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

Estate planning attorneys love to beat you over the head with the fact that you need a will. It's one of our favorite pastimes, after late night readings of the latest generation skipping transfer tax regulations.

But what happens if you die without a will? That is what's known as intestacy. If you die intestate, then the law governs how your property is distributed. This law is based upon your marital status and whether you have any descendants.

The law is also significantly changing on October 1, 2011. Under the new law, if the Decedent's descendants are all also descendants of the Decedent's surviving spouse, and the surviving spouse does not have any descendants who are not descendants of the decedent, then the surviving spouse receives the entire estate.

Perfectly clear, right?

Yeah, I know. Not so much.

In the past, I've written about Kelley's Homestead Paradigm, which takes Florida's notoriously complicated laws regarding the disposition of your home upon your death, and makes it understandable through an easy to follow chart. Inspired by Rohan Kelley's work, I decided to make a flow-chart showing how Florida's new intestacy law works.

It's not as fancy as Kelley's Paradigm. I always received bad grades in arts in crafts. But I think it does its job.

PDF Link here.

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This past Friday I was interviewed on the Rocketlawyer podcast, in which I discussed estate planning, asset protection, probate, real estate, and the rules regarding Florida Homestead.

The link to a summary of the episode is here.

If you want to download the MP3 directly, click here or pick it up through iTunes here.

The whole podcast is interesting to listen to, but I come on at about the 9:00 mark.

Let me know what you think.

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It is a well-worn cliche among Florida estate planning lawyers that the concept of "Homestead" is a "legal chameleon," in which there are three different meanings for the term. The first is the tax exemption that homeowners are entitled to. The second is the "devise and descent" rules – in which there is a prohibition on how a home may pass at death if the owner is survived by a spouse or a minor child.

The third way in which the term "homestead" is used is the protection of your homestead from creditors. I've written about this before. Once again, I'd like to re-quote the relevant portion of the Florida Constitution.

Article X, Section 4, of the Florida Constitution provides:

a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:

(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner's consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner's family; (b) These exemptions shall inure to the surviving spouse or heirs of the owner.

To simplify, if you owe someone money not related to your home, they can't take your home. It's a bit more complicated than that, but that's the basic rule.

Of course, there are always wrinkles.

In the recent Third District opinion filed in Beltran and Beltran v. Kalb (see link for full text),the facts are as follows

Evaristo and Carmen were married, jointly owned a home, and had a daughter, Grisel. In 1990, Evaristo and Carmen got divorced. As part of the divorce agreement Carmen retained "sole and exclusive" occupancy of the home, and Evaristo was supposed to deed his interest in the home to Carmen.

Evarsito never executed the deed, so, technically, retained a tenancy-in-common interest in the home, where Carmen and Grisel continued to live. During the time, Evaristo racked up some debts, and had a recorded judgement against him.

Carmen died in 2007. At the time of Carmen's death, she was unmarried, and Grisel was an adult. This is not a case about devise and descent, but as I said earlier, protection from forced sale of the homestead to satisfy creditors.

Here is what happened next:

1. February 2007 - Carmen passed away.
2. March 2007 - A sheriff's levy was recorded on the home for Evaristo's debt
3. April 2007 - Evaristo quit-claimed his interest in the property to Grisel.
4. May 2007, a third party purchased Evaristo's interest in the home at a sheriff's sale.

Evaristo and Grisel filed a motion to set aside the sale, which the lower court denied, because it found that Grisel had "failed to carry her burden of proof by offering testimony to demonstrate the decedent (Carmen Beltran) was the head of household for homestead purposes."

In effect, the lower court said that in order for the homestead to be protected from Evaristo's creditors, then Grisel had to prove that Carmen was a "head of household."

There's only one problem with this. That's not the law. It used to be (sort of), but not since 1984.

For some reason, the trial court was concerned with determining who supported Carmen while  she lived in the home, and whether Carmen and Grisel lived there together, as a “family unit.” As the 3rd DCA instructs, prior to 1985, the homestead protection from forced sale benefitted owners who were the "head of a family."

The current and correct standard was that Carmen lived in the home and made it her residence, even after Evaristo left, and therefore, it was her homestead.

If it was Carmen's homestead at the time of her death, then than status inures to Grisel, Carmen's daughter. I'm not so sure why it matters though, as the real issue is Evaristo's creditors.

The appellate court found that Evaristo's interest was also protected from creditors. As the Florida Constitution says, the protection from force sale (creditors) "shall be limited to the residence of the owner or the owner's family." Grisel, Evaristo's daughter continued to live in the property continuously, and was supported by her father financially. Even though he did not live there, the property maintained its status as protected Homestead because his family (his daughter) still did.

I'd like to point out that this case did not come from the probate division. The probate judges work with Homestead issues like this every day and are well versed in the intricacies. Even though Carmen died, this was not a probate case, in that it was a motion to set aside the sale of property.

Do the probate judges occassionally get the issues wrong? Of course. A recent court case stated that "It has been said by those who labor in the area, that 'the leading cause of cerebral herniation among probate lawyers, real estate lawyers, circuit court judges sitting in probate, and appellate judges reviewing their work is the study of the legal chameleon also known as homestead." Cutler v. Cutler, 2007 WL 601866.

But would a probate judge have gotten this case wrong in this manner? I don't think so.

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I honestly never believed that it would happen.

I never thought that Congress would actually be this irresponsible.  After all, they've known that it was happening since 2001.  But here we are.  It is 2010 and there is no estate tax.  For now.

What does this mean?

First, remember that in 2009, the estate tax only applied to a person who died owning assets in excess of $3.5 million.  So for most people, it means absolutely nothing.  

However, along with the temporary repeal of the estate tax, there is also a temporary repeal of what's known as step up in basis.  Let me explain.  Generally, when you inherit assets from someone, your basis in the asset is the value at the time of death.  So that when you go to sell the 100 shares of IBM that you inherited from Grandma, you don't have to figure out how much she paid for it.  You only have to figure out what it was worth at the time of her death.

With the repeal of the estate tax, there is also a repeal of the step up in basis rules.  Instead there is "carry-over basis" and a decedent's estate will have $1.3 million of basis to spread around their various assets.  How will this be done?  I don't know.  But the effect is actually a tax increase on estates valued between $1.3 million and $3.5 million.

Then, one  year from now, the estate tax comes back to life with a $1 million exemption, and a 55% rate.  

Of course Congress could change all of this.  Most people agree that they can retroactively change the law to reinstate the estate tax.  I'm sure there will be lawsuits if they do though.  

What is going to happen?  I have no idea and anyone who says they do is lying.  I was so sure that they weren't going to let repeal happen, and I was wrong.  So we'll just have to wait and see.

But don't throw momma from the train just yet.

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One of the cool things about having a blog is looking at "the stats."  The stats are the internal analytics of the blog, where I can see how many people have visited, what articles they read, and if they came here from Google or another search engine, what terms they were searching for.  It's always nice to see that people are looking for certain topics, and I hope that my post answers their question.  Of course, I also hope that if they are in Fort Lauderdale, Broward County, or elsewhere in South Florida, that they'll consider hiring me as their attorney too.

Recently though, I have seen a lot of people coming to my blog with using the search term "Florida Estate Tax" or some variant thereof.  I can only assume that they want to know if you die in Florida, what is the estate tax, and how much they'll have to pay.

I'd like to put their mind at ease and say that for anyone dying after 2004, there is no estate tax in Florida.

(If that was your question, you don't have to read any further.  If you'd like a little bit of an explanation, read on).

There used to be a Florida estate tax.  The way it worked, is the Florida Estate Tax was known as a "pick up tax."  That is because the Federal Estate tax allowed a tax credit as opposed to a deduction for any state death taxes.  The Florida Estate Tax was equal to the maximum amount of the Federal Estate Tax's death credit.  Economically, this resulted in a decedent's estate paying no more in taxes -- just some of it went to the state of Florida instead of the federal government.

As part of the gradual estate tax repeal, the state death tax credit was turned to a deduction.  Because there is no more state death credit, there is no more Florida estate tax.  Could that change in the future?  Possibly.  We'll have to wait and see.  

Note:  This just means that there is no State of Florida estate tax.  The Federal Estate tax still applies.

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I recently discovered a new (to me) blog entitled the Pet Trust Law Blog, written by attorney Danny E. Meek. As you can tell from the title, Danny's blog is dedicated to the issues of estate planning for people with pets  -- especially those who want to ensure that their pets are taken care of after their death.

He recently wrote an entry on "in terrorem" clauses in wills:

I spoke with a dog owner yesterday about some estate planning for her Boxer named Molly.

Molly’s owner, Mandy, told me that her only relative is a brother that she has not spoken with for years, and she is sure that no matter how she provides for Molly in her will, that the brother will contest the matter in the courts and try to take the money set aside for Molly.

We discussed the option of establishing a trust for Molly, but Mandy was not interested in that avenue.

I then suggested that the will could include an "in terrorem" clause.

“My brother may be a bad person, but he is certainly no terrorist,” exclaimed Mandy.

I smiled and explained that an "in terrorem” clause provides that if a person unsuccessfully challenges a provision in a will, then the challenger cannot receive any property under any other provision of the will.

So, if a court finds that Mandy’s will is otherwise valid, the clause providing monies for the care of Molly will be upheld, despite the protests of her brother.

Mandy’s desire to take care of her dog will be fulfilled.
 

In Terrorem clauses can be used by a testator wishing to prevent a will contest after their death.  As Danny wrote, the clause serves as a disincentive for heirs to challenge the amount that they would otherwise receive.  However, these clauses are invalid in the state of Florida. Section 732.517 of the Florida Statutes provides that a provision in a will purporting to penalize any interested person for contesting the will or instituting other proceedings relating to the estate is unenforceable.

So if you are a Florida resident, there are still methods to dissuade your potential heirs from challenging your will, and, if you believe such methods are necessary you should speak about those with your estate planning attorney.  However an in terrorem clause is not one of them.

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 If you live in Florida and own your own home, you have probably heard of the term "Homestead."  Most people in Florida think of Homestead in terms of their real property taxes -- both in the exemption from taxes that they receive, and the amount by which their taxes can be raised each year.  In fact, there are three different uses of the term Homestead in Florida.  One is the familiar property tax exemption; one is the protection of your Homestead from creditors, and one is what is known among attorneys as "devise and descent," that is rules strictly governing the disposition of your Homestead property upon your death.

In this, the first of three blog posts introducing the three types of Homestead, I will discuss the rules concerning who you may, and who you may not, leave your Homestead to in the event of your death.

First though, what, in Florida, is a "Homestead?"  A recent court case stated that "It has been said by those who labor in the area, that 'the leading cause of cerebral herniation among probate lawyers, real estate lawyers, circuit court judges sitting in probate, and appellate judges reviewing their work is the study of the legal chameleon also known as homestead." Cutler v. Cutler, 2007 WL 601866.  In other words, there is no clear answer.

Article X, Section 4 of the Florida Constitution states, in relevant part:

SECTION 4.  Homestead; exemptions.--

1. There shall be exempt from forced sale. . . the following property owned by a natural person:

1. a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner's consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner's family. . . 

1. The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner's spouse if there be no minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.

Other than the fact that your Homestead can be up to 160 acres if it is located outside a municipality and up to one half an acre inside a municipality, there is no real Constitutional or Statutory definition of Homestead.  But if you are a full time Florida resident who owns and lives full time in their own house, condominium, and in some cases, mobile home, you have a Homestead.  (I’ll leave the discussion of part time Florida residents a/k/a Snowbirds and Houseboats for another day).

In simplified terms, Florida law involving the disposition of your Homestead upon your death is as follows:

1. If you are not married, and have no minor children, then you are free to devise your Homestead to whomever you want.
2. If you are married and have no minor children, meaning you only have children that have reached the age of majority, or you have no children at all, you may only devise your Homestead to your spouse (and it must be a devise of the entire Homestead.  A life estate is not permissible).
3. If you have minor children, whether or not you are married, your Homestead is not subject to devise.  That means you have no say in the matter as to what happens to it after your death.

(For a far more detailed explanation, see Florida Attorney Rohan Kelley’s chart, which is posted at Juan C. Antunez’s Florida Probate and Trust Litigation Blog). 

In each case above in which the Homestead was not properly devised, or not subject to devise, the law provides that the following happens:  Your surviving spouse (if you have one) receives a life estate in the Homestead, with the remainder going to your “lineal descendants in being,” both minor children and adult children.  Your spouse gets to live in the home for the rest of their lives, and has to pay most of the costs involved in maintaining the Homestead  (as set forth in the Florida Principal and Income Act).  Your “lineal descendants” have a vested remainder interest in the Homestead, meaning they inherit the home upon your spouse’s death. 

If this is not what you wanted, there is usually nothing that can be done after your death.  However, there are ways to plan around this while you are still alive, including a properly drafted pre (or post) nuptial agreement or owning the property with your jointly with your spouse.

Far too often people from other states move to Florida and are told by their prior attorneys that their wills are “still valid,” and thus, are never updated.  While it is generally true that a will drafted in New York is valid when you move to Florida, an out of state will likely does not properly deal with the unique issue of the disposition of Florida Homestead upon your death.

The key here is to emphasize that Florida Homeowners must engage in proper planning with an attorney licensed to practice in Florida who understands the intricacies of Florida Homestead.  Otherwise, they risk having the ownership of their most important asset, their home being decided by the law, and possibly causing untold discord amongst their loved ones after their death.

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