Estate Planning

by John T. Prahl, Esq.

Estate planning broadly defined is preparing for the unexpected. As such it can cover many topics other than the typical documents normally associated with the estate plan. The titling of assets, business entities, life insurance and retirement plans are just some of the issues which may be dealt with when doing an estate plan. The ability to look at each person’s unique situation is part of the value that and experienced estate planning attorney brings to each client. This section will review some of the most common documents and situations encountered.

1. WILL: A Will is the traditional document containing one’s plan of asset distribution and management after death. All Wills name a Personal Representative, (often called an Executor in other states) to manage the decedent’s affairs after death. The Personal Representative may be an individual or entity such as a bank or asset management company. All Wills also contain a plan to distribute the assets of the deceased. The asset distribution plan can range from the simple to the very complex. Complex distribution plans usually involve a trust or trusts of various types to allow separation of the benefit of the assets from legal control. A very common type is to allow minor children to benefit from a parent’s assets while placing a responsible adult or entity in charge of regulating distribution to or for the children’s benefit.

2. REVOCABLE TRUST: This type of Trust is used as an alternative to a Will. Like a Will, it is designed to provide for the management and distribution of the maker’s (called the Settlor’s) assets after his death. It can have a simple or detailed distribution plan and often contains other trusts which become active at the Settlor’s death. Unlike a Will, a Revocable Trust must operate and be active from its creation in order to confer its largest benefit. This benefit is that assets placed in a properly created and maintained revocable trust are not subject to probate. Probate is a judicial process whereby a court supervises assets of the decedent to insure creditors and taxes are paid and the terms of the Will are followed. Probate is time consuming and can be expensive.

A Revocable Trust avoids the probate process, but it does not allow the avoidance of creditors or taxes in and of itself. For a revocable trust to work properly all of the decedents assets must be held by the Trust prior to death. The failure to transfer all assets is the most common failure of a revocable trust based estate plan. Assets left out of the Trust are still subject to probate. For this reason, revocable trusts are not for everyone. Revocable Trusts require follow-up whenever a new asset is acquired. For those comfortable with the administrative tasks, the benefit for heirs upon death and upon incapacity for the Settlor can be large.

3. DURABLE POWER OF ATTORNEY: This document allows the holder of the power to do virtually anything of a business or financial nature, that the maker can do. Unlike a Will, it is intended to be used while the maker is alive. The intention is usually that it will not be used while the maker can handle his or her own affairs. The intention is that it will be used when the maker is alive, but due to age or mental state, the maker is unable to make informed decisions. The most common type of Durable Power of Attorney is not contingent upon incapacity. It is invaluable in the hands of a trustworthy individual in the event of dementia because it avoids guardianship, which is expensive and time consuming.

4. HEALTH CARE SURROGATE: This document names an individual or individuals to make health care decisions when one cannot make them for himself or herself. It is limited to health issues only. It only operates upon the mental or physical incapacity of the maker.

5. LIVING WILL: A Living Will deals with end of life issues. It covers terminal conditions and directs life prolonging procedures be stopped when they would only prolong the process of dying. It can also direct that food and water be withdrawn when the machines maintaining physical existence are withdrawn. A few years ago the statute was amended to cover the Terri Shiavo situation; a persistent vegetative state or the related condition of a coma. In either condition, the decision is whether and when to withdraw food and water. These conditions may not require machines to breathe or for dialysis, but can be very long term, unless food and water are withdrawn. This decision is hard for other to make and a Living Will allows one to make the decision ahead of time, after due consideration.

The five documents discussed above should be considered by virtually anyone. Each can be changed or revoked during the life and competency of the maker. There are many other documents and situations which will be beneficial to some people, but not others. There are many other types of Trusts, each with different terms and characteristics. A Trust can be used to benefit children or to protect adults from their own spending habits or from a spouse or other creditors. A very common trust is used to own and receive the benefits of a life insurance policy.

People who die without an estate plan in Florida are subject to the Florida intestacy statutes. These work best for a person married to a first spouse with no minor children. People with minor children or any “unconventional” family arrangement have a much tougher time. Unmarried partners, whether same sex or mixed, and persons on a second or subsequent marriage especially with children from a prior marriage or partner will be ill-served by intestacy. Inheritance is where the “wicked step-mother” (or “step-father”) made her reputation. Unintentionally disinherited children from a first marriage are all too common. A proper plan can provide for each of the interests and reduce ill feelings.

Finally, there is the estate tax. Although as this is written in early 2010, there is no estate tax, Congress and the President have several proposals to reinstate the tax. The worst scenario would be if Congress passes nothing. In that case, beginning January 1, 2011, the estate tax springs back to life with a one-million dollar tax exemption and with a 55% maximum rate. The taxable estate includes retirement plans and almost all life insurance death benefits, which most people don’t count as wealth and so is often overlooked. Most people will still be exempt from the tax, but those subject to it will face high tax bills with an estate valued only modestly above the one-million dollar threshold.


Article published by - committed to delivering the very best of my expertise when dealing with the probate & estate planning affairs, and real estate & business transactions for each of my clients. If you are currently seeking a professional, competent South Florida lawyer in Miami, Coral Gables, Pinecrest or Palmetto Bay, contact me now for a no obligation first consultation.