We’ve all heard the typical excuses for not making an estate plan: “the law already provides for what happens to people’s money and property after death – an estate plan is expensive – I don’t have much of an ‘estate’ to plan.” People procrastinate when it comes to money issues, especially when it concerns a time that we think will never come. Superstition prevents some people from dealing with anything that has to do with their own death. However, before giving up on creating your Miami estate plan, consider the benefits it has to offer.
As you will see, an estate plan keeps the money in your immediate family, helps those who care about you manage your finances in the event of your disability, helps you save money on taxes and spares your family the delay, expenses and exposure of going to court. But I will not make this a hard sell, and will tell you about the downside of some of the Florida estate planning techniques that I will discuss.
Now, more about the benefits of a proper Miami, Florida estate planning:
Avoid the Probate Process – What’s so bad about the probate process? Many things, actually. The probate process was designed with heavy emphasis on protecting the rights of creditors. Some say that the laws involved are closely monitors by the major creditors’ lobbies. As a consequence, the Florida probate process has notice requirements for creditors and the file is a public record and is completely open to anyone who requests it. There are companies that monitor estate filings and compile a database to make it easier for various creditors to make a claim against the estate. Now, because the rules are so formal and strict, and the procedure has to be followed, a 3% fee is the standard rate for Florida attorneys to charge for an administration of a fairly large estate. Even if an attorney charges by the hour, at a typical rate of $300 per hour, the amount of work required may cost an estate about the same amount. Meanwhile, the assets of the estate will be restricted, making it difficult to sell estate property and distribute assets to the heirs. Read more about avoiding probate.
Save money on estate taxes – the first way we save money on estate taxes is using accounting rules and discounts to let you start transferring some limited property rights to your heirs during your lifetime. The discounted transfers are done through Limited Liability Companies, trusts, and annuities. The second way is by letting your assets “pass through” your estate in a trust to your spouse, which results in delaying the estate taxes to other heirs until the last of the spouses dies. The third way is by creating annuities that let you “freeze” the value of the assets and apply accounting discounts to the assets, so that the assets pass to your heirs with no estate taxes on the appreciation and little or no estate taxes on the underlying value. All of this may sound a little complicated, but the takeaway point is that trusts, annuities and limited liablity companies can be used to save a lot of money on estate taxes.
Keep the Estate to Blood Relatives – An estate plan lets you control what happens decades after its creation. You may not want your estate to end up being owned by your heir’s spouse, wishing instead that your children and grandchildren benefit from it. That goal can be easily accomplished with a trust.
Protect Estate from Heirs’ Creditors – An estate plan lets you protect your estate from claims of your heir’s creditors. If a probate case is filed,it will show up on the radar of a monitoring agency and all sorts of creditors will rain down on the estate. A good Miami estate plan avoids that through the use of a trust. The trust remains private and the creditors will have a very hard, if not impossible, time finding it.
Protect Minor Children and Disabled Heirs – if you have a minor child or a disabled heir who needs to be taken care of after your death, it’s not a good idea to leave money for them to a person you trust and have that person use the money for your heir. Your heir will be more secure if the money is placed in a trust, with the person of your choosing managing the trust and a trust protector to monitor the trust and make sure that all of the money is being used for the benefit of your heir. If your heir is disabled and qualifies for Florida Medicaid, a Florida Special Needs Trust provision can shield the money from disqualifying your heir from Medicaid.
Select a Guardian for Minor Children – Florida is one of the few states that allows a Pre-Need Guardian Designation. Selecting a guardian for your children in the event of your death is an important part of a Florida estate plan – the last thing a parent wants is for the children to linger in a temporary situation while a court takes years to deside who will be their guardian.
Protects your Assets – Forming an out of state or offshore trust will help you protect your assets from claims of creditors and will make it more difficult for a creditor to satisfy a judgment against you.
Plan for Your Own Disability – When planning for your own disability, you may get to see the results of the plan during your lifetime. A Power of Attorney is crucial to make sure that someone will be able to make financial decisions for you without having to go through the courts and obtain a guardianship. The Power of Attorney we’re discussing is different from the power of attorney commonly known as the one used at a real estate closing. The difference is, the Miami estate planning Power of Attorney becomes effective only upon your disability, and will require a certification of your doctor in order for it to become effective. A healthcare proxy, living will and a HIPAA form will also need ot be executed, to make sure that the people you trust have access to your healthcare information and have the authority to make healthcare decisions for you.
If you need to learn more about creating a Florida estate plan, give me a call. I can be reached at (786) 522-1411.