Florida Intestacy Law Changing On October 1, 2011 - Or, "Hey look, I drew a picture!"

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.

New Intestacy Chart.jpg

A "Holographic" Will is ALWAYS invalid in Florida, unless it is properly executed

One thing that makes our country both great and frustrating is that for certain types of law, there are often different, incompatible, conflicting laws that vary by state. On occasion, various committees are formed to draft "Uniform" Codes, but it is still up to the individual state legislatures as to whether or not they should be adopted, and what changes are to be made before they are.

One such area of law in which there are a wide variety of rules is the probate law.

I was reading an article on the Wealth Law Blog, the blog of Samuels, Yoelin, Kantor, Seymour & Spinrd LLP in Portland, Oregon. In an article titled, "Don't Write Off Holographic Wills," the author, Victoria Blachy writes that under certain circumstances, a handwritten will may still be valid, because of certain backdoor rules. She write "many states (let's label it "State A") recognize that a will executed in a foreign state ("State B"), pursuant to the laws of State B when executed, can also be valid in State A. For example, see ORS 112.255(1)(c) and RCW 11.12.020. This can come into play when you are dealing with states that recognize holographic (handwritten) wills, like California, and states that do not recognize such wills, such as Oregon and Washington."

I am not licensed to practice law in either California or Oregon, so I'll be talking about Florida law. But first, I think we need to define what exactly a "holographic" will is, as it sounds like something that Mr. Spock would enter into the Enterprise's log before being killed fixing the warp core. A holographic will is a will that is entirely in the Testator's handwriting and signed by the Testator. No typing, no writing.

In Florida, in order for a will to be valid, section 732.502 of the Florida statutes provides that in order for a will to be valid it has to be signed (or acknowledged) at the end by the testator in the presence of two witnesses who must be in the presence of the testator and the presence of each other when signing. If there are two witnesses, but each sign separately, and do not see both each other and the testator sign, then the will is invalid.

In her post, Ms. Blachy points out that often states have a rule that if a will executed by a resident of another state would have been valid in that state at the time it was executed, then it will be valid in the new state too. Florida has a similar rule. For example, let's Michael executes his will while he lives in a state that only requires one witness and not two. If Michael later moves to Florida, then that will will be valid in Florida also. Under the Florida Statute 732.502, "Any will, other than a holographic or nuncupative will, executed by a nonresident of Florida, either before or after this law takes effect, is valid as a will in this state if valid under the laws of the state or country where the will was executed."

In other words, in Florida, even if a Holographic will would have been valid in another state, it still will not be accepted in Florida. Of course, if the will is properly witnessed, then it is valid either way.

PS. A "nuncupative" will is an oral will. They're not valid in Florida either, even if videotaped or put on YouTube.

Casey Johnson: Sex, Drugs, and the Estate Tax

If you read the tabloids, or even the mainstream press, you may have come across the sad tale of Casey Johnson. Johnson was one of the great-great granddaughters of Robert Wood Johnson I, and an heiress to the Johnson & Johnson fortune. Her father, Woody Johnson, owns the New York Jets.

Johnson's life, to put it mildly, was a mess. A contemporary of Paris Hilton, she had a long history of alcohol and drug problems, public battles with family members, and a recent"engagement" to reality tv star Tila Tequila (if you don't know who that is, do your own internet search. But the images might not be safe for work). The thirty year old woman was found dead in her home on January 4, 2010, leaving behind an adopted four year old daughter. Police are saying that she could have been dead for several days.

I'm sure there are going to be criminal investigations, recriminations, lawsuits, and possibly a messy probate, which I may or may not write about as it happens. For now, I am only interested in one aspect of this: the estate tax.

I don't know what Johnson's financial situation was at her death, I hear that she was "cut off" and broke, but it's also quite possible that she had substantial assets in trust that would be includable in her estate for estate tax purposes, but was beyond her reach for her own protection. This amount could be several million or even tens of millions of dollars.

As I have been discussing, 2010 is currently the year without an estate tax. That means that if Johnson died in 2010, no matter how large her estate was, it will not be subject to the federal estate tax. If she died in 2009, then her estate is taxed at 45% of its value over $3.5 million . If she had a taxable estate of $10,000,000, then her estate will owe $2,925,000 in taxes to the federal government. . I believe (although I do not know for sure) that her death certificate shows the date of death as the date she was found, January 4, 2010. However, if the evidence shows that she died in 2009, then her estate is liable for the tax.

Let's take this one step further. Assume that she did die in 2010. Most people think that Congress is going to retroactively reinstate the estate tax back to January 1, 2010 at some level -- probably the 2009 exemption of $3.5 million. Most legal scholars also believe that it is constitutional for Congress to do so. If someone dies during that time and owes a minimal amount of tax, then it's likely their estate will just pay it, instead of challenging the constitutionality in court, which of course requires hiring attorneys. But if there is enough money at stake, then I wouldn't be surprised if Johnson's estate does challenge it. It would be worth the risk to see how the Roberts, Scalia, Thomas, Alito Court would rule.

Of course, none of this would be an issue if Congress weren't so deadlocked, so incompetent, so unable to get anything at all done. But that's for another day.

Don't let the state decide how your property is disposed of upon your death

I meet people all the time -- single people, married people, with and without children who have none of their estate planning documents in place.  There are a number of reasons as to why people don't get their documents in order -- worry about the cost is often a reason given (although it does not have to be expensive to do).  For some, it's just general procrastination.  It's on their list of things to do along with lose 30 lbs or clean out the garage.  Yet for others, it is the fear of thinking about their own mortality or the misguided belief that a tragic and sudden death could never happen to them.  But if you have your own property, and you want to decide for yourself how your property is distributed after your death instead of having the state decide for you then you generally need a Will.

Dying with out a Will is known as being intestate.  Each state has its own laws of intestacy, determining how an intestate decedent's property is disposed of upon their death.  In Florida, the intestacy provisions are set forth in Chapter 732 of the Florida Statutes.  Under the rules:

  1. If you are married and have no descendants (children, grandchildren, etc.), your spouse receives your entire intestate estate.  It doesn't matter if you were married for 3 days or 30 years.
     
  2. If you are married and have descendants and all of your descendants are also children of your spouse (meaning that you have no living children or grandchildren from another relationship), then your spouse receives the first $60,000 of your intestate estate, plus 1/2 of the value of the remaining intestate estate, with the balance being distributed among your descendants "per stirpes".  If your intestate estate is $60,000 or less, then your surviving spouse receives it all.
     
  3. If you are married and have any descendants who are not descended from your surviving spouse (e.g. you have children from a previous marriage), then your intestate estate is split 1/2 between your surviving spouse and 1/2 among your descendants, "per stirpes".  Your spouse does not receive the first $60,000 off of the top.
     
  4. If you are not married, and have descendants, your intestate estate is distributed to your descendants, "per stirpes".
     
  5. Then, if you do not have descendants, there are a series of "alternate takers" depending on who in your family is surviving.  It will go first to your parents, then your siblings, then to your paternal and maternal grandparents equally, then to your aunts and uncles, and on down the line.
     
  6. Then, Section 732.107(1) provides the worst possible scenario, "When a person dies leaving an estate without being survived by any person entitled to a part of it, that part shall escheat to the state,"
     

The term "escheat" means that your property become the property of the state.  Remember, under the law "friends" have no rights to your property after you die.  If you have property and no family and lots of friends, unless you have a Will (or have made some other provision for the dispostion of your property such as a Pay on Death Account), your property will go to the state upon your death.  And if you do have family, you need a Will so that you can decide how your property is divided instead of having the law and a judge make that choice for you.