Estate Planning is a process involving the counsel of a lawyer who is familiar with your goals and concerns, your assets and how they are owned, and your family structure. It can involve the services of other professionals, such as your accountant, financial planner, life insurance advisor, or broker.
Estate Planning covers the transfer of property at death as well as a variety of other personal matters and may or may not involve tax planning. The core document most often associated with this process is the will.
If you die intestate (without a will), your state's laws of descent and distribution will determine who receives your property by default. These laws vary from state to state, but typically distribution would be to the spouse and children, or if none, to other family members. The state's plan reflects the legislature's guess as to how most people would dispose of their estate and builds in protections for beneficiaries, particularly minor children. That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting. A will allows you to alter the state's default plan to suit your personal preferences.
It might be possible to work out a plan whereby all of your property will be distributed after your death without the necessity of a will. This is not to say, however, that this is desirable. Other forms of property disposition should supplement rather than replace a carefully drawn will.
By will you may provide for the disposition of all property owned by you in your name alone at the time of your death in any manner you choose (subject to the forced heirship laws of some states that prevent disinheriting a spouse and, in some cases, children). Your will cannot, however, govern the disposition of properties that pass outside your probate estate (such as joint property, life insurance, employee death benefits, etc.) unless they are payable to your estate.
Like trusts, wills can be of various degrees of complexity and can be utilized to achieve the wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will establishes one or more trusts it is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust, in which case it is called a pour over will. In either case, the purpose of the trust arrangement (as opposed to outright distribution) is to ensure continued property management and creditor protection for the surviving family members, to provide for charities, and sometimes to minimize taxes.
Wills are signed in the presence of witnesses and certain formalities must be observed. A later amendment to a will is called a codicil and must be signed with the same formalities. In some states, the will may refer to a memorandum disposing of tangible personal property, such as furniture, jewelry, automobiles, etc., which may be changed from time to time without the formalities of a will. In many states, a will that is formally executed with the signatures notarized is deemed to be self proved and may be admitted to probate without testimony of witnesses or other additional proof.
The Term trust describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or bank) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. A person may be both a trustee and a beneficiary of the same trust. A trust created by your will is called a testamentary trust and the trust provisions are contained in your will.
If you create a trust during your lifetime, you are described as the trust's grantor or settlor, the trust is called a living or inter vivos trust, and the trust provisions are contained in the trust agreement or declaration. The provisions of that trust document (rather than your will or state law defaults) will usually determine what happens to the property in the trust upon your death.
The living trust may be revocable (subject to change and terminated by the settlor) or irrevocable. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust.
Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during their life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by them to indicate sufficient maturity to handle property.
This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specific age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.
Many states now provide for the delegation of health care decisions under a document covering a broad range of health care issues. However, it is extremely important to get advice specific to your state, as the laws differ greatly from state to state.
Living wills are allowed in many states and usually provide for the avoidance or elimination of extraordinary measures if you are in a terminal condition. Individuals who wish to donate organs or tissues for transplant should coordinate living wills carefully to fit their wishes.
While you are planning for disposition of your property at death, you may want to consider a number of other personal objectives that can be accomplished through related documents.
You may designate a friend or relative to act on your behalf under a power-of-attorney, which can be specific and limited to a certain task or transaction or may be broad and general and allow the power holder to do almost anything. All states provide that a properly drafted power-of-attorney will be effective even after the disability or incapacity of the person who gave the power, and indeed that has become a primary reason to create powers-of-attorney. The power-of-attorney can also prevent problems that arise when the name of the other person is added as a joint tenant (or other form of co-owner) to a bank account or other asset as a matter of convenience.
At death, your will goes through probate. Narrowly defined, probate (i.e., probate of the will or admitting the will to probate) simply means the process by which your last will is determined to be your final dispositive statement and which confirms the appointment of the person or institution you have named to administer your estate. The term probate is also used in the larger sense of probating your estate. In this sense, probate means the process by which assets are gathered, applied to pay debts, taxes and expenses of administration, and distributed to those designated as beneficiaries in the will. The executor or personal representative named in the will is in charge of this process, and probate provides an orderly method for administration of the estate. The executor is held accountable by the beneficiaries (and sometimes is supervised formally by a probate court). The executor is entitled to a reasonable fee or commission. Probate law generally encourages or provides for partial distribution during the period of administration; assets may generally be distributed in kind rather than sold during this time. The tax laws generally focus the responsibility for death tax filings and payments on the executor under a will. Thus, the choice of an executor is an important one.
While assets held within a Revocable Living Trust avoid probate, the Trust does need to be administered before assets are distributed to beneficiaries according to the Trusts terms. Some administration is required by Florida statutes and some by federal tax law. While the Trustee may accomplish this administration without attorney assistance, it is more typical that the Trustee will employ an attorney to assist in the administration. When we represent the Trustee, we handle the statutory requirements, offer guidance to the Trustee throughout the process and respond to the Trustees requests for assistance. This typically results in a lower legal fee than if the assets had passed through probate.
We prepare and file income tax returns for individuals, businesses and trusts. Additionally, we prepare and file federal and state Estate, Gift and Generation Skipping Transfer Tax returns for individual clients. Our knowledge of tax issues is essential in structuring your Estate Plan in order to minimize these taxes, and provides a benefit to our clients not available to clients of attorneys who lack this level of tax knowledge.Registered Tax Return Preparer
The IRS now has more stringent standards for tax preparers. In order to sign and file tax returns on behalf of others, tax preparers must meet certain qualifications and register with the IRS. With this process, the IRS is working to eliminate unqualified preparers who often prepare tax returns for a fee, but do not sign the returns they prepare to avoid the IRS requirements. If someone offers to prepare your tax return but refuses to sign it, do not hire that person. Hire a qualified professional.
The IRS return preparer initiative requires anyone who is paid to prepare all or substantially all of any federal tax return or claim for refund to register with the IRS and obtain a PTIN. Certain preparers (those who are not an Attorney or a CPA) also must pass a competency examination, undergo a suitability check and complete continuing education courses annually. The IRS will designate individuals who meet these requirements as a “Registered Tax Return Preparer.”
Individuals designated as a Registered Tax Return Preparer will be authorized to prepare federal tax returns and claims for refunds and to represent their clients during an IRS examination of a tax return or claim for refund that the individual signed as the paid tax return preparer. As both an Attorney and a CPA, I am qualified to be a Registered Tax Return Preparer, and have registered as such with the IRS.
We assist clients in preparing and negotiating real estate contracts and leases in residential and commercial transactions. With or without a realtor’s involvement, an attorney’s knowledge and perspective can be valuable to the success of your transaction. As a member agent of Attorney’s Title Insurance Fund (“The Fund”), we also have access to a source of real estate law unavailable to non-agents.
The material presented on the Cahill Law Firm, P.A. website is intended for informational purposes only. The material is not intended to constitute legal advice and viewing this information does not constitute the provision of legal services. Use of the material herein is not intended to create, and receipt does not constitute, an agreement to create an attorney-client relationship with Cahill Law Firm, P.A. or any member thereof.
Michael L. Cahill is an attorney and certified public accountant licensed to practice in Florida, providing estate planning, probate and tax services in the St. Petersburg, Seminole, Largo, Clearwater and Florida gulf beach communities.
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Seminole Florida estate planning attorney and certified public accountant for wills, trusts, living wills, powers of attorney, probate, trust administration, income tax, estate tax, gift tax and real estate contracts. 33708