South Florida Estate Planning Law : Florida Estate Planning Lawyer & Attorney : David Shulman Law Firm : South FL Wills & Trusts

I came across an article written by Christopher Yugo in the Times of Indiana.  According to the article, Mr. Yugo is a member of the Indiana Bar and a vice president and senior trust officer for First National Bank's Trust Department.  The following question and answer (reposted here in part, see the original for the whole) appeared in last week's column.

Q: My wife and I own a timeshare. Should it be titled in our trust? If so, how do we go about doing that?

A: Timeshares are fairly common assets that people own. I see them coming up in estate plans fairly frequently.

In my opinion, it should be titled in the name of your trust. Let me preface this by saying my knowledge of timeshares is somewhat limited. However, it's my understanding that most timeshares are deeded interests in real property. In other words, you own a small undivided interest in a building and/or land. If you bought a timeshare, you likely received a deed demonstrating your ownership interest.

Since you have an interest in land hopefully in another warmer state, your family could face the prospects of the dreaded ancillary estate. An ancillary estate is a probate estate that is opened in a jurisdiction other than Indiana to administer out-of-state property. If your timeshare is in sunny Florida, an estate may need to be opened there to transfer ownership.

Fortunately, timeshares tend to have a limited value so any ancillary estate proceedings may take the form of an informal process such as using a small-estate affidavit. Unfortunately, I can't tell you that for sure. Every state has its own rules.

One way around the ancillary-estate issue is to transfer ownership of the interest to your revocable living trust. As we all know, one of the benefits of using a trust is avoiding probate.

Mr. Yugo is absolutely right.  As a trusts and estates attorney that practices in Florida, the state that probably has more timeshares than anywhere else, I have seen this hundreds of times.  As he points out, a timeshare is generally an interest in real property -- just like a house, an apartment, or a parcel of land.  While personal property may be probated in the state where the decedent is domiciled, real property must be probated where it is located.

I have handled dozens, if not hundreds of ancillary estates for families with a loved one who lived out of state, but owned a timeshare in Florida.  Depending on the circumstances, these cases can cost the family between $1200 and $1800, plus court costs.  Under Florida law, they may not be handled by an out of state attorney.  Only a Florida attorney can practice in front of Florida courts. 

Usually these could be handled by what's known as Summary Administration, which in Florida is for estates worth less than $75,000, as timeshares generally are.  While I certainly don't mind the business, I do feel bad that these families have to go through with this, when need for the ancillary probate could have been avoided with proper planning.  If the Decedent had transferred the timeshare to his or her revocable trust before death, probate in Florida would not have been necessary.

Another big mistake that I've seen on more than one occasion is a husband and wife who purchase their timeshare together, but for some reason the deed specifically states that the property is held by them as tenants in common, and not as joint tenants with right of survivorship or as tenants by the entirety).  Generally, unless they are purposely splitting assets for their own reasons (for example it is a second marriage and they want their share to go to their separate children), property is held jointly by spouses, so that when the first spouse dies, the second automatically inherits the property by operation of law, without any probate necessary.  In each and every situation that I've come across in which a timeshare is owned by spouses as tenants in common and not jointly, the surviving spouse told me that that was not their intent, and that they had no idea it wasn't titled properly.

So, if you own a timeshare, a condo, or any other real property in a state other than the state that you live in, you should talk to your estate planning attorney to see whether or not it would be wise to transfer your timeshare to your revocable living trust.  In addition, check to make sure that the deed is titled properly with you and your spouse.

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Yesterday the New York Times published an article about how gay and lesbian couples are engaging in "adult adoption," in effect adopting each other, in order to secure inheritance rights to family trusts.

In "Adult Adoption a High Stakes Means to an Inheritance" writer Deborah L. Jacobs writes that while it is not necessary to use this strategy to transfer your own assets, which can be left to anyone you choose, it can be useful for certain trust beneficiaries.

For example, often when I draft a Trust, the Settlor will provide that upon his death, the property will go in Trust to his child, X, for life.  X is entitled to all of the income from the trust, plus principal for X's health, support, education, and maintenance.  Upon X's death, the trust monies will go to X's children, either in further trust, or outright.  Sometimes, depending on the wishes of the Settlor and what type of tax planning we are trying to accomplish, X will have a power to appoint the property upon X's death to someone else.  Sometimes the power will be limited to X's children or the Settlor's descendants, and sometimes the power will be more broad.

If cases in which the property will automatically go to X's children, or when X is limited in his power to appoint the property, an adult adoption may allow X to direct the property to X's partner.  Of course, as the article points out, this strategy is fraught with danger.

An adult adoption clearly is an attempt to frustrate the intention of the Settlor, who wished for the property to go to further generations.  If X has a sibling, Y, who is married, Y can not leave the property to Y's spouse, which is in effect what X is trying to do. 

As the article points out, "The lessons here? Family opposition to an adult adoption should never be underestimated. And family members should be informed about your intentions; don’t surprise them."

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There is an article today on CNN's site, taken from its Time-Warner Sister Money Magazine entitled "Rethinking your estate plan."  In it, the author interviews a couple whose assets have recently fallen 15% in value (which actually isn't bad compared to most people).  The couple, Les and Anna Glowacz executed estate planning documents five years ago, but due to the decrease in the value of their assets and the increase in the lifetime exemption to $3.5 million, they are unsure whether or not their plan still makes sense.

I am not going to reprint the entire article here.  However, I made some comments in the parentheticals below re: their questions.

1. Give gifts now or later (I think that now is probably the best time in history to give gifts as their values are low, interest rates are low, and there is uncertainty over what will happen with the estate tax)
2. Does your state have a state death tax?  (Florida currently does NOT).
3. Should you split your property among your children "equally" or "fairly?"  (Generally, "equal" is "fair" but not necessarily in all circumstances).
4. Simple or complicated? (This depends on the circumstances.  Simple situations, such as a couple in their first marriage with adult children and significantly less than $3.5 million might have two simple wills.  However, the more complicated the larger the estate and the more complicated the family dynamics, the more complicated the documents).
5. Do you want to give to charity? (With regards to charitable donations, there are a number of decisions to make, as to whether to give now or at your death, what assets to give, and whether to make a "split interest" gift, such as through a charitable remainder trust).

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Just a little light humor for a Sunday afternoon.

A guy walks into a bar. He recently found out that his elderly father will be passing away in a few years and leaving him a very large inheritance. Using this new information as leverage in the dating market, he decides it’s time to find someone to settle down with.

So guy looks around the room and locks eyes with this stunning young woman. He figures she’s probably out of his league, but walks up to her with his new boost of confidence and says, “I may not look like much now, but in a few years my father will pass away and I will have millions. Would you be interested in going to dinner sometime?” She’s interested, and gets his name and number. A week later, she became his step-mom.

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 George E. Meng, an estate planning attorney in Maryland for over 35 years, has written an article in The American Chronicle entitled "Realistic Estate Planning."  In it he discusses some of the following issues:

1. Will or Trust?  Mr. Meng points out that the primary reason for using a trust is probate avoidance, something I've written about before.  He explains that a trust needs to be funded and takes commitment to be run properly -- otherwise there will be more probate work after the settlor's death.
2. Should there be bond?  While most trusts and wills waive bond, the article explains that that is not always in a client's best interest, and estate planning attorneys should explain the pros and cons of requiring a bond or waving bond.
3. Using co-PRs or co-Trustees -- Mr. Meng does not think that it is a good idea as it may cause more issues than it solves.

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One of the bedrock rules for estate planning attorneys is that our clients must have sufficient mental capacity to execute their documents.  This does not mean that a client has to have perfect understanding of every passage of legal boilerplate.  Basically, a client needs to be able to understand the nature of their property and the "natural objects of their bounty" -- i.e. who their family members are.

I have had situations in which I have interviewed potential new clients (generally senior citizens who were brought to me by their children), and have refused to represent them because I did not believe that the potential client had capacity to execute documents.

What made me think about this is that I read an article about a case in California, in which an attorney was sued for malpractice by a decedent's new wife because the attorney refused to amend the Decedent's trust before the Decedent received a psychiatric evaluation.  According to an article in the Metropolitan News-Enterprise, the attorney did not owe duty to a potential beneficiary for a document not drafted.

Although it does not directly impact me because I am not in California, it is interesting nonetheless, as it is a constant reminder of the many interests that estate planning attorneys have to balance in working for our clients.

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I've written numerous posts about how the estate tax remains in flux.  Right now the exemption, that is the amount a person can own when they die before being subject to the federal estate tax is $3,500,000.  Next year (2010) that amount becomes unlimited, and the year after that it goes down to $1,000,000.  No one (or very few people) actually think that this will happen == at some point, Congress will change the law to "fix" things.

But as Teresa Norton and Kristen Ingersoll, two estate planning attorneys in California wrote in the North Bay Business Journal, even if the exemption is set at $3,500,000 permanently, that does not mean that less wealthy people should put off, or forgo their planning.  They write:

Assuming the estate tax is ultimately “fixed” by year end and the exclusion remains at least $3.5 million per person, many clients question whether they still need to undertake the sometimes arduous and often emotional task of estate planning. The answer is, of course, absolutely.  First and foremost, estate planning is critical to ensure that your estate is distributed to the heirs and beneficiaries that you desire. . .  Secondly, every solid estate plan should include powers of attorney to ensure that fiduciaries are nominated to handle financial affairs and make health care decisions for you in the event of incapacity. In addition, with the escalation of litigation in the area of decedent’s estates, attentive and deliberative planning is essential to minimize the risks of litigation among family members. Moreover, uncertainty often strikes when we least expect it. Thus, until the state of the estate tax is clarified in the coming months, and even more so thereafter, estate planning remains vital and essential.

 Definitely good advice.

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This past weekend was the annual conference of the American Bar Association Section on Taxation. At one of the sessions focused on the estate and gift tax, aides to Senate Finance Committee Member Charles Schumer (D-NY) and John Kyl (R-AZ) appeared jointly. According to Sen. Schumer's aide, there will much more likely be a "patch" then any long term reform this year.

My guess continues to be that they will just take the 2009 exemption and rates and extend it outwards -- without portability, without changing the rules regarding GRATs, and without changing valuation rules with family limited partnerships.

But we'll see.

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