Florida Estate Planning: Reviewing Wills and Trusts for Compliance with Florida Law

While Florida generally recognizes wills created in another state that were valid at the time they were created, it is often a good idea to have your will reviewed by a Florida Estate Planning Attorney when you move to Florida.

One problem we often run into is guardians for minor children who reside in Florida must be a close relative or a resident of the state of Florida. Often people designate non-relatives that do not reside in Florida and these are not effective. While it is possible to create a trust or other legal instrument to allow a non-resident to manage the property of a minor, this should not be done in a will as it may be ineffective.

There are many other issues that arise with a move across state lines. Some states are "community property" states; Florida is not. It is best to have your documents reviewed to make sure that your desires are carried out. There are some wills like holographic wills (a will that is handwritten by the testator) that may be valid in states like California that Florida will not recognize unless they comply with the Florida Statute of Wills.

Contact a Florida Estate Planning Lawyer for more information and a review of your documents.

Florida Irrevocable Trust: Medicaid Asset Protection

One very useful Medicaid planning technique involves the creation of an irrevocable Medicaid Asset Protection Trust (a Florida Irrevocable Trust). With a Medicaid Asset Protection Trust a person or couple can transfer some of their property to the trust to hold and manage for their benefit during their live with the remainder paid to their family after their death. (As always, such a trust should only be done for you by a competent Florida Estate Planning attorney or Florida Elder Law attorney.)

Problem: John and Jane have assets in their savings and stock accounts of $250,000. They currently live off income from their investments, social security, and other retirement benefits. They are concerned that if they need nursing home care they will not have enough money to support their lifestyle and pay for the medical expenses for the remainder of their life.

Solution: John and Jane decide to transfer $150,000 to a Medicaid Asset Protection Trust. The trust provides that all income is paid to them while alive and in the even one need nursing home coverage under Medicaid the income is paid to the other. Upon the death of the surviving spouse, the trust will terminate and distribute the remainder to their children. By using this type of irrevocable trust their assets are protected and they receive an income stream for their lives.

Potential Issues: The gift to the Medicaid Asset Protection Trust can cause the a period of ineligibility for Medicaid benefits. The length of the ineligibility period depends upon the value of the assets given away as well as how long before the care is needed they are disbursed. After the ineligibility period, the assets in the Medicaid Asset Protection Trust should be protected and not counted as a disqualifying asset for Medicaid planning purposes. In addition, this removes the assets from the reach of the spouses.

A Medicaid Asset Protection Trust is not for everyone, but it can be a means of protecting a family's financial security. These trusts can be complicated and must be tailored to the families resources and needs. It is important that you use a Florida Estate Planning or Elder law attorney who is familiar with the Florida Medicaid laws and who has experience in creating this type of trust.

Please note: The Irrevocable Medicaid Asset Protection Trust is not the same as a "revocable trust", "revocable living trust" or "living trust" that is currently being sold through various outlets.

The Trustee's and Beneficiary's Guide to Florida Trust Accountings

Under Florida's new trust laws, generally, the Trustee of an irrevocable trust is required to keep beneficiaries of the trust reasonably informed about the trust and its administration. This article provides a simplified guide to Trustees and trust beneficiaries regarding the new trust law related to this duty to inform and account.

BENEFICIARIES DEFINED. This duty to inform and account under the new law is owed to a "qualified beneficiary" of an irrevocable trust. A "qualified beneficiary" is defined as any living beneficiary who currently receives trust income or principal or would receive trust income or principal if the current beneficiary's interest terminated.

REQUIREMENTS. To meet a Trustee's responsibilities to inform and account, the Trustee is required to do the following:

Within 60 days after acceptance their position as Trustee of the trust, the Trustee shall give notice to the qualified beneficiaries of the acceptance of the trust and the full name and address of the trustee.


Within 60 days after the date the Trustee becomes aware there is an irrevocable trust, whether by the death of the Grantor (person(s) who established the trust) or otherwise, the Trustee shall give notice to the qualified beneficiaries of the trust's existence, the identity of the Grantor(s), the right to request a copy of the trust instrument, and the right to accountings.


Upon reasonable request, the Trustee shall provide a qualified beneficiary with a complete copy of the trust instrument, including amendments.


A Trustee of an irrevocable trust shall provide a trust accounting, to each qualified beneficiary annually and on termination of the trust or on change of the Trustee.


Upon reasonable request, the Trustee shall provide a qualified beneficiary with relevant information about the assets and liabilities of the trust and the particulars relating to administration.

REPRESENTATION. The new Florida trust law permits a person to act as a representative for another person (i.e., the beneficiary). Therefore, any notice, information, accountings, and reports sent to a representative have the same effect as those sent to the person being represented, and actions taken by a representative bind the beneficiary. There are several different categories of representation, including:

Fiduciaries: This includes a guardian of the property, an attorney-in-fact, a Trustee or personal representative. Additionally, a parent may represent an unborn or minor child if no guardian of the property has been appointed.


Virtual: If not otherwise represented, a minor, incapacitated, unborn, unascertainable, or un- locatable person may be represented by another person having a substantially identical interest.


Court-appointed: The court may appoint a representative for a person the court determines is not otherwise adequately represented.

In each of the above situations, representation is precluded in matters as to which the representative has a conflict of interest with the person being represented. This restriction, however, does not apply to either of the following two remaining categories of representation:

Powers of appointment: a holder of either a general or a special power of appointment may represent and bind objects and takers in default of the power. However, generally, a beneficiary with a power cannot represent others while the beneficiary is serving as sole Trustee.

Grantor-designated: a Grantor may appoint or designate a person to represent and bind a trust beneficiary or to receive notices, information, reports, and accounts on the beneficiary's behalf with a few exceptions such as a designated representative who is also a Trustee may not represent or bind a trust beneficiary while serving in that capacity.

TRUST ACCOUNTING.
A trust accounting must be a reasonably understandable report from the date of the last accounting or, if none, from the date on which the Trustee became accountable, that adequately discloses the following information:

The accounting must begin with a statement identifying the trust, the Trustee, and the time period covered by the accounting.


The accounting must show all cash and property transactions and all significant transactions affecting administration during the accounting period, including compensation paid to the Trustee and the Trustee's agents. Gains and losses realized during the accounting period and all receipts and disbursements must be shown.


The accounting must identify and value trust assets on hand at the close of the accounting period.


The accounting must show significant transactions that do not affect the amount for which the Trustee is accountable, including name changes in investment holdings, adjustments to carrying value, a change of custodial institutions, and stock splits.


The accounting must reflect the allocation of receipts, disbursements, accruals, or allowances between income and principal when the allocation affects the interest of any beneficiary of the trust.


The Trustee shall include in the final accounting a plan of distribution for any undistributed assets shown on the final accounting.


WAIVERS AND USE OF INVESTMENT STATEMENTS.
Certain Trustees, at the request of the trust beneficiaries, might not want to incur the costs associated with preparing annual statutory trust accountings. Under the new Florida trust law, a qualified beneficiary may waive the Trustee's duty to account. The waiver can be effective until the beneficiary withdraws the waiver previously given. Withdrawals of prior waivers are effective only with respect to accountings for future periods. Waivers and withdrawals of prior waivers must be in writing. Importantly, the Grantor of an irrevocable trust cannot waive the Trustee's obligation to provide an annual accounting to the beneficiaries. This power to waive is held strictly by the beneficiaries.

Another option to reduce the trust accountings costs of trust administration is to utilize the monthly, quarterly, or annual statements issued by the trust advisor reporting all trust activities as the trust accounting. Assuming the accounting is relatively simple, the situation might be appropriate for using the investment statements as the annual accounting. The Trustee could determine whether to prepare an additional summary or exhibit to comply with Florida law, depending on the circumstances. Alternatively, all of the beneficiaries could consent to accepting the investment statements in lieu of a formal accounting.

Whether you are a Trustee or a beneficiary, you must be aware of these guidelines and should consult with your trust administration attorney if you have any questions regarding how the new Florida trust law impacts you in relation to the trust.

Trustee's Duty to Disclose

Gerry Beyer has an article on a Trustee's Duty to Disclose and the rise in Surcharge Litigation. Dana G. Fitzsimons Jr. recently published an article - Navigating the Trustee's Duty to Disclose, Prob. & Prop., Jan/Feb 2009, at 40.

If you are managing wealth for your children, this should be a concern for you. As a Florida Trustee, it is important to avoid potential liability to your children. Always consult with a Florida Trust Attorney to adequately plan your trusts.