Florida Wills, Trusts, and Estate Planning Basics

Summary:

Do I need a Will if I have a Trust?

Do I need to update my Will if I move to Florida?

Do I really need any of these documents? 

What’s the bare minimum I can get away with?

In this show we cover the basics on wills, trusts and estate planning in Florida.  Local estate planning attorney, Debbie Faulkner, joins the conversation and fields a bunch of common questions that need answering.

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Podcast Transcript

Tony Shore 0:07
This is a special edition of Dolphin Financial Radio. In this podcast host Dan Wendol brings in a legal expert to discuss issues surrounding estate planning and retirement. As a fiduciary and investment advisor focused on retirement planning, Dan appreciates the importance of having certain legal aspects of your financial life in order. This is why he has invited Debbie Faulkner to join him on a series of estate planning focused podcast. Debbie is an estate planning business attorney and owner of Burke Faulkner law firm in Oldsmar, Florida. She grew up in Palm Harbor, Florida, and has been a lawyer for over a decade. Debbie went to Cornell law school and obtained her advanced law degree in taxation with a focus on family wealth planning. As a tax lawyer she is able to integrate tax planning into her estate work. Now let’s begin one of several estate planning focused conversations on Dolphin Financial Radio.

Daniel Wendol 1:06
Hello and welcome to another show with me Dan Wendol, owner of the Dolphin Financial Group. Today we have a special show. This is going to be our first show where we ask a lawyer questions questions about estate planning. But in reality, this is the first of several that we’re going to do over the over the course of the year. So we’ll start off easy, not only to keep it easy for Debbie, but also to keep it real because I know a lot of listeners out there have just basic questions that they want answers to. So Debbie, thanks for coming. Thanks for doing this. This is going to be fun. Listeners if you want to connect with us, with Debbie, there will be links in the show notes to find out how to connect with us. You can always call and if you have a legal question that you want an answer to on the next show, just email us and we’ll try and fit it in the next time we do a show together. So Debbie, thanks for coming.

Debbie Faulkner 2:05
I’m excited to be here.

Daniel Wendol 2:10
We should heard in the intro that you focus on estate planning and your local. I’m going to play the typical person that comes to me and I have questions. Legal questions. So I’m just going to ask you these and you give us the answer and tell me what you think. So the first thing people come to me with, when it comes to legal questions…a lot of my clients are a little older in their 50s 60s….they ask – “Do I need a will? Do I need a trust?” And then they say, “I heard about a will but I heard about a living will, is that different? I heard about a living trust. What is this?” So tell me, what’s the basics here? What’s the difference?

Debbie Faulkner 2:51
First and foremost, a will and a trust are both mechanisms, or ways that you can pass your property, your wealth, which is called an estate, down to the next generation. A trust is often thought of as something that is solely for the wealthy, but that’s simply not true. A trust and a will are both at their core, a set of instructions that tell the executor or the trustee, what you would like to happen to your property after you die. A trust also advises a trustee, or the person that was equivalent to an executor, how you like your money is spent on yourself if you become permanently disabled, like you have dementor Alzheimer’s one day in the future. A living will is not the same thing, A living will is the what I call the “Terri Schiavo” document. A living will tells a physician or a hospital, what you would like to happen to you if you are in a persistent vegetative state, or if you have an end stage condition or a terminal condition that two certifingy physicians tell you you are unlikely to ever recover from. So that is what a living will is. A living trust, on the other hand, is the set of instructions of what you like to happen your property in the event that you die or become disabled.

Daniel Wendol 4:15
Okay, so Terri Schiavo, that was Florida. That was long time ago. That was a crazy case. I remember that. So now the idea is if you’re living and you can’t act on your own, and there’s probably some sort of requirements to meet to get that, a living will will provide directive. How is that different than a healthcare proxy? Or is it the same thing?

Debbie Faulkner 4:40
Oh, it’s a different document. So a health care proxy, also known as a designation of health care surrogate and in some states, it’s referred to as a health care power of attorney, tells the physicians that are treating you who you would like to make a healthcare choice for you if you’re incapacitated. For example if your under anesthesia and a surgeon see something they want operate on but it’s not in your prior consent, they can talk to your healthcare proxy or your healthcare designee. A living will is is just used if you’re in a persistent vegetative state, or you are the terminal or end stage condition, and you two physicians have indicated you’re never going to recover. That document basically says, Please don’t treat me with any new conditions. Because under the Hippocratic oath that doctors take, if you don’t have that, they have to treat anything new and basically continue to provide treatment no matter what. A living well is really a gift to your family. So if you’re in one of those situations, they don’t have to make a really difficult decision about whether to “pull the plug” or leave you continuing to be treated.

Daniel Wendol 5:47
Would a health care proxy or health care POA, allow them to make that same decision or do you need a living well?

Debbie Faulkner 5:55
A health care proxy typically allows the proxy to make that decision for you, but the living will kind of tells your healthcare proxy what your wishes actually are so that they don’t have to make that decision on your behalf. It kind of leaves a lot to the conscience of the individual you name. So it’s really a gift to that person.

Daniel Wendol 6:17
Okay, so let’s stay on the living. So we’re not dead yet, but we want to make some decisions on what happens to our health if we can’t make those decisions, or maybe even our finances if we can’t sign our name or something like that. Is a healthcare proxy different than a traditional power of attorney? If I just have a power of attorney on my mom, does that mean I can make all decisions for her without her consent? Does it have to be a healthcare decision POA?

Debbie Faulkner 6:58
So there are two different powers of attorney. The healthcare proxy, or in Florida, designation of healthcare surrogate, is completely different than your financial power of attorney. Your healthcare individual can also be different than your financial power of attorney and oftentimes it is. Typically clients will have one child who’s really great in the medical, personal realm, and one child who may be great with finances but would be uncomfortable making a healthcare choice. So typically, I see often clients name different health care proxies, then financial power of attorney.

Daniel Wendol 7:36
Interesting, I guess you could say, this one’s going to have trouble pulling the plug where this one wouldn’t.

Debbie Faulkner 7:44
Or one child’s a nurse and one person is an executive at a company. Things like that happen often where one child is involved in the medical field, and one child is not or the other children are not.

Daniel Wendol 7:56
What if they don’t have this? What if someone doesn’t have any power of attorney or health care surrogate or Durable Medical power attorney? Doesn’t the spouse get first right to do all this anyway?

Debbie Faulkner 8:08
This best is not have the automatic right to act on your own behalf.

Daniel Wendol 8:12
You’re kidding me!?

Debbie Faulkner 8:13
No, I’m not kidding. It’s it’s not automatic. And if you think about it, it shouldn’t be automatic because there are all different people who stay married to people who maybe they don’t like or don’t want to be with anymore.

Daniel Wendol 8:27
Thats for another show.

Debbie Faulkner 8:28
Perhaps the spouses are estranged, and that is not a position that a physician’s office would like to be in is determining whether the spouse is on good terms with the other one. So in order to receive protected health care information under HIPAA, you have to have a person named to receive that information. So, when you execute a power of attorney, a healthcare power of attorney, or health care proxy, you also execute a HIPAA release that says that the physicians offices is able to release all of your protected information.

Daniel Wendol 8:59
Hence so we don’t have to worry about being in the Terri Schiavo situation where we had two different people wanted two different strategies with her. And there was a big battle….

Debbie Faulkner 9:10
She was around for 15 years on on life support. And her husband wanted to have her pass of natural causes without medical intervention any further. And her parents believed that she may eventually come out of a vegetative state. And so that went all the way to the Supreme Court.

Daniel Wendol 9:31
Absolutely crazy. It could have been avoided.

Debbie Faulkner 9:32
It could have been avoided with one simple document – the living will.

Daniel Wendol 9:36
Do a lot of people have this or do most people not have this type of document?

Debbie Faulkner 9:42
If they’re coming to me, they typically are having it done now, but about 70% of the population does not have a will, trust, or estate plan in place. It’s a staggering statistic.

Daniel Wendol 9:55
Anecdotally, I would say that a majority of the clients that I have, the people that come to me for the first time, do not have these documents. And they’re asking me about it. And that’s why we’re talking today because I think having these things is critical. And that’s a very prime example. Now let’s move to when you pass away. We talked about a will, living well, and a living trust. Well, first of all, what does intestate mean? Does that mean dying without a will? Is that what that means?

Debbie Faulkner 10:26
Yes. If you die without a will, the government dictates who gets your money.

So the federal government? State government?

State government.

Daniel Wendol 10:34
So Florida would dictate? If I died and didn’t have a will, my wife doesn’t get everything automatically?

Unknown Speaker 10:36
Well, it depends. So under Florida law, there’s a statute that provides who gets your property if you don’t have a will. If you are married, at the time that you die and all of your children are in common…that means neither spouse has children outside of the marriage and all children that may exist belong to the couple together…then all of your property would pass to your spouse. If you’re on a second marriage or you have children outside of the marriage, either person, then only half of the property would go to your surviving spouse and the remainder to any children that you may have. Things like that. And it goes on and on and on. There’s about 14 different levels.

Daniel Wendol 11:23
So if you have a single spouse and children with only that spouse, could you get away with not having a will?

Debbie Faulkner 11:35
Yes, in theory, you could.

Daniel Wendol 11:37
Then the long-lost child comes out of the woodwork and messes it up.

Debbie Faulkner 11:41
Right! It just complicates matters a little bit. The reason that the law exists in the way that it does is because it governs, or takes care of the traditional family situation. But as you know, Dan, there are fewer and fewer “traditional” families. I’d say that’s definitely the minority.

Daniel Wendol 12:00
I will also say that most families, the traditional families included, there’s always going to be problems anyway- fighting. And so having some directives, having some things written down really helps and goes a long way.

Debbie Faulkner 12:14
Absolutely. And you know, even in a “traditional” situation, there can be inadvertent consequences. I’ve recently had a client who was the surviving daughter. A man passed away in a car accident unexpectedly. He was in his 40s and left two children. The issue is that he hadn’t spoken to one of his children in 15 years, and his daughter and him were extremely close. But under the law, since he was unmarried at the time of death, his estate passed evenly to both children. Certainly not what he intended.

Daniel Wendol 12:48
Right and the daughter was probably upset. She had no recourse?

Debbie Faulkner 12:56
Well, in this particular instance, I suggested to her that we asked the estranged son to waive all of his rights to the estate. And we were actually successful in obtaining his consent and waving his rights. But that’s very atypical.

Daniel Wendol 13:13
I would say so. So, probate. Is that probate?

Debbie Faulkner 13:16
Probate is a fancy legal word that I disliked greatly because who knows what probate is anyway? And truthfully, I didn’t even learn the word probate in my first law school program. So it’s not uncommon to not understand the word but it really just means wills and trusts court. Wills court, essentially. It’s where all wills go after somebody dies. So in essence probate is the wills court process. And if any property passes through a will, it goes to the probate court. The court supervises your executor, which is called a personal representative in Florida, and basically supervises the process of moving property from you down to the next generation.

Daniel Wendol 14:03
Okay, if you don’t have a will does it go to probate?

Debbie Faulkner 14:06
Automatically probated. Yes.

Daniel Wendol 14:07
So, to avoid probate, you need a Will?

Debbie Faulkner 14:10
You need a trust. A will does not avoid probate. So if for example I have a will and I do not have a trust, all of my property is in my name when I die, then all of the property that is owned by me at the moment I die is included in a petition to the probate court or the wills court. And it basically says my will provides that my property goes to these folks. Then we request that the court appoint the personal representative for the executor. They have to post a bond with the court and then it goes through like a nine to 12 month process of moving my property from my name to the individuals name to my will. There are two ways to avoid probate. The first and the one I recommend is having a trust. So a trust is trust is really, like I said earlier, not for the wealthy, it’s just a mechanism of passing your property down the line without having a court involved in that process. A trust is similar to a will in the sense that it says, I am giving my property to my three children equally and then basically, the person that you named to take care of your trust is called a trustee. And that person is responsible for taking care of your directions. But that person doesn’t have to post a bond with the court. The court isn’t involved. It’s a completely private proceeding between you, your trustee and your family.

Daniel Wendol 15:38
So you can name the trust as the beneficiary of all your assets, even within a will. Would you have a will and a trust?

Debbie Faulkner 15:47
When you have a trust it’s not an independent document like a Will. You must have a will with it. But unlike a traditional will that says I want my property to go to my kids equally, when you have a trust, your will says I want all my property to go to my trust. So basically it’s called a pour-over will. And you can think of it like the water being dumped into a jar. All the property that’s outside of your trust when you die is like the water that goes into your trust when you die. But I would say that one of the reasons for having a trust is to avoid probate. If you leave all of your property in your individual name, like all my property when I die is under Debbie Faulkner, my pour-over will will put it in the trust when I die, but then I have a probate proceeding first and then a trust proceeding after.

Daniel Wendol 16:40
Okay, so the the will…if you have a will that lists the trust, then you avoid probate?

Debbie Faulkner 16:50
No, actually, that’s a very great question because that’s most commonly what I see happen. If a client does have a trust and a pour-over will that says everything goes to trus when they die, there’s a common perception that that automatically funds the trust. But I want you to think about trust more like a bank account. When you go to a bank and you open an account, you sign a legal document that nobody reads, including lawyers, and then you have a legal document between you and the bank that says how the relationship goes. What happens to that contract if you never put a dime in the bank account? It’s still a legal contract, but there’s nothing for that contract to govern. It’s the same thing with a trust. So if you just have a trust document, and you never fund the trust or put anything inside of it, it really just stands alone as something that takes place after you die. So really, the key is putting your money into that trust. And that’s the part that gets a little bit confusing. I want you to think about it like a bank account. If you go to the bank and you put your money inside that account. Now the contract has some thing to govern and all the money in the bank account.

Daniel Wendol 18:02
But can you put anything in that trust? Can you put in a vehicle?

Debbie Faulkner 18:06
You can put anything in that trust except your IRAs, 401k’s, and other qualified plan assets. Those have to be beneficiary designated into the trust. But for example, this is where people get a little bit hung up…how do I put something inside a trust inside a legal piece of paper? It’s the same thing with your identity as an individual. I have a social security number, you have a social security number. If you go down to a local bank number one and you open an account, you give them your name, your ID and your social. A Trust has its own identity. So if I want my bank account in my trust name, I bring a certificate of trust, which is like the trust identity paperwork that your lawyer draws up and then I give them my license as a trustee. And then they open the account. Instead of Debbie Faulkner they put Debbie Faulkner trustee of the Debbie Faulkner Trust. Now that account is governed by that same set of instructions. So if I have a home, for example, instead of saying Debbie Faulkner’s home, it says Debbie Faulkner trustee of the Debbie Faulkner trust owns that home. And that’s exactly how my estate is set up now, because I have I just bought a home and I put it in the name of my trust. What this essentially does is it puts the world on notice that I have this legal set of introductions that govern my property. One thing that often I get asked about it is well, doesn’t that make it more complicated for me to sell my property or do anything with my property? The short answer is no, it’s not more complicated. It’s just a matter of showing that the trust exists, and it has its identity. And then I’m able to do whatever I can with my property as an individual, I can do with my property as a trustee of my own trust.

Daniel Wendol 19:53
Perhaps the only extra complication would be when you sign you have to sign as a trustee as opposed to just your name. You might have to present the trust document somewhere as well. But you do that once and you’re set.

Debbie Faulkner 20:05
That’s right. And the good thing is, once you put your accounts in the name of your trust, or you beneficiary designate them to the trust, it’s very, very simple to change your entire plan. So let’s say you stop talking to one of your children, which is actually much more common than people think, you can just change your trust with one simple page, one or two page document, and cut that child out of all of your assets, because all the assets are now in one, essentially box, which is the trust box.

Daniel Wendol 20:36
So I’m staying on this idea of a trust. Who really needs it? A lot of times people think trust are for the really wealthy. You already said that’s not true. But are people getting a trust when they don’t need it when a simple will would do? Someone that doesn’t have a lot of assets…o they really need to trust?

Debbie Faulkner 21:00
Great question. So there are really a few different situations where I recommend a trust unequivocably no matter what. First is if you have real property, which is basically houses or buildings or land in more than one state. If you have real estate in more than one state, then there will be two probate proceedings. So if I had a vacation home, for example, in North Carolina and I owned by home here, if I just died with them in my own name, I would have to hire a probate attorney in North Carolina and a probate attorney in Florida to handle my estate which gets very expensive. And also I should mention, in Florida, because attorneys make up the legislature, it is required that you hire a lawyer to go through the probate process . Lawyers are entitled to 3% of your entire estate by law, and they can charge more in about 15 different scenarios. So just want to make that as a side note- that attorneys have written themselves into the law that if you own more than $75,000 in total, then your family must hire a lawyer to help them get the assets.

Daniel Wendol 22:05
So there’s some monetary savings to be had by avoiding probate.

Debbie Faulkner 22:10
Well, there’s definitely monetary savings. And this is also Dan why some attorneys out there will give you a free will, if you do other services with them. Because they know that in 30 years or 50 years, when you die, that family is coming back to them and all of your estate, they’re going to get 3%. So on every hundred thousand, they’re getting $3,000 to help your family out with the estate. But it’s a little bit of a tricky way of lawyers writing themselves into your trust.

Daniel Wendol 22:36
They could have avoided it by writing a trust as opposed to the will. Speaking of that, you’ve I’m sure you’ve seen they have software where you can write your own will. Will-maker software I see on the shelves at Office Depot. I don’t know if they have trust software, but have you ever seen anyone use that? They come to you in probate situation where they said “I made this and I thought I did it right”….

Debbie Faulkner 23:07
Yes. So oftentimes, I’ve actually seen quite a few wills done Legal Zoom and wills done on software made at home. The most common thing that happens with these wills, it’s not that they necessarily don’t have the right language is that they’re not signed properly. So Florida law sets forth, basically execution requirements, signing requirements, that if they’re not met, then the will essentially gets thrown in the trash. So if you do the will wrong, and you don’t sign it exactly correctly, then the willgets tossed out altogether. The judge does not read your will and follow your wishes at all. So if you do sign a will incorrectly or make a will that does not have legal effect, none of your wishes will govern. The law will govern. But I want to go back to your other question about whether you need a trust or a will, because it’s very important. So I mentioned the two homes scenario as one reason why you’d have trust.

Daniel Wendol 24:08
Property in two different states.

Debbie Faulkner 24:10
That’s right. There’s a couple of other reasons. One is if you have beneficiaries that you want to treat differently, or you want to govern how your money is spent after death. You essentially want that power to dictate from the grave how the money goes. So if you’re giving away a significant amount of money, or you have children, maybe one of them spends everything that they may get their hands on, or they have a spouse you don’t like, or maybe you have a child with special needs that you may want to provide for, a trust is really the only way that you can dictate from the grave. And so if you also have a kid with special needs, you need a trust because you don’t want them to be kicked off of public benefit that they may be receiving for their disability. And if they’ve received a large inheritance, sometimes that affects public benefit, but you can protect all of that in a trust. At my firm anyway, we creditor protect all the assets from your beneficiaries’ creditors. So if I put money in my own trust, I can’t protect it from my own creditors. That’s often a misconception I hear about trusts.

Daniel Wendol 25:23
And a creditor would be if you have a bill or you get sued or….

Debbie Faulkner 25:27
Yes, if you get sued for a car accident or something, if it’s in your own trust, and you still have control over your trust, that doesn’t provide asset protection so to speak for you. But let’s say I want my money to go to three kids and one of them gets in a car wreck the week before I die. I can make sure that the inheritance I leave my child goes to my child and skips over any lawsuit. Even if the person that sues my child wins, I can creditor protect all their inheritance from that lawsuit and from their spouse. So from creditors or predators, I’d like to say.

Daniel Wendol 26:00
That’s a good point. I didn’t even think of that! So I want to wrap up this discussion because I think next time I want to talk more specifically about naming beneficiaries and how that impacts wills and trusts. But last questionI, don’t know if it’s something that we just see on TV a lot, but do people actually contest wills? Do you see that often?

Debbie Faulkner 26:18
People contest wills and trusts all the time. There’s an entire field of lawyers called probate litigators, that all they deal with is will and trust contests. Because if you don’t already know money, adversely affects a lot of people and causes people to be a little bit greedy. And some people are just grieving and they lose control. They don’t have any control over a death so they try to take control of property to hold on to somebody that they love. And it may not be for greed it just is how they’re coping with the death. It happens all the time.

Daniel Wendol 26:52
Well, I appreciate you spending some time talking about wills and trusts and the basics today. We’re going to step it up in the next show and get a little bit more detailed, but if listeners have any questions, they can contact us go to DolphinFinancialGroup.com or you can go and listen to this podcast. You can contact Debbie her website is BurkeFaulknerLaw.com

Thanks for listening to Dolphin Financial Radio based in the Clearwater, Tampa area.