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What to avoid when making beneficiary designations

Those who are going through the estate planning process in Florida should understand that a beneficiary designation trumps a will. Typically, retirement accounts are transferred through a beneficiary designation, and the same can happen with other assets as well. While it is relatively easy to create such a designation, it is also relatively easy to make an error while doing so. For instance, leaving an asset to a minor may not be the best idea.

This is because minors cannot control an asset on their own. Instead, an adult would need to be named to manage it until the child turned 18. Those who have special needs could lose access to government benefits if they are allowed to inherit an asset directly. Therefore, it may be best to put an item into a trust that will be overseen by whoever an individual trusts most to do so.

Reflecting a lifestyle through an estate plan

When wealthy Florida residents think about their future, they often want their lifestyle to be reflected in their estate plans. In order to accomplish this goal, they often use trusts. These trusts can be used in order to avoid probate court and can contain multiple subtrusts. They are usually revocable while the grantor is alive and irrevocable upon death. While most assets will pass through these trusts, the estate plan may also contain a will to handle certain matters.

For families that have a lot of assets to pass down, estate planning is a continuous process where documents may be changed up to the final moments of a person's life. Wills and trusts change over time as people's priorities and relationships evolve. When people become aware that they may not have long to live, they may wish to go over their estate plan in detail to see if any changes need to be made.

Planning for special needs children

Florida parents who have special needs children might want to think about their estate plans in a way that might address the future needs of their offspring. This might require some careful thought and some different types of approaches.

One thing that makes it difficult to plan for special needs children is that many parents are uncertain what their children's needs might be in the future. Children who will be eligible for government benefits might require special needs trusts to help to support them while not interfering with their eligibility for benefits.

Succession planning when the future is uncertain

It's important for all business owners in Florida to make plans for succession. Whether it's brought on by a death or retirement, a company will need to change hands at some point. This will be less complicated if family members are already part of the business and ready to take over. However, it is more common for the situation to be more complex.

One situation might involve a family member who is not quite ready to step into running the business. This will require a strong team of managers as well as good business succession planning. The owner should think about how to keep people motivated. There may need to be a plan in place to train the family member and prepare that person to run the business. Furthermore, it's wise to have a backup plan to sell the business. Another approach is to put much of the work into preparing the business for sale while also allowing for the possibility that an uncertain family member may decide to commit to the company.

How Luke Perry created an estate plan for his family

Florida fans of actor Luke Perry, who died suddenly of a stroke at the age of 52, might wonder whether he had an estate plan in place to protect his family. The fact that Perry's family made the decision to take him off life support after it became clear that he would not recover suggests that he had made arrangements using a power of attorney or health care directive to appoint someone to make medical decisions on his behalf. Without these, a family might have to get a court order to allow a loved one to be removed from life support, particularly if they disagree.

In 2015, after Perry had a colonoscopy that led to the discovery of precancerous growths, he became an advocate for colorectal screenings. Reports are that he made a will that same year that left his assets to his children. However, Perry might have created a trust in addition to the will. A trust allows for more privacy and for assets to be transferred directly to beneficiaries instead of going through probate.

How irrevocable trusts can be changed

When Florida residents create an irrevocable trust, they generally cannot make changes to the document; after all, it is called "irrevocable" for a reason. Of course, this is one reason why many people prefer to plan using revocable trusts instead. The latter are more flexible instruments and offer options that let people make important changes that reflect different circumstances.

However, there are a number of reasons why people may want to repair an irrevocable trust that is broken or unable to function properly. There are 26 states across the country with statutes that make it possible to "decant" one broken trust into a new trust in order to repair challenges that do not allow the trust to function properly. These options let people create a new irrevocable trust with changed dispositive or administrative provisions reflecting differing circumstances. However, many of these laws are quite restrictive and involve difficult requirements that may be challenging to fulfill. Therefore, many people may first wish to relocate the trust to a state with more favorable, flexible laws.

A revocable trust is a valuable estate planning tool

Death is something people do not like thinking about, but not preparing for what will inevitably happen is a less attractive alternative. Controlling where assets will go and avoiding family conflict are two basic goals of estate planning, but there are other possibilities as well. A common misconception among many Florida families is that trusts are tools only for the wealthy and are prohibitively expensive to establish. In fact, a revocable trust can be beneficial for many people who wish to protect their families without costing a fortune.

Although there are many types of trusts that can be employed to protect estates of varying complexities, a revocable trust can be constructed in a straightforward manner to pass along assets to beneficiaries and avoid probate in the process. Legal experts point out that probate can be a lengthy and expensive procedure but may be necessary if title to an asset needs to be transferred from the decedent to a beneficiary. Assets in a trust generally do not come under the jurisdiction of the probate court.

When is the best time to create a trust?

If you are considering creating a trust to help manage your assets, you have to decide whether you want the trust to hold your assets while you are alive or if you want the trust to become active upon your death.

The benefits of a living trust are that your heirs can avoid the expense of probate and that you can determine how your assets will be handled if you are incapacitated but not dead. If neither of these are a concern to you, then a testamentary trust that activates upon your death is likely sufficient.

The many uses of an estate plan

Florida residents who hesitate to create estate plans are not alone. The American Association of Retired Persons reports that more than half of U.S. adults do not have an estate plan in place. However, putting off this task can mean no plan will be in place for becoming incapacitated, the care of minor children or the distribution of assets. All adults should consider the following benefits to estate planning.

If assets are placed in a living revocable trust, they can be managed in case of incapacitation. Furthermore, they can pass directly to beneficiaries if the creator dies. A power of attorney is another way to appoint someone to manage financial and legal matters. For medical matters, documents such as a health care proxy and a living will can arrange for others to step in and make medical decisions.

The need for estate planning

It's important for all Florida adults, even those who don't have children or any close relatives, to have an estate plan. In addition to addressing what happens to property and assets after death, an estate plan could cover many issues directly related to the creator.

One of the aspects of an effective estate plan is the instructions for what should happen if the estate owner becomes incapacitated. All adults should have a durable power of attorney for financial and legal decisions and an advance directive for medical decisions. An estate owner can use these documents to designate a trusted person to make medical and legal decisions on their behalf if they are unable to do so on their own. If these documents have not been completed, there will decisions that even a spouse would be unable to make.

Kramer A. Litvak, P.A.
226 East Government Street
Pensacola, FL 32502

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