How to Make Most of Your Heirs Mad

Occasionally I will get an estate planning client who wants to leave all of his or her property to one child in the belief that  it will somehow make their estate easier to probate and that the chosen child will “know what to do.” This is a recipe for disaster. I have never prepared an estate plan that does this because I always talk the client out of it. I have two main objections: (1) the child is not obligated to follow the decedent’s instructions, and (2) if the child does follow the decedent’s instructions then they may be liable for gift taxes. 

Both objections come down to one basic problem. Once you have left all of your estate to a person, that person owns it and is not obligated to give it away. If they do give it away, then they may be liable for gift taxes for any amount in excess of $14,000 for the year (as of 2014). The First DCA confirmed that this was the case late last year. If you leave all of your estate to one person, that person has the discretion to honor your wishes or not. 

As you can imagine, this is a recipe for litigation. It is much better to take the time and effort to decide exactly how you want your estate divided than to kick off a fruitless and expensive battle between your heirs. Even if your heirs choose not to fight, you will have done extensive, probably irrevocable damage, to their relationships. 

Squatting Is Not Going To Get You A Mansion

I do NOT recommend adverse possession as the way to acquire a new home. See, “Squatting in Style.”  Seven (7) years is a long time. Adverse possession does have legitimate uses and legitimate purposes. I have been involved in many adverse possession cases. Most adverse possession cases involve boundary disputes and strips of land not entire houses. Squatting in a $2,500,000.00 home is never going to work.

I also think the Boca Raton police officers who decided this was a “civil matter” need a course in remedial law. I am not aware of a requirement that some one actually see you breaking into a home as a requirement to arrest someone for breaking and entering. If that were the case hardly anyone would ever be prosecuted for breaking and entering. If you do not own the house and you are in it uninvited, you have committed a crime.

By the way, the remedy for illegal squatting is not an eviction lawsuit. The squatter is not a “tenant.” The proper remedy to remove a squatter is a suit for ejectment. Frankly, the better remedy is for the police to do their job and remove the squatter upon a complaint from the owner. There really is no such thing as “adverse possession paperwork” that would allow you to hold property against the owner other than a final judgment from a court.

2012 in review

The WordPress.com stats helper monkeys prepared a 2012 annual report for this blog. And now I’m sharing my report with you. Enjoy!

Here’s an excerpt:

600 people reached the top of Mt. Everest in 2012. This blog got about 3,700 views in 2012. If every person who reached the top of Mt. Everest viewed this blog, it would have taken 6 years to get that many views.

Click here to see the complete report.

Is There A New Federal Surtax On Home Sales?

Today we have a guest post from David Campione, who practices in the area of real estate, bankruptcy, and transactions at Campione & Hackney, P.A.

Yes, there is a new 3.8 percent surtax that takes effect January 1, 2013 on certain investment income of upper-income individuals — including some of their real-estate transactions. When the Supreme Court upheld the health-care law on federal tax grounds, it restoked a housing issue that had been relatively quiet for the past year: the alleged 3.8 percent “real-estate tax” on home sales beginning in 2013 that is buried in the legislation.

It’s not a transfer tax and not likely to affect the vast majority of homeowners who sell their primary residences next year. In fact, unless you have an adjusted gross income of more than $200,000 as a single-filing taxpayer, or $250,000 for couples filing jointly ($125,000 if you’re married filing singly), you probably won’t be touched by the surtax at all, though you could be affected by other changes in the code if Congress fails to extend the Bush tax cuts scheduled to expire at the end of this year.

Even if you do have income greater than these thresholds, you might not be hit with the 3.8 percent tax unless you have certain types of investment income targeted by the law, specifically dividends, interest, net capital gains and net rental income. If your income is solely “earned” — salary and other compensation derived from active participation in a business — you have nothing to worry about as far as the new surtax.

Where things can get a little complicated, however, is when you sell your home for a substantial profit, and your adjusted gross income for the year exceeds the $200,000 or $250,000 thresholds. The good news: The surtax does not interfere with the current tax-free exclusion on the first $500,000 (joint filers) or $250,000 (single filers) of gain you make on the sale of your principal home. Those exclusions have not changed.

But any profits above those limits are subject to federal capital-gains taxation and could also expose you to the new 3.8 percent surtax. Here’s an example provided by the tax staff at the National Association of Realtors. Say you and your spouse have adjustable gross income (AGI) of $325,000 and you sell your home at a $525,000 profit. Assuming you qualify, $500,000 of that gain is wiped off the slate for tax purposes. The $25,000 additional gain qualifies as net investment income under the health-care law, giving you a revised AGI of $350,000. Since the law imposes the 3.8 percent surtax on the lesser of either the amount your revised AGI exceeds the $250,000 threshold for joint filers ($100,000 in this case) or the amount of your taxable gain ($25,000), you end up owing a surtax of $950 ($25,000 times .038).

The 3.8 percent levy can be confusing, and can bite deeper when your taxable capital gains are far larger or you sell a vacation home or a piece of rental real estate, where all the profits could subject you to the investment surtax. Definitely talk to a tax professional for advice on your specific situation.
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Ex-spouses Won’t Be Laughing All The Way To The Bank Anymore

I have handled more than one case where someone died and a former spouse unintentionally received life insurance proceeds as a result. Some times the former spouses hated each other and the pay out was many years after the divorce. If the potential client was a family member, I usually could not do much for them. If I was defending the former spouse against the family or subseqent spouse, then I was likely to succeed. It is a fairly frequent occurrence for a former spouse, more often than not the husband, to forget to change the beneficiary of his life insurance policies. Thus, many years later the ex-spouse (usually the wife) would get a delightful surprise of several thousands of dollars much to the chagrin of the second wife in many cases. The same could and did happen with joint accounts, payable on death designations, and named beneficiaries for annuities, IRAs, 401(k)s, and other financial accounts.

With more than a trillion dollars changing hands as the oldest baby boomers pass away, the Florida Legislature has passed a new statute to address this problem. Florida Statute section  732.703 took effect as of July 1, 2012. It provides in part as follows:

A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent. An individual retirement account described in s. 408 or s. 408A of the Internal Revenue Code of 1986, or an employee benefit plan, may not be treated as a trust for purposes of this section.

In other words, once the marriage is dissolved (i.e., the parties are divorced) or declared invalid, any asset transfer or payment that is effective at death is a nullity as to those assets listed in the statute. This statute is not, however, an excuse to be lazy or incautious. A failure to change beneficiaries could still result in a payment to the former spouse. The current spouse or beneficiaries would then have to sue the former spouse to recover the money and the insurer or other payor can not be sued. So a failure to take care of the details could still be trouble for the family. 

For a detailed discussion of the new statute with links to other helpful posts, you can visit attorney Juan Antunez’s Florida Probate and Trust Litigation Blog.

 

Harry Hackney Board Certified in Civil Trial Law

I am pleased to announce that as of June 1, 2012 I am Board Certified by the Florida Bar in the area of Civil Trial Law. According to the Florida Bar:

Certification is the highest level of evaluation by The Florida Bar of competency and experience within an area of law, and professionalism and ethics in practice. More than 4,500 Florida lawyers are recognized as specialists in one or more of 24 certification areas.

Certification Logo
Board certification recognizes attorneys’ special knowledge, skills and proficiency in various areas of law andprofessionalism and ethics in practice. 

 

So, what exactly does “Board Certification in Civil Trial Law” mean, and what did I have to do to get Board Certified? Here’s the explanation from the Florida Bar website:

Certified lawyers in civil trial law deal with litigation of civil controversies in all areas of substantive law before state and federal courts, administrative agencies and arbitrators. In addition to actual pretrial and trial process, civil trial law includes evaluating, handling and resolving civil controversies prior to the initiation of suit.

Every board certified civil trial lawyer has practiced law for at least five years and been substantially involved — 30 percent or more — in the area of civil trial law during the three years preceding application. To be certified, the lawyer is required to have conducted at least 15 contested civil cases in courts of general jurisdiction during the lawyer’s practice, including cases before a jury and as lead counsel. Credit is given to the lawyer if he or she has served as a judge.

Each certified lawyer must also have passed peer review, completed 50 hours of continuing legal education within the three years preceding application and passed a written examination demonstrating knowledge, skills and proficiency in the field of civil trial law to justify the representation of special competence.

I have to admit that I am proud and honored to be able to call myself a Board Certified Civil Trial Lawyer.

The Importance of a Health Care Surrogate

A client recently came to see me because her husband’s son from a previous marriage had himself appointed his father’s emergency temporary guardian. This was done with no notice to her, as allowed by Florida law. I recently received a distraught call from her because her husband was in the hospital, and she had just heard that her husband’s doctors would not discuss his condition with her. The Order appointing her stepson as emergency temporary guardian (ETG) gave him the right to make all health care decisions for his father and he had instructed them not to discuss her husband’s care with her. Just to make matters worse, the son who is now calling the shots had been estranged from his father.

The guardianship laws require that the judge shall determine whether the ward, prior to incapacity, has executed any valid” advance directive naming a health care surrogate. If an advance directive exists, then the judge is required to “specify in its order and letters of guardianship what authority, if any, the guardian shall exercise over the surrogate.” Generally, the judge will provide that the guardian shall have no authority over the health care surrogate pending further order of the court. See, Fla. Stat. sec. 744.3115 

It is unclear whether the client has a health care surrogate directive from her husband. If she has one, then we could probably get the judge to modify his previous order appointing the ETG. The judge could not modify or revoke her authority as the health care surrogate without finding grounds under Florida Statute section 765.105. Therefore, in all likelihood, she would have the right to make the health care decisions and to discuss her husband’s care with his doctors.

If there is no directive naming her as her husband’s health care surrogate, then the client may not gain back control of her husband’s health care. However, at a minimum, the judge will probably require that she be kept informed of her husband’s care and treatment.

This situation highlights the importance of proper estate planning, including a directive naming a health care surrogate.