000 would fund the Family Trust, $0 would fund the Marital Trust.
What to do? If it is your intention to provide for a surviving spouse, it is imperative that you review your assets and your Family Trust to make sure it provides for your surviving spouse and not thrust the spouse into poverty, which can happen.
Here is the current schedule of the exemption amount increases:
Year of Death “Exemption” Amount
2002 and 2003 ………………………………….….$1 million
2004 and 2005 …………………………..….……$1.5 million
2006-2008 ………………………………………….$2 million
2009 ………………………………………………$3.5 million
2010 ………………..………………..N/A (estate tax repealed)
2011 …………………….………………………….$1 million
3. The New “Springing” Durable Powers of Attorney. A springing durable power of attorney (DPOA) is a DPOA that becomes effective upon the principal’s lack of capacity to manage property.
A durable power of attorney (DPOA) is a written power of attorney by which a principal (you) designates another as your agent (called attorney in fact) to manage your financial, legal and to some degree your medical affairs. Prior to January 1, 2002, there was only one kind of DPOA recognized in Florida. This DPOA granted your agent immediate power to manage your affairs whether or not you were incapacitated. Many people did not create a DPOA because they were unwilling to give someone that much power over their affairs while they were competent. Now the law authorizes a springing DPOA that is conditioned upon the principal’s (your) lack of capacity to manage property. Manage property is defined as the ability to take those actions necessary to obtain, administer, and dispose of real and personal property, intangible property, business property, benefits and income. An affidavit executed by the attorney in fact (your named Agent under your springing DPOA) and an affidavit executed by a physician to practice medicine stating the principal lacks the capacity to manage property must be provided to a third party before the DPOA can be used.
Durable Powers of Attorney, Living Wills and Health Care Powers of Attorney (Health Care Surrogate) are two inexpensive documents that can be used to avoid an expensive court supervised guardianship.
4. Opening safe-deposit box.
Effective January 1, 2002, the initial opening of the decedent’s safe-deposit box must now be conducted in the presence of any two of the following persons: bank employee where the box is located, the Personal Representative (PR) or the PR’s attorney of record. Each person present must verify the contents of the box by signing a copy of the inventory under penalties of perjury. The PR must file the safe-deposit box inventory, together with a copy of the box entry record from a date that is 6 months prior to the date of death to the date on inventory.
Please contact our office if you or a family member need legal assistance with Probate & Trust Administration, Estate Planning, Wills, Trusts, Medicaid Planning, Asset Preservation, Gift & Estate Tax Planning, Elder Law, Guardianships, Real Estate Law, or Business & Corporate Law, and would like to set up an appointment to have your situation evaluated.
The Law Offices of Barbara Buxton, P.A. is a South Florida law firm that focuses on estate planning, trusts & estates, wills, probate, asset preservation, Medicaid planning & eligibility, elder law, business and corporate law, real estate and transactional law, and litigation related to these areas. With a Master of Laws in Estate Planning Degree (LL.M.) and over fifteen years practicing law, Ms. Buxton is an experienced estate planning attorney, trust attorney, probate attorney, asset preservation attorney, Medicaid attorney, elder law attorney, corporate attorney, and real estate attorney.
